|MT. LAUREL, N.J., Dec. 28, 2012 /PRNewswire/ — Central European Distribution Corporation (NASDAQ: CEDC) announced today that it has agreed to a revised transaction with Russian Standard (through its affiliate, Roust Trading Ltd. (“RTL”)). This agreement represents a renewed commitment by Russian Standard to a strategic alliance with CEDC and is an important vote of confidence in the future success of CEDC’s business. The agreement also addresses the ongoing management of CEDC, with directors nominated by Russian Standard taking responsibility for CEDC’s operations through a newly-formed committee of the CEDC Board of Directors. A special committee led by CEDC directors unaffiliated with Russian Standard will retain control of any restructuring of CEDC’s capital structure. This amended transaction is intended to stabilize CEDC’s business and to pave the way for CEDC to address its balance sheet issues in an orderly fashion.
Under the revised terms, Russian Standard has:
In turn, CEDC has:
CEDC and Russian Standard are implementing these revised terms pursuant to a binding term sheet signed today, which modifies the Amended and Restated Securities Purchase Agreement and Amended and Restated Governance Agreement between CEDC and RTL. These two agreements will terminate with automatic effect on January 21, 2013, and, from today, CEDC will be permitted to have restructuring discussions and negotiations with the holders of CEDC’s outstanding debt obligations. These revised terms also represent a settlement of the issues between CEDC and Russian Standard stemming from, among other things, the restatement of CEDC’s financial statements for its 2010 and 2011 fiscal years in October of this year, with CEDC and RTL agreeing to mutually release all claims and causes of action and not to bring any legal action against the other under either agreement for matters arising prior to today.
CEDC and Russian Standard believe that these revised terms constitute a mutually beneficial way of addressing CEDC’s near-term funding and operational issues while also committing CEDC and Russian Standard to work together to address CEDC’s long-term capital requirements, including a restructuring of its current debt obligations. In that regard, CEDC and Russian Standard also believe that the changes to CEDC’s corporate governance comprise an appropriate component of CEDC’s strategy.
Terms of the Revised Transaction
Effective immediately, RTL has released contractual restrictions on $50 million in cash previously invested in CEDC to allow CEDC to use this cash for working capital and general corporate purposes, and committed to make available a $15 million revolving credit facility to CEDC (drawable no earlier than February 1, 2013), subject to definitive documentation and the provision of reasonably satisfactory security by CEDC. Russian Standard has also committed to provide CEDC with up to $107 million of new capital (reduced by the amount of the commitment under the new revolving credit facility) subject to and conditional upon an overall restructuring of CEDC’s capital structure that is acceptable to CEDC and Russian Standard.
In exchange, CEDC will provide guarantees and liens on assets of its subsidiaries in respect of the debt currently evidenced by $50 million of senior CEDC notes held by Russian Standard. In addition, CEDC has agreed to certain corporate governance changes, including:
CEDC and Russian Standard have also reached agreement on the slate of directors to be proposed at the next annual general meeting of CEDC shareholders, which will be convened as soon as practicable. The slate of directors will consist of three directors nominated by Russian Standard and three directors nominated by non-Russian Standard directors. In addition, shareholders will be given the opportunity to elect a seventh director from among two candidates, one nominated by Russian Standard and one by the non-Russian Standard directors.
Finally, CEDC and Russian Standard have agreed that the Amended and Restated Securities Purchase Agreement and the Amended and Restated Governance Agreement by and between CEDC and RTL will automatically terminate on January 21, 2013 and to mutually release all claims and causes of action (and not to bring any legal action against the other) under either agreement for matters arising prior to today.