Liberty Mutual reveals pricing on upsized exchange offers for notes

By Sarah Lizee

Olympia, Wash., Sept. 26 – Liberty Mutual Group Inc. announced pricing for its offers to exchange new senior notes due 2050 for six series of its outstanding notes, according to a press release late Wednesday.

Earlier in the day, the company had announced the early results of the exchange.

By the early participation date, 5 p.m. ET on Sept. 24, the following amounts had been tendered for exchange, listed in order of acceptance priority level:

• $67,072,000 of the $503,705,000 of series A junior subordinated notes, with pricing set using the 2.875% Treasury due May 15, 2049 plus a fixed spread of 290 basis points, for a yield of 5.001% and a total exchange consideration of $1,323.47 per $1,000 of notes;

• $16,971,000 of the $51,749,000 of series C junior subordinated notes, with pricing set using the 2.875% Treasury due May 15, 2049 plus a fixed spread of 310 bps, for a yield of 5.201% and a total exchange consideration of $1,658.64 per $1,000 of notes;

• $480,148,000 of the $750 million of 6.5% senior notes due 2042, with pricing to be set using the 2.875% Treasury due May 15, 2049 plus a fixed spread of 165 bps, for a yield of 3.751% and a total exchange consideration of $1,416.33 per $1,000 of notes;

• $78,575,000 of the $231,222,000 of 7% senior notes due 2034, with pricing set using the 2.875% Treasury due May 15, 2049 plus a fixed spread of 160 bps, for a yield of 3.701% and a total exchange consideration of $1,366.96 per $1,000 of notes;

• $169,402,000 of the $470,515,000 of 6.5% senior notes due 2035, with pricing set using the 2.875% Treasury due May 15, 2049 plus a fixed spread of 145 bps, for a yield of 3.551% and a total exchange consideration of $1,348.62 per $1,000 of notes; and

• $436,078,000 of the $1.05 billion of 4.85% senior notes due 2044, with pricing set using the 2.875% Treasury due May 15, 2049 plus a fixed spread of 170 bps, for a yield of 3.801% and a total exchange consideration of $1,167.64 per $1,000 of notes.

The total exchange consideration includes the early participation premium of $30 per $1,000 of notes. Holders who tendered their notes by the early deadline are eligible to receive the early participation premium.

The total exchange consideration for the series C junior subordinated notes was calculated as if the notes are due on the par call date of June 15, 2038.

Each of the exchange offers will expire at 11:59 pm ET on Oct. 8.

Eligible holders that tendered their existing notes at or prior to the early participation date will be eligible to receive an early participation premium as part of their exchange consideration.

In each of the exchange offers, Liberty Mutual is offering to exchange for each $1,000 principal amount of the existing notes validly tendered and not validly withdrawn at or prior to the early participation date and accepted for exchange, a principal amount of new notes equal to the applicable total exchange consideration for the relevant series of the existing notes, plus accrued interest to but not including the applicable settlement date.

If the total exchange consideration exceeds $1,000 per $1,000 principal amount of existing notes, the amount of the excess will be paid in cash.

According to Wednesday’s release, Liberty Mutual increased the limit on the aggregate principal amount of new notes to be issued in the exchange offers to $1,248,246,000 from $750 million. The company had previously said that it intended to increase the limit to the extent necessary to allow the acceptance of existing notes validly tendered, up to a maximum increased new notes issuance limit of $1.25 billion.

If Liberty Mutual elects to have an early settlement, settlement for the existing notes tendered and accepted after the early participation date is expected to be on Sept. 27.

Settlement for the existing notes tendered and accepted after the early participation date, if any, is expected to be Oct. 10.

Liberty Mutual does not intend to exercise the early settlement election unless existing notes exchangeable for at least $750 million principal amount of new notes have been validly tendered as of the early participation date.

The total exchange consideration for the existing notes of each series will be calculated at 10 a.m. ET on Sept. 25.

The new notes will bear interest at an annual rate equal to the sum of the bid-side yield on the 2.875% Treasury due May 15, 2049, as of the price determination date, plus 185 bps. The company said Wednesday that it had set the coupon for the new notes at 3.951%.

Tenders of the existing notes may be withdrawn at any time at or prior to 5 p.m. ET on Sept. 24.

The exchange offers are subject to a number of conditions, including the condition that at least $300 million of new notes be issued.

Global Bondholder Services Corp. (866 470-4300 or 212 430-3774) is the information agent.

Liberty Mutual is a Boston-based property and casualty insurance company.

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