National Rural sets reference yield for exchange offer for 8% notes

By Angela McDaniels

Tacoma, Wash., Sept. 25 - National Rural Utilities Cooperative Finance Corp. said the reference yield is 2.898% for the modified Dutch auction exchange offer for its $1 billion of 8% medium-term series C notes due 2032.

As previously reported, the company is offering a combination of new collateral trust bonds due Nov. 1, 2032 and cash in exchange for up to $339,621,000 principal amount of 8% notes. The cap was increased from $300 million on Sept. 24.

The reference yield is the yield to maturity of the 3% Treasury due May 15, 2042 at 11 a.m. ET on Sept. 25.

The company also announced that the interest rate on the new collateral bonds is 4.023%.

The total exchange consideration will be determined based on the reference yield plus a spread set using a modified Dutch auction procedure. The company will pay 74% of the total exchange consideration in the form of new bonds and 26% in cash.

Each tendering holder must specify a bid spread in excess of the reference yield that the holder would be willing to accept as the basis for determining the total exchange consideration. Holders who tender their notes without specifying a bid spread will be deemed to have specified the maximum spread. The minimum bid spread is 112.5 basis points, and the maximum bid spread is 137.5 bps.

Holders who tendered their notes by the early participation deadline, 5 p.m. ET on Sept. 24, will be eligible to receive the total exchange consideration, which includes an early participation amount of $30.00 per $1,000 principal amount of 8% notes.

The company will also pay accrued interest for the old notes.

Acceptance of tendered notes may be subject to proration.

The exchange offer will end at midnight ET on Oct. 9.

Holders had tendered $491.8 million of the notes as of the early participation deadline.

The exchange offer is conditioned on holders tendering enough 8% notes to result in at least $250 million of new bonds being issued.

The company previously said it is pursuing the exchange offer to improve its overall cost of funding.

A holder must be 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 to be eligible for the offer.

D.F. King & Co., Inc. (800 488-8075, collect for banks and brokers at 212 269-5550 or e-mail NRUCFC@dfking.com) is the information agent for the exchange offer.

National Rural Utilities Cooperative Finance is a market lender for electric cooperatives based in Dulles, Va. It launched the offer on Sept. 12.

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