E*Trade gets tenders for $1.53 billion notes, hits consent threshold

New York, July 1 - E*Trade Financial Corp. said it received tenders for $1.53 billion of its existing notes and has sufficient consents in its exchange offer for any of its 8% senior notes due 2011 and a portion of its 12½% springing-lien notes due 2017, according to a company news release.

By 5 p.m. ET on July 1, holders had tendered $428,206,000 of the 8% notes and $1,102,779,248 of the 12½% notes. The totals include $230,245,000 and $700,000,000 respectively of notes tendered by affiliates of Citadel Investment Group LLC.

Because more than $310 million of the 12½% notes have been tendered by holders other than Citadel, acceptance will be pro-rated.

E*Trade added that Citadel has deliver sufficient consents by midnight ET on July 1 to ensure that approval of the changes will be received for each series of notes. Citadel has waived the consent fee on its notes.

E*Trade announced the exchange on June 22 The company is offering more than $1 billion of new zero-coupon convertible debentures due 2019 in exchange for the notes on a par-for-par basis.

E*Trade said affiliates of Citadel Investment Group LLC, its largest stockholder and bondholder, have agreed to exchange at least $800 million of notes, including $200 million principal amount of the 8% notes and at least $600 million principal amount of the 12½% notes.

The company is offering to exchange all of the 8% notes and up to $310 million principal amount of the 12½% notes not held by Citadel.

The extent of Citadel's participation in the exchange offer is subject to approval from E*Trade's primary federal banking regulator, the Office of Thrift Supervision.

Offer details

The new debentures will be convertible into common stock at an initial conversion price of $1.034 per share for class A debentures and $1.551 per share for class B debentures.

Holders who tender by midnight ET on July 1 will receive class A debentures, and holders who tender after that time but before the offer expiration will receive class B debentures.

The terms of the class A and class B debentures are identical except for the conversion prices.

The offer will expire at midnight ET on the date of the vote at the special shareholders meeting the company plans to hold in mid-August.

Shareholders will vote on the issuance of the new convertibles in the exchange offer under applicable Nasdaq Marketplace rules, the issuance of up to 365 million shares of common stock in additional debt exchange offers and to increase the authorized shares of common stock, among other things.

Consent solicitation

The company is also soliciting consents to amendments and waivers of some provisions of the indentures governing the notes during the period ending at midnight ET on July 1.

If the needed consents are received, E*Trade will pay a consent fee of $5 per $1,000 principal amount of notes to holders who deliver consents before July 1 but do not tender their notes.

Holders tendering their notes before July 1 will be automatically deemed to have delivered consent to the amendments and waivers and to have waived any consent fee.

The company needs consents from holders of a majority of each series of notes.

Citadel has agreed to tender notes or provide consent as needed to ensure that enough consents are received.

Plans for the offer were first announced June 17. The exchange offer is one element of the company's $1.2 billion plan to strengthen its capital structure, which also includes a $400 million public offering of common stock.

The completion of the exchange offer is subject to conditions that include the closing of the stock offering and shareholder approval.

The proceeds from the stock offering will provide additional equity capital, primarily for E*Trade Bank and secondarily for other corporate purposes.

E*Trade is a financial services company based in New York.

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