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Timminco Announces Closing of Joint Venture with Dow Corning

Published on 2010-10-08. Author : SpecialChem

TORONTO, ONTARIO -- Timminco Limited announced that it has completed its previously announced joint venture transaction with Dow Corning Corporation ("Dow Corning") regarding the silicon metal production facilities of Timminco's wholly-owned subsidiary, Bécancour Silicon Inc. ("Bécancour Silicon").

Dow Corning has acquired a 49% equity interest in Québec Silicon Limited Partnership ("Québec Silicon"), the new joint venture entity that owns the silicon metal operations in Bécancour, Québec, in consideration for net cash proceeds of approximately US$40.3 million. Bécancour Silicon could receive earn-out payments of up to potentially an additional US$10.0 million, subject to achieving certain performance objectives relating to production cost and capacity improvements within three years after the closing. Bécancour Silicon has retained a 51% equity stake in Québec Silicon, as well as all of the solar grade silicon purification operations and facilities at the Bécancour site. The majority of Bécancour Silicon's senior management team, led by Mr. René Boisvert who becomes President and Chief Executive Officer of Québec Silicon, will continue to manage the day-to-day silicon metal manufacturing operations of Québec Silicon going forward.

Timminco and Bécancour Silicon (collectively, the "Company") will use the net cash proceeds from the joint venture transaction to repay fully all outstanding amounts due under the existing revolving credit facility and term loan with Bank of America of approximately US$27.7 million. The balance of the net cash proceeds will be used for the Company's general corporate purposes.

Dow Corning is also providing a $10.0 million revolving credit facility to Québec Silicon to provide funding for its working capital requirements. Funding is available to Québec Silicon upon request at any time, up to the full amount of the unused credit commitment and subject to continued compliance. Outstanding amounts bear interest at a variable rate of Canadian prime plus 2%, which is payable quarterly. The revolving credit facility expires on October 1, 2013, and may be terminated earlier, at Dow Corning's discretion, if it ceases to own any interest in Québec Silicon or upon the occurrence of certain change of control events in respect of Timminco. This facility includes customary negative debt and negative pledge covenants. All of Québec Silicon's assets have been pledged to Dow Corning as security for Québec Silicon's obligations under the revolving credit facility.

Timminco also announced that the maturity date of the Credit Agreement with Bank of America has been extended for an interim period from September 30 to November 30, 2010, to facilitate on-going negotiations regarding a new multi-year revolving credit facility for the Company. For the duration of such period, the credit commitments have been reduced from US$39.0 million to US$20.0 million, the advance rates on eligible inventory have been capped at a reduced level, certain slow-moving inventories have been deemed ineligible, the minimum availability reserve has been increased to US$5.0 million from US$2.0 million, and certain other post-closing deliveries are required as a condition for further advances. All of the Company's assets, including Bécancour Silicon's equity interests in Québec Silicon, continue to be pledged as security for the Company's obligations under the Credit Agreement.

Timminco also announced that Investissement Québec has conditionally agreed to an eight-year extension of the maturity date of the $25.0 million term loan advanced to Bécancour Silicon in July 2009, from August 31, 2011 to July 16, 2019, and certain other amendments to such term loan, subject to the Company's execution of a new revolving credit facility by December 1, 2010 in an amount and on terms that are satisfactory to Investissement Québec. If the conditions for such extension and amendment are satisfied, the term loan would be repayable in monthly installments of $175,000, starting August 2012, and additional annual installments in amounts based on a percentage of Bécancour Silicon's defined adjusted cash flow, in respect of periods beginning August 2012. As well, Bécancour Silicon would be obligated to remit 50% of any future earn-out payments received from Dow Corning as repayment of any outstanding obligations under such term loan. Investissement Québec continues to have a charge upon all of Bécancour Silicon's assets, subordinated to the obligations of the Company under the Credit Agreement with Bank of America.

About Timminco:

Timminco is a producer of silicon metal for the chemicals industry (used in silicones, as well as in polysilicon for electronics and solar energy) and the aluminium industry. The Company is also a producer of solar grade silicon, using its proprietary technology for purifying silicon metal, for the solar energy industry.

Forward-Looking Statements

This news release contains "forward-looking information", as such term is defined in applicable Canadian securities legislation, concerning Timminco's future financial or operating performance and other statements that express management's expectations or estimates of future developments, circumstances or results. Generally, forward-looking information can be identified by the use of forward-looking terminology such as "expects", "believes", "anticipates", "budget", "scheduled", "estimates", "forecasts", "intends", "plans" and variations of such words and phrases, or by statements that certain actions, events or results "may", "will", "could", "would" or "might" "be taken", "occur" or "be achieved". In this news release, such information includes statements regarding future earn-out payments, the use of proceeds from the joint venture transaction, funding and availability for Québec Silicon under the revolving credit facility provided by Dow Corning, the ability to borrow funds under the existing revolving credit facility with Bank of America, negotiations in respect of a new revolving credit facility, and the conditional extension of the maturity date and other amendments to the term loan with Investissement Québec. Forward-looking information is based on a number of assumptions and estimates that, while considered reasonable by management based on the business and markets in which Timminco operates, are inherently subject to significant operational, economic and competitive uncertainties and contingencies. Timminco cautions that forward-looking information involves known and unknown risks, uncertainties and other factors that may cause Timminco's actual results, performance or achievements to be materially different from those expressed or implied by such information, including, but not limited to: liquidity risks; foreign currency exchange rates; equipment failures, downtime or inefficiencies; dependence upon power supply for silicon metal production; pricing and availability of raw materials; global economic conditions; credit risk exposure; selling price of silicon metal; customer concentration; transportation delays and disruptions; class action lawsuits; contract termination claims; interest rates; future growth plans and strategic objectives; environmental, health and safety laws and liabilities; conflicts of interest; limited history with the solar grade silicon business; selling price of solar grade silicon; customer commitments; production cost targets; achieving and maintaining quality of solar grade silicon; customer capabilities in producing ingots; protection of intellectual property rights; production capacity expansion at the Bécancour facilities; closure of the magnesium facilities; investment in Applied Magnesium; insurance costs; government and economic incentives; dependence upon key executives and employees; completion and integration of potential acquisitions, partnerships or joint ventures; intellectual property infringement claims; and climate change. These and other factors are discussed in greater detail in Timminco's Annual Information Form for the year ended December 31, 2009, and in Timminco's most recent Management's Discussion and Analysis.

Source: Timminco


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