Macy's exceeds tender cap in offer to purchase four series of notes

By Toni Weeks

San Diego, Nov. 28 - Macy's, Inc. subsidiary Macy's Retail Holdings, Inc. released the results for its cash tender offer for notes from four series of debentures, which ended at 11:59 p.m. on Nov. 27.

The company said that a total of $1,178,097,000 principal amount of notes from the four series was tendered, exceeding the $700 million cap.

When the offer began Oct. 29, the company said it would accept up to $500 million of tenders for the four note series, then increased the amount on Nov. 13 and also extended the early deadline to 5 p.m. ET on Nov. 16 from 5 p.m. ET on Nov. 9. It also set the maximum principal amount of 5.9% notes due 2016 to be accepted at $400 million.

The company accepted tenders for the following note series, which are listed in order of priority:

• $400 million of the outstanding $976,966,000 of 5.9% senior notes due 2016, representing a prorated acceptance factor of 57.5%;

• $63,734,000 of the outstanding $122.7 million of 7.45% debentures due 2016, an acceptance factor of 100%;

• $31,011,000 of the outstanding $100 million of 7.5% debentures due 2015, an acceptance factor of 100%; and

• $205,255,000 of the outstanding $611,875,000 of 7.875% senior notes due 2015, representing a prorated acceptance factor of 53%.

As previously noted, the company is paying per $1,000 principal amount of notes $1,195.41 for the 5.9% notes, $1,235.28 for the 7.45% debentures, $1,159.86 for the 7.5% debentures and $1,179.53 for the 7.875% notes.

The amounts include a $30.00 early tender premium for notes tendered by the early tender date. Settlement for these notes will occur Nov. 28.

Notes tendered after that date but before the expiration date will not receive the early tender premium.

The company will also pay accrued interest up to, but not including the applicable settlement date.

The actual purchase price was determined at 2 p.m. ET on Nov. 13 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, was 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 was conditioned on the sale by Macy's Retail Holdings of new debt in an amount at least equal to the principal amount of notes tendered. The company announced a $1 billion offering of senior notes, upsized from $800 million, earlier this month.

According to a press release, Macy's expects to record additional interest expense relating to the tender offer of about $133 million, or $83 million after income taxes, prior to Feb. 2. However, by completing the tender offer and related financing, Macy's said its interest expenses is expected to be reduced by $30 million on a full-year basis.

"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 when the offer was announced.

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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