NEW YORK, June 14 /PRNewswire/ -- Tyco's recently announced plan to spin-off two businesses to shareholders on June 29th could be delayed because of Tyco's failure to fulfill its obligations to its bondholders, according to the Ad-Hoc Committee of Tyco Noteholders, a group that holds a majority of the Notes issued by Tyco International Group, S.A. and guaranteed by the parent company, Tyco International, Ltd. under the 1998 and 2003 Note Indentures.
In a letter sent to Tyco's Board of Directors today, the bondholder committee notes that Tyco failed to obtain requisite bondholder consents for the proposed break-up of the company and instead attempted, unsuccessfully, to coerce the bondholders to accept less than the full amount of money owed to them.
The letter states: "Tyco's management and Board have made substantial progress over the past several years in helping the company recover from the darkest chapter in its history. We now hope that you will recognize that instructing the company to honor its obligations to the pension funds, insurance companies and other financial institutions that have lent it money is in the best interest of Tyco and all of its stakeholders. Nothing less than the financial community's long-term trust and confidence in the company is at stake."
The Ad-Hoc Committee is represented by Andrew N. Rosenberg of Paul, Weiss, Rifkind, Garrison & Wharton LLP.
The full text of the letter follows: June 14, 2007 Board of Directors of Tyco International Group, S.A. and Tyco International, Ltd. c/o Judith A. Reinsdorf, Esq. Tyco International Group, S.A. 9 Roszel Road Princeton, NJ 08540 Re: Tyco International, Ltd. Dear Board Members:
I write to you on behalf of the Ad-Hoc Committee of Tyco Noteholders (the "Committee") to direct your attention to an important matter that affects Tyco's credibility in the financial community and may delay Tyco's recently announced plan to spin-off two businesses to shareholders on June 29.
The members of the Committee hold a majority of the Notes issued by Tyco International Group, S.A. and guaranteed by the parent company, Tyco International, Ltd. (collectively, "Tyco") under the 1998 and 2003 Note Indentures. Each of the members is either an insurance company or traditional asset manager -- much of the money that they lent to Tyco was done so on behalf of pension funds and retirees.
The Committee has no interest in delaying or obstructing the break-up transaction, which Tyco has said is intended to enhance shareholder value. However, recent actions by Tyco have increased the likelihood that such a delay will occur.
Please consider the following: -- The break-up will violate what is known as the successor obligor provision of the Indentures under which the Notes were issued. The Noteholders lent to a diversified conglomerate which, as of today, has a market cap of approximately $65 billion. After the break-up, the Noteholders will be lenders to a new entity holding just a few of the conglomerate's business lines and a fraction of the assets. This is not what the Noteholders bargained for when they purchased billions of dollars of securities from Tyco. -- When they invested in Tyco, the Noteholders agreed to lend to the company billions of dollars at fixed rates of interest, in some cases for up to thirty years. As part of that deal, the Noteholders and Tyco agreed that if Tyco wanted to change its business such that it could no longer abide by the terms of the Indentures, it could redeem the Notes at a preset price. -- Once the break-up was announced, Tyco was expected to honor its end of the bargain and redeem the Notes at the preset price. To date, Tyco has reneged on that agreement and instead has resorted to a form of coercive tender and consent in an attempt to force the Noteholders to consent to the break-up and tender their Notes at less than the agreed upon redemption price. -- Despite its coercive nature, the tender and consent was a failure. Only one-third of the Notes were tendered and Tyco did not receive the requisite consents to amend the Indentures so as to authorize the proposed break-up. -- It now appears that Tyco will attempt to ignore the required consents and proceed with the break-up anyway. However, the Indenture Trustee for the Notes -- The Bank of New York -- has commenced a court proceeding seeking a ruling as to whether the break-up violates the Indentures. The Noteholders are confident that the Court will rule in their favor. This Court action could very well delay the proposed timing of the break-up. A multi-billion dollar judgment in the Noteholders favor would obviously have an impact on Tyco's future as well.
To date, Tyco's strategy has produced widespread outrage in the public finance markets, resurrecting images of Tyco as a bad actor whose detrimental conduct to securityholders was hoped to be a thing of the past by most market participants. This is highly unfortunate, particularly since this matter can be easily resolved. The Noteholders are not asking for a single dollar above the contractually agreed to redemption price. The Notes can simply be redeemed by Tyco and this matter will be concluded.
Tyco's management and Board have made substantial progress over the past several years in helping the company recover from the darkest chapter in its history. We now hope that you will recognize that instructing the company to honor its obligations to the pension funds, insurance companies and other financial institutions that have lent it money is in the best interest of Tyco and all of its stakeholders. To do otherwise will put at risk the financial community's long-term trust and confidence in the company.
To this end, we would welcome an opportunity to meet with the Board, or its representatives, at the earliest convenient time so that this matter can be addressed on a timely basis.
Sincerely, Andrew N. Rosenberg Counsel to the Ad Hoc Committee of Tyco Noteholders cc: Ad Hoc Committee of Tyco Noteholders Gerard E. Harper, Esq. Contact for the Ad-Hoc Committee of Tyco Noteholders: Mark Semer Kekst and Company (212) 521-4800
Ad Hoc Committee of Tyco NoteholdersCONTACT: Mark Semer of Kekst and Company, +1-212-521-4800, for Ad HocCommittee of Tyco Noteholders
