Dow buys back $1.5 billion of notes in Dutch auction tender offers

By Angela McDaniels

Tacoma, Wash., March 23 - Dow Chemical Co. received $2.54 billion principal amount of notes in its modified Dutch auction tender offers, according to a company news release.

The company accepted $1.5 billion of the notes for purchase including:

• $1,135,170,000 of its $3.25 billion 8.55% notes due 2019;

• $64.83 million of Union Carbide Corp.'s $200 million 7.75% debentures due 2096;

• $192.06 million of Dow's $1 billion 9.4% notes due 2039; and

• $107.94 million of Rohm & Haas Co.'s $881.8 million 7.85% debentures due 2029.

Dow's 8.55% notes and Union Carbide's debentures make up pool 1, and Dow's 9.4% notes and Rohm & Haas' debentures make up pool 2.

The proration factor was 21.4% for pool 1 notes and 13.7% for pool 2 notes.

When the offer began on Feb. 23, Dow planned to accept up to $750 million of notes, including up to $450 million of pool 1 notes and up to $300 million of pool 2 notes.

The offers were oversubscribed as of 5 p.m. ET on March 8, the early participation date, prompting the company to increase the cap to $1.2 billion for the pool 1 notes.

The total purchase price for the notes is $1.94 billion, including:

• $1,450,460,000 for Dow's 8.55% notes. The clearing spread was 90 basis points, and the tender yield is 4.446%;

• $69.09 million for Union Carbide's debentures. The clearing spread was 260 bps, and the tender yield is 7.27%;

• $287.4 million for Dow's 9.4% notes. The clearing spread was 113 bps, and the tender yield is 5.8%; and

• $128.59 million for Rohm & Haas' debentures. The clearing spread was 143 bps, and the tender yield is 6.1%.

The purchase prices were set using the yield to maturity of a reference Treasury security plus a spread determined through a modified Dutch auction.

The reference Treasury was the 3.625% Treasury due Feb. 15, 2021 for Dow's 8.55% notes and the 4.25% Treasury due Nov. 15, 2040 for the three remaining note series. The reference yields for the two reference Treasuries were 3.546% and 4.67%, respectively.

The reference yields were set based on the bid-side prices of the reference Treasuries at 2 p.m. ET on March 8.

The acceptable bid spread range was 90 bps to 120 bps for Dow's 8.55% notes, 260 bps to 290 bps for Union Carbide's debentures, 110 bps to 140 bps for Dow's 9.4% notes and 140 bps to 170 bps for Rohm & Haas' debentures.

The prices include an early participation amount of $30 per $1,000 principal amount of notes tendered by the early participation date.

Holders will also receive accrued interest. The settlement date was expected to be March 23.

The offers expired at midnight ET on March 22.

All notes purchased in the offers will be canceled.

The tender offers are part of a series of debt-reduction activities the company plans to execute in the first quarter, including the payoff of $800 million of matured debt and more than $150 million of InterNotes.

The lead dealer managers were Goldman Sachs & Co. (800 828-3182 or 212 902-5128) and J.P. Morgan Securities LLC (866 834-4666 or 212 834-2494). The co-dealer managers were ING Financial Markets LLC, RBC Capital Markets, LLC and Scotia Capital (USA) Inc.

Global Bondholder Services Corp. (212 430-3774 for banks and brokers, others call 866 389-1500) was the information agent and depositary.

Dow is a specialty chemical, plastics and technology company based in Midland, Mich.

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