(Bloomberg) — Some of DuPont de Nemours Inc.’s bondholders have agreed to block part of a proposed debt exchange, complicating the chemical company’s efforts to buy back the securities after announcing a plan to spin off a unit.
Holders of a majority of the company’s notes due in 2038 and 2048 have signed a pact declining to participate in an exchange offer that would remove some investor protections on existing notes, according to people with knowledge of the matter.
The bondholder group plans to form a steering committee to negotiate better terms with the company, said the people, who asked not to be identified discussing private information.
DuPont last week said it was looking to swap those securities and additional notes due in 2028. For the swap to go through, holders of more than 50% of each bond need to agree to the exchange. Bondholders opposing the transaction couldn’t reach a deal to block a swap of the 2028 notes.
Investment bank Solomon Partners and law firm Milbank LLP hosted a call this week to discuss ways for money managers to push back against the bond exchanges and related consent agreements, said the people.
A spokesperson for Solomon Partners declined to comment, while representatives for DuPont and Milbank didn’t respond to requests for comment.
DuPont plans to buy back as much as $2.16 billion of bonds after spinning off its electronics business into an independent company named Qnity Electronics Inc.
The deal would allow DuPont to reduce its debt load following the spinoff, according to a Moody’s Ratings report. The new bonds would come with a clause known as a special mandatory redemption, which would force the company to buy back the notes assuming the spinoff happens by a particular date.
Some money managers object to the debt swap for a number of reasons, including questioning whether the company should buy back all of the debt, and not just some of it, and whether investors should get more compensation through the transaction.
Debtholders looking to exchange will receive the highest possible payments for their debt if they agree to the transaction by an early deadline of Sept. 15.
Bondholders agreeing by the early deadline would get about 100.25 cents on the dollar, DuPont said earlier this month.
The 2028 notes were most recently trading at around 101.6 cents on the dollar, with the 2038 notes last traded at more than 105 cents and the 2048 at 102.3 cents, according to data from pricing service Trace.
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