Kansas City Southern unit accepts early tenders for two note series

By Jennifer Chiou

New York, May 3 - Kansas City Southern subsidiary Kansas City Southern de Mexico, SA de CV announced that it has settled early tenders for $237,202,000 of its $300 million of 8% senior notes due 2018 and $180.97 million of its $185 million of 6 5/8% senior notes due 2020.

Those tenders were received as of 5 p.m. ET on April 23.

The company is offering to buy any and all of the 8% notes and 6 5/8% notes and a maximum amount of its $200 million of 6 1/8% senior notes due 2021.

As reported, the total amount paid to holders of the 6 1/8% notes will not exceed $650 million less the total amount paid to holders in the any and all tender offer, in both cases excluding accrued interest. Acceptance of 6 1/8% notes will be subject to proration.

For the early settlement, the company paid a total consideration of $259,619,961 for the 8% notes and $214,065,794 for the 6 5/8% notes.

For each $1,000 principal amount of notes, the total consideration was $1,094.51 for the 8% notes, $1,182.88 for the 6 5/8% notes and $1,177.84 for the 6 1/8% notes.

The total considerations include an early tender payment of $30.00 per $1,000 principal amount of notes tendered by the early tender deadline.

Holders will also receive accrued interest up to but excluding the settlement date. The final settlement date for the 6 1/8% notes is expected to be May 8.

The company is also soliciting consents to amend the indentures governing the 8% notes and 6 5/8% notes to, among other things, eliminate substantially all of the restrictive covenants and some events of default.

As noted, the consents received so far are enough to make the amendments. Supplemental indentures have been executed, and the amendments will become operative once a majority of the notes are repurchased.

The tender offers began on April 10 and will expire at midnight ET on May 7.

The total considerations were determined by reference to the yield to maturity of a reference Treasury security as of 2 p.m. ET on April 23 plus a fixed spread.

The reference Treasury is the 0.25% Treasury note due Jan. 31, 2014 for the 8% notes, the 0.25% Treasury note due Dec. 15, 2015 for the 6 5/8% notes and the 1.75% Treasury note due May 31, 2016 for the 6 1/8% notes. The reference yields are 0.123%, 0.303% and 0.361%, respectively.

The spread is 50 basis points for the 8% notes and 6 5/8% notes and 87.5 bps for the 6 1/8% notes.

Each tender offer is subject to a condition that Kansas City Southern de Mexico consummates a debt financing transaction.

The dealer manager and solicitation agent is BofA Merrill Lynch (888 292-0070 or 980 387-3907). The information and tender agent is D.F. King & Co., Inc. (800 829-6551, 212 269-5550 or kcs@dfking.com).

Kansas City Southern is a railroad company based in Kansas City, Mo.

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