Exelon subsidiary begins exchange offer for Constellation's 7.6% notes

By Susanna Moon

Chicago, June 14 - Exelon Corp. subsidiary Exelon Generation Co., LLC began private exchange offers for the $700 million of 7.6% senior notes due April 1, 2032 issued by Constellation Energy Group Inc.

In exchange, Exelon Generation will issue new 4.25% senior notes due 2022 plus a cash payment or 5.6% senior notes due 2042 plus a cash payment, according to a press release by Exelon Generation.

Holders who tender their notes by the early participation deadline at 5 p.m. ET on June 26 will receive the total exchange price, which includes a premium of $50.00 per $1,000 principal amount.

Settlement for the early tendered notes will occur on June 28.

Pricing for 4.25% notes

The total exchange price for the 4.25% notes will be the discounted value on the early settlement date of the remaining payments of principal and interest, excluding accrued interest to but excluding the early settlement date, per $1,000 principal amount of old notes through maturity.

Pricing will be set using the bid-side yield on the 3.125% U.S. Treasury bonds due Feb. 15, 2042 at pricing at 2 p.m. ET on June 26 plus a fixed spread of 215 basis points.

For each $1,000 principal amount of notes tendered, the total exchange price for the 4.25% notes will be cash equal to 10% of the total exchange price plus a principal amount of new 4.25% notes equal to 90% of the exchange ratio multiplied by $1,000.

The new notes value will be the discounted value on the early settlement date of the remaining payments of principal and interest, excluding accrued interest to but excluding the early settlement date, per $1,000 principal amount of new 4.25% notes through maturity.

The new notes value will be set using the bid-side yield on the 1.75% U.S. Treasury note due May 15, 2022 at pricing plus a fixed spread of 265 bps.

The new 4.25% notes will form a single series with the senior notes that Exelon Generation expects to issue for cash on June 18 in the total amount of $275 million.

Pricing for 5.6% notes

The total exchange price for the 5.6% notes will be the discounted value on the early settlement date of the remaining payments of principal and interest, excluding accrued interest to but excluding the settlement date, per $1,000 principal amount of 7.6% notes through maturity.

Pricing will be set using the bid-side yield on the 3.125% U.S. Treasury bonds due Feb. 15, 2042 at pricing plus a fixed spread of 215 bps.

For each $1,000 principal amount of notes tendered, the total exchange price for the 5.6% notes will be cash equal to 10% of the total exchange price plus a principal amount of new 5.6% notes equal to 90% of the exchange ratio multiplied by $1,000.

The new notes value will be the discounted value on the early settlement date of the remaining payments of principal and interest, excluding accrued interest to but excluding the early settlement date, per $1,000 principal amount of new 5.6% notes through maturity.

The new notes value will be set using the bid-side yield on the 3.125% U.S. Treasury bonds due Feb. 15, 2042 at pricing plus a fixed spread of 290 bps.

The new 5.6% notes will form a single series with the senior notes that Exelon Generation expects to issue for cash on June 18 in the amount of $500 million.

More offer details

The exchange offer will end at midnight ET on July 11. Tendered notes may be withdrawn at any time before the early participation deadline.

The offer is conditioned on the issuance of the original notes, tax fungibility and the absence of certain adverse legal and market developments, according to a company press release.

Generation will not receive any cash proceeds from the exchange offer.

Holders who want a copy of the eligibility letter may contact D.F. King & Co., Inc. at 800 859-8508 or, for banks and brokers, 212 269-5550 or go to dfking.com/exelon.

Exelon Generation announced the exchange offer for the 7.6% notes on June 13, noting that Exelon assumed the notes when it acquired Constellation in March.

Exelon Generation sold $775 million of notes (Baa1/BBB/BBB+) in two maturities on Wednesday, as reported by Prospect News on June 13.

The $275 million of 4.25% 10-year notes priced at 99.976 to yield 4.253% with a spread of Treasuries plus 265 bps. There is a make-whole call at 40 bps over Treasuries.

A $500 million tranche of 5.6% 30-year bonds sold at 99.813 to yield 5.613% with a spread of 290 bps over Treasuries. The bonds have a make-whole call at 45 bps over Treasuries.

The exchange offers will only be made to qualified institutional buyers under Rule 144A and Regulation S of the Securities Act of 1933.

Exelon is an energy provider based in Chicago.

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