Outlook 2021: Host of multi-billion-dollar offers dot liability management in 2020; LatAm active

By Wendy Van Sickle

Columbus, Ohio, Dec. 31 – In a year that was marked by the Covid-19 pandemic, uncertainty and persistent peculiarity, some of 2020’s heaviest liability management exercises included a bevy of big and bigger, mostly distressed, tender and exchange offers by Latin American nations and provinces, as well as several multi-billion-dollar transactions brought by companies in sectors including pharmaceuticals, defense, software, financial services and banking.

LatAm active

In one of the biggest liability management exercises of the year by face amount, the Republic of Argentina launched an exchange offer and consent solicitation on April 22 for $464.8 billion of foreign bonds. The eligible bonds included 12 series issued under the republic’s indenture dated June 2, 2005 and 17 series issued under the indenture dated April 22, 2016.

Argentina said the overall purpose of the exchange offer was to obtain the relief needed to regain the sustainability of its external debt.

The republic made a series of amendments to the offer’s terms and conditions in response to discussions with representatives of the investor community and their advisers.

On Sept. 2, Argentina announced that it had obtained the consents required to exchange and or modify 99.01% of the principal amount outstanding of all series of eligible bonds under the offer.

Meanwhile, on April 27, the country’s Province of Buenos Aires launched an offer to exchange $7.1 billion of its foreign bonds for new bonds, citing the need for relief and sustainability of its external debt. That offer was extended on at least a monthly, sometimes more often, basis throughout the year.

Farther north on the South American continent, Ecuador began an exchange offer and consent solicitation for $17.4 billion of its external bonds on July 20.

The republic said it had been working with an ad hoc group of bondholders, which had expressed support for the restructuring Ecuador sought to achieve. Ecuador reported at least a 98.29% participation rate in the exchange.

In November, Mexico announced it would hold capped tender offers for an aggregate combination of $26,013,604,000 of notes. However, that deal would prove to be much smaller than the initial sound of it, as the following day Mexico announced it would accept a total of just over $2.67 billion of notes tendered under that offer.

AbbVie’s Allergan exchange

Elsewhere, in May AbbVie Inc. wrapped an enormous exchange offer for 18 series issued by subsidiaries of Allergan plc that was carried over from October of 2019. The offer was made in connection with North Chicago, Ill.-based biopharmaceutical company AbbVie’s acquisition of Allergan, a Dublin-based pharmaceutical company.

On May 13, AbbVie said holders had tendered a total of $13,994,942,000 principal amount of dollar-denominated notes and €3,064,769,000 of euro-denominated notes under that offer.

For each $1,000 or €1,000 principal amount of Allergan notes tendered, holders received a like principal amount of notes with the same interest rate and maturity date issued by AbbVie and, in the case of those notes tendered by the early deadline, $1 or €1 in cash.

Raytheon swaps $8.15 billion

Also in May, Raytheon Technologies began private exchange offers and related consent solicitations for several series of notes totaling about $9.2 billion in principal amount issued by its Raytheon Co., Goodrich Corp. and Rockwell Collins Inc. subsidiaries.

For each $1,000 principal amount of notes tendered by the early deadline, the Waltham, Mass.-based defense and homeland security technology company offered holders a like principal amount of notes with the same interest rate and maturity date issued by Raytheon Technologies and $1 in cash.

Raytheon reported that by the early deadline, a hefty $8,153,826,000 in principal amount, or 88.2%, of the notes, had been tendered under the exchange offer.

Microsoft exchange

On April 30, Microsoft announced an offer to exchange 14 series of notes. For 10 series of the existing notes due 2035 through 2047, the Redmond, Wash.-based computer software company offered up to $6.25 billion of new notes due 2050, and for four series due 2055 through 2057 it offered up to $3 billion of new 2060 notes and cash.

At the offer’s end in May, Microsoft said $7,562,270,000 of notes in the first pool of 10 series and $4,939,514,000 of notes in the second pool had been validly tendered and not validly withdrawn.

Microsoft said it would deliver $6,249,997,000 of new 2050 notes and $3.75 billion of new 2060 notes and cash payments to settle the offer, as the issuer prorated its acceptance amount from each pool.

Capital One goes big

Capital One Financial Corp. subsidiaries Capital One, NA and Capital One Bank (USA), NA announced cash tender offers for $7.55 billion of notes on the first of June. The McLean, Va.-based financial holding company’s tender offer covered eight series of notes with maturities from 2021 through 2026.

The company reported it received and accepted tenders of $3.66 billion of notes under the weeklong offer.

Discovery tenders, exchange

On Sept. 10, Discovery, Inc. began tender offers and separate exchange offers for five series of outstanding senior notes totaling $4.7 billion issued by Discovery Communications, LLC and wholly owned subsidiary Scripps Networks Interactive, Inc.

The existing notes covered under the offer had maturities ranging from 2037 through 2047.

Discovery offered cash for the notes under the tender offer or to swap the notes for up to $2.1 billion of notes due 2055 under the exchange offer.

Ultimately, the company said it planned to issue $1.73 billion of the new notes to cover the exchanges and to repurchase about $22 million principal amount of notes under the tender offers.

Earlier in the year, on May 7, Discovery announced a tender offer for any and all of three series due in 2021 through 2022 and a waterfall offer for six series due 2022 through 2024. Under the waterfall offer, the maximum tender amount was set at $1.5 billion less the principal amount of notes tendered and accepted for purchase in the any-and-all offer.

The company reported it received tenders for $925.38 million of notes in the any-and-all offer and tenders for $1,515,228,000 of notes in the waterfall offer, which was subject to proration because the maximum tender amount was $574,591,000 based on the tenders received in the any-and-all offer.

Broadcom with two exercises

On April 6, Broadcom Inc. announced cash tender offers for three series of notes due in 2021 and 2022, but the San Jose, Calif.-based semiconductor manufacturer and infrastructure software developer more than quadrupled that offer over the course of two upsizings to $3.75 billion later that same day after announcing a corresponding increase to a concurrent sale of new notes, and to $4.06 billion on April 22.

Not long after, on May 6, the company offered to exchange seven series of notes issued by itself, Broadcom Corp. and CA, Inc. for up to $2.2 billion of new notes due Sept. 15, 2026 under a pool one offer and up to $3.75 billion of new notes due Sept. 15, 2028 under a pool two offer.

The existing notes covered under the pool one offer had maturities in 2021 and 2022. The notes included in pool two were due to mature in 2024. The company said it took in tenders to exchange just over $3.74 billion of notes. As a result, the company issued $1.7 billion of new 3.459% notes due 2026 in exchange for the pool one notes and $2.22 billion of new 4.11% notes due 2028 in exchange for the pool two notes.

CVS makes offers

On Aug. 12, CVS Health Corp. commenced cash tender offers for up to $3 billion principal amount of notes due 2023 from three series, including one issued by wholly owned subsidiary Aetna Inc., and up to $3 billion aggregate principal amount of notes due 2025 from two series. That offer was oversubscribed and CVS held to its cap, accepting the tenders on a pro rata basis.

Then, on Dec. 7, the Woonsocket, R.I.-based health care company announced cash tender offers for up to $4 billion of notes from six series due 2023, 2025 and 2028, including one 2023 series issued by Aetna.

HSBC makes rounds

On May 28, HSBC Holdings plc began offers to purchase for cash the outstanding notes from five series, all due in 2021, with outstanding principal amounts totaling $10 billion.

The London-based investment-banking company ultimately announced it would pay $3,399,745,608 to purchase $3,303,662,000 of tendered notes from two of the five tranches in its tender offer. HSBC did not accept notes tendered from three other tranches.

On Aug. 11, HSBC launched offers to purchase for cash notes from nine series due in 2021 and 2022 with a total outstanding principal amount of $13.35 billion. The company later announced a $3.5 billion total-consideration cap in that offer, which was oversubscribed and subject to proration.

Then, on Nov. 17, HSBC launched offers to purchase for cash notes from nine series totaling $8.26 billion. The company later set a $2 billion total-consideration cap in that offer, which was also oversubscribed and prorated.

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