Macy's begins tender offer for $500 million of notes from four series

By Toni Weeks

San Diego, Oct. 29 - Macy's, Inc. subsidiary Retails Holdings, Inc. began a cash tender offer for up to $500 million principal amount of notes from four series of debentures.

The company will accept tenders from the following note series, which are listed in order of priority:

• $976,966,000 of 5.9% senior notes due 2016;

• $122.7 million of 7.45% debentures due 2016;

• $100 million of 7.5% debentures due 2015; and

• $611,875,000 of 7.875% senior notes due 2015.

The company estimates it will pay per $1,000 principal amount of notes $1,189.19 for the 5.9% notes, $1,229.16 for the 7.45% debentures, $1,157.72 for the 7.5% debentures and $1,177.26 for the 7.875% notes.

The amounts include a $30.00 early tender premium for notes tendered by 5 p.m. ET on Nov. 9, the early tender date. Notes tendered after that date but before the expiration date, 11:59 p.m. ET on Nov. 27, will not receive the early tender premium.

The company will also pay accrued interest up to, but not including the settlement date, which is expected to be Nov. 28.

The actual purchase price will be determined at 2 p.m. ET on the business day following the early tender date by the dealer managers with reference to a fixed spread over the yield based on the bid-side price of the applicable reference U.S. Treasury security.

The applicable U.S. Treasury security for each note series, along with the fixed spread, will be as follows:

• 0.75% U.S. Treasury note due Oct. 31, 2017 plus 30 basis points for the 5.9% notes;

• 0.75% U.S. Treasury note due Oct. 31, 2017 plus 60 bps for the 7.45% notes;

• 0.25% U.S. Treasury note due Oct. 15, 2015 plus 70 bps for the 7.5% notes; and

• 0.25% U.S. Treasury note due Oct. 15, 2015 plus 62 bps for the 7.875% notes.

The offer is conditioned on the sale by Macys Retail Holdings of new debt in an amount at least equal to the principal amount of notes tendered.

"Given the current low interest-rate environment, we expect to extend a portion of our near-term debt maturities at lower rates, both decreasing our ongoing interest expense and protecting us against potential future rate increases, Macy's chief financial officer Karen M. Hoguet said in a press release.

Credit Suisse Securities (USA) LLC (800 820-1653) is the coordinating dealer manager for the tender offer. Bank of America Merrill Lynch (888 292-0070) and J.P. Morgan Securities LLC (866 834-4666) are additional dealer managers.

Global Bondholders Services Corp. (212 430-3774 or 866 873-6300) is the information agent and depositary.

Cincinnati-based Macy's operates about 840 department stores.

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