Apr 21, 2020 - At its board of directors meeting held on April 21, 2020, Showa Denko K.K. ("Showa Denko") decided to execute a money consumption loan agreement with Mizuho Bank, Ltd. ("Mizuho Bank") for fundraising purposes.
In addition, with respect to Showa Denko and its wholly-owned subsidiary, HC Holdings K.K. ("HC Holdings"), Showa Denko's board of directors and HC Holdings' representative officer also decided, on the same date, that a money consumption loan agreement will be executed between Mizuho Bank and HC Holdings, that HC Holdings will issue preferred shares by means of a third-party share allotment (the "Issuance of the Preferred Shares") and Mizuho Bank and Development Bank of Japan Inc. ("Development Bank of Japan") will subscribe for all of such preferred shares, and a preferred share investment agreement will be executed among Mizuho Bank, Development Bank of Japan, Showa Denko, and HC Holdings, and that HC Holdings will issue common shares by means of a third-party share allotment (the "Issuance of Common Shares") and Showa Denko will subscribe for all of such common shares. Accordingly, we hereby announce the following information.
We also hereby announce that through the Issuance of the Preferred Shares and the Issuance of the Common Shares, the amount of HC Holdings' stated capital will be equivalent to 10% or more of the amount of Showa Denko's stated capital, and that HC Holdings will constitute Showa Denko's specified subsidiary company; however, thereafter, and as a result of the capital reduction, HC Holdings will cease to be the specified subsidiary company.
I. Fundraising
1. Reasons for Fundraising
As announced in "Announcement Regarding the Commencement of Tender Offer for Shares in Hitachi Chemical Company, Ltd. (Securities Code 4217)" on March 23, 2020, and "Announcement Regarding Results of Tender Offer for Shares in Hitachi Chemical Company, Ltd. (Securities Code 4217) and Change in the Subsidiary (a Second-tier Subsidiary Company)" on April 21, 2020, as part of the transactions to make Hitachi Chemical Company, Ltd. ("Hitachi Chemical") a wholly-owned subsidiary of HC Holdings (the "Transactions"), Showa Denko and HC Holdings carried out a tender offer for common shares in Hitachi Chemical. It was decided that HC Holdings will obtain a loan from Mizuho Bank in order to allocate such loan to the fund for the Transactions (for the outline, please see "2. Outline of the Non-recourse Loan Agreement" below), and that HC Holdings will issue Class A preferred shares, which will be subscribed for by Mizuho Bank and Development Bank of Japan (for the outline, please see "3. Outline of Issuance of the Preferred Shares" below) and will also issue common shares, which will be subscribed for by Showa Denko (for the outline, please see "4. Outline of Issuance of the Common Shares" below).
Furthermore, Showa Denko decided that it will take a loan from Mizuho Bank in order to raise the funds necessary for Showa Denko to subscribe for HC Holdings' common shares with respect to the Issuance of the Common Shares (for the outline, please see "5. Outline of Senior Loan Agreement" below).
2. Outline of the Non-recourse Loan Agreement
Term Loan A / Term Loan B / Commitment Line
(1) Borrower: HC Holdings
(2) Lender: Mizuho Bank
(3) Loan amount: 50 billion yen / 350 billion yen / 90 billion yen
(4) Interest rate: Variable interest rate based on JBA Japanese Yen TIBOR
(5) Repayment method: Repayment in installments / Repayment in a batch at the due date / Repayment in a batch at the due date
(6) Implementation date: April 27, 2020
(7) Final due date: (Term Loan A & B:) April 27, 2025 (However, if such date is not a business day, the final due date will be the next business day or, if the next business day falls in the next month, the preceding business day.) / (Commitment Line:) After one week to six months from the implementation of individual loan.
(8) Securities: Shares of Hitachi Chemical and others
3. Outline of Issuance of the Preferred Shares
(1) Issuer: HC Holdings
(2) Number of shares to be issued: 275 billion shares
(3) Issuance value: One yen per share
(4) Subscribers:
- Mizuho Bank 185 billion shares
- Development Bank of Japan 90 billion shares
(5) Amount to be paid (total amount): 275 billion yen
(6) Due date for payment: April 27, 2020
(7) Condition for acquisition
After the fifth anniversary of the due date for payment, the preferred shares can be purchased
(8) Capital characteristics (to be fixed): "Medium/50%" (Japan Credit Rating Agency, Ltd.)
(9) Others: No voting rights
(Note) If HC Holdings acquires the preferred shares by exercising the condition for acquisition, or if Showa Denko purchases the preferred shares, the fund is intended to be raised by a method determined by a rating agency to have capital characteristics equivalent to or higher than those of the preferred shares. However, if it satisfies certain financial indicators, replacement can be omitted.
4. Outline of Issuance of the Common Shares
(1) Issuer: HC Holdings
(2) Number of shares to be issued: 295 billion shares
(3) Issuance value: One yen per share
(4) Subscriber: Showa Denko
(5) Amount to be paid: 295 billion yen
(6) Due date for payment: April 27, 2020
5. Outline of the Senior Loan Agreement
(1) Borrower: Showa Denko
(2) Lender: Mizuho Bank
(3) Loan amount: 295 billion yen
(4) Interest rate: Variable interest rate based on JBA Japanese Yen TIBOR
(5) Repayment method: Repayment in a batch at the due date
(6) Implementation Date: April 27, 2020
(7) Final due date: April 27, 2027 (However, if such date is not a business day, the final due date will be the next business day or, if the next business day falls in the next month, the preceding business day.)
(For reference) Outline of the subordinated commitment-type syndicated loan agreement
Showa Denko plans to execute the subordinated commitment-type syndicated loan agreement, whose outline is as follows, with Mizuho Bank and Development Bank of Japan by April 27, 2020.
(1) Borrower: Showa Denko
(2) Lender: Mizuho Bank, Development Bank of Japan
(3) Total commitment amount: 275 billion yen
(4) Commencement date of the commitment period (to be fixed): April 27, 2020
(5) Expiration date of the commitment period (to be fixed): April 27, 2025
(6) Final due date: April 27, 2055
(7) Repayment before the due date:
All or part of the principal can be repaid on each interest payment date after April 2025, even before the due date.
(8) Capital characteristics (to be fixed): "Medium/50%" (Japan Credit Rating Agency, Ltd.)
(9) Purpose of use of the fund
Fund for purchase by Showa Denko of the preferred shares, or source for Showa Denko to invest and lend the purchase fund for acquisition by HC Holdings of the preferred shares by exercising the condition for acquisition.
(Note) In the case of repayment before the due date, the fund is intended to be raised by a method determined by a rating agency to have the capital characteristics equivalent to or higher than those of a loan based on the subordinated commitment-type syndicated loan agreement. However, if it satisfies certain financial indicators, replacement can be omitted.
6. Future Outlook
The impact of this fundraising on Showa Denko's consolidated results is currently under review. If modification of the financial forecast is required, or if any matters to be announced arise, they will be promptly disclosed.
Full release can be viewed at www.sdk.co.jp/assets/files/english/news/2020/20200421_sdknewsrelease2_e.pdf
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