Norfolk Southern wraps exchange offers; tender limit met by early date

By Susanna Moon

Chicago, Aug. 16 - Norfolk Southern Corp. said holders tendered $549,593,000 of notes in the private exchange offers for six series of notes by the early exchange deadline at 5 p.m. ET on Aug. 15 and that it will accept $521,445,000 of the notes for purchase based on priority acceptance levels and proration.

As previously noted, the company offered to issue up to $600 million principal amount of new 2.903% notes due 2023 plus cash in the exchange offers. The interest rate of the new notes is the yield that corresponds to the bid-side price of the 1.75% Treasury due May 15, 2022 plus 115 basis points at 11 a.m. ET on Aug. 15.

The company will accept all of the following tendered notes with a priority acceptance level of one through four, listed in order:

• $38,127,000 of its $294,817,000 of 7.05% notes due 2037;

• $156,385,000 of its $472,701,000 of 7.25% notes due 2031;

• $71,801,000 of its $440 million of 7.8% notes due 2027; and

• $139,684,000 of its $350 million of 5.64% notes due 2029.

Holders also tendered $142,596,000 of its $366.62 million of 5.59% notes due 2025, and the company will accept $115,448,000, or 81%, of those notes with a priority acceptance level of five.

Holders tendered $1 million of $83,372,000 of 9% notes due 2021, and the company will accept none of those notes, which have a priority acceptance level of six.

The exchange offers were set to end at 11:59 p.m. ET on Aug. 29, but the company will no longer accept any more tendered notes because the offer was oversubscribed, according to a press release. The offers began on Aug. 2.

Pricing details

The total exchange payment for each $1,000 principal amount, the fixed spread used for pricing and the makeup of the total exchange price for each series of notes were set on Aug. 15 as follows:

• $1,459.80 for the 7.05% notes using spread of 120 basis points, with 90% of notes and 10% cash;

• $1,476.07 for the 7.25% notes using spread of 80 bps, with 87% of notes and 13% cash;

• $1,494.96 for the 7.8% notes using spread of 60 bps, with 81% of notes and 19% cash;

• $1,257.97 for the 5.64% notes using spread of 70 bps, with 77% of notes and 23% cash;

• $1,266.09 for the 5.59% notes using spread of 130 bps, with 87% of notes and 13% cash; and

• $1,486.52 for the 9% notes using spread of 85 bps, with 67% of notes and 33% cash.

The company will also pay accrued interest up to but excluding the settlement date of Aug. 20.

The total exchange price was set using the bid-side yield of a reference Treasury security at 11 a.m. ET on Aug. 15 plus a fixed spread and includes an early exchange premium of $30.00 for every $1,000 principal amount of notes tendered by the early exchange date.

The reference Treasury is the 1.75% Treasury due May 15, 2022 for the 5.59% notes and 9% notes and the 3% Treasury due May 15, 2042 for the remaining notes.

The cash payable to each noteholder will be adjusted by the accrued interest on the existing notes and the new notes up to but excluding the settlement date.

The exchange offers are conditioned on the issuance of at least $250 million principal amount of the new 2.903% notes, which are not registered under the Securities Act of 1933.

The exchange offers are only being made to holders who can certify their status as a qualified institutional buyer as defined in Rule 144A under the Securities Act or a non-U.S. person as defined in Rule 902 under the Securities Act.

The information agent is D.F. King & Co., Inc. (800 848-3416, 212 269-5550 or www.dfking.com/norfolksouthern).

Norfolk Southern is a transportation company based in Norfolk, Va.

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