Altria wraps $2 billion tender offer, accepting only 9.7%, 9.25% notes

By Marisa Wong

Madison, Wis., Sept. 4 - Altria Group, Inc. said it received tenders for $3,735,444,000 of notes as of midnight ET on Aug. 31, the expiration of the tender offer that began on Aug. 6.

The amount of tendered notes exceeded the $2 billion offer cap. As a result, the company only accepted a portion of the tendered 9.7% notes due 2018 and 9.25% notes due 2019, which have a priority acceptance level of one, and none of the tendered 9.95% notes due 2038 or 10.2% notes due 2039, which have a priority acceptance level of two.

According to a company news release, Altria has accepted for purchase priority one notes using a proration factor of 0.66, or about $1.15 billion principal amount of the $1,738,893,000 of tendered 9.7% notes and about $850 million of the $1,285,087,000 of tendered 9.25% notes.

For each $1,000 principal amount, the company will pay $1,435.83 for the 9.7% notes and $1,421.02 for the 9.25% notes. These amounts include a $30.00 early tender payment for each note tendered by the early tender deadline, 5 p.m. ET on Aug. 17.

As previously reported, holders had already tendered $3,705,501,000 of notes as of the early deadline.

The company will also pay accrued interest up to but excluding the settlement date, which is expected to be Sept. 4.

The payment would have been $1,665.86 for the 9.95% notes and $1,693.62 for the 10.2% notes, both including the $30.00 early tender payment.

Pricing for the offer was set at 11 a.m. ET on Aug. 20. The total consideration is intended to result in a yield to maturity equal to the sum of the yield to maturity of the applicable reference Treasury, calculated based on the bid-side price of that Treasury at the pricing time, plus a fixed spread.

The reference Treasury for the 9.7% notes is the 0.5% Treasury due July 31, 2017, and the fixed spread is 135 basis points. The reference Treasury for the 9.95% notes is the 1.75% Treasury due May 15, 2022, and the fixed spread is 80 bps.

For the 9.95% notes and 10.2% notes, the reference Treasuries would have been the 3.125% Treasury due Feb. 15, 2042 with a spread of 235 bps and 240 bps, respectively.

On Aug. 9, Altria completed a $2.8 billion offering of senior notes, satisfying the tender offer's financing condition. The tender offer is subject to the satisfaction or waiver of certain other conditions.

Citigroup Global Markets Inc. (800 558-3745 or 212 723-6106), J.P. Morgan Securities LLC (866 834-4666 or 212 834-2494) and Morgan Stanley & Co. LLC are the lead dealer managers. Global Bondholder Services Corp. (866 387-1500 or, for banks and brokers, call 212 430-3774) is the information agent and depositary.

Altria is a tobacco company based in Richmond, Va.

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