Reynolds gets needed consents to exchange $3.5 billion Lorillard notes

By Toni Weeks

San Luis Obispo, Calif., June 25 – Reynolds American Inc. said it received tenders for a majority of the outstanding principal amount of each of the seven series of senior notes issued by Lorillard Tobacco Co. by 5 p.m. ET on June 24 and expects to promptly enter into a supplemental indenture to amend the notes.

In exchange for each $1,000 principal amount, the company will issue $1,000 of new senior notes plus a consent payment of $2.50 to holders who tender their notes for exchange by a new consent payment deadline of 5 p.m. ET on July 10. Previously the company had planned to issue $1,000 of new senior notes plus the consent payment only to holders who tendered by 5 p.m. ET on June 24, the original consent payment deadline, and $970 for those who tendered after that.

The new consent deadline coincides with the expiration of the offering.

According to a press release, the company took in tenders as of the first consent deadline, as follows:

• $394,861,000, or 78.97%, of the outstanding $500 million of 3.5% senior notes due 2016;

• $441.38 million, or 88.28%, of the outstanding $500 million of 2.3% senior notes due 2017;

• $654,409,000, or 87.25%, of the outstanding $750 million of 8.125% senior notes due 2019;

• $630,914,000, or 84.12%, of the $750 million of 6.875% senior notes due 2020;

• $465,816,000, or 93.16%, of the $500 million of 3.75% senior notes due 2023;

• $235,641,000, or 94.26%, of the outstanding $250 million of 8.125% senior notes due 2040; and

• $238,302,000, or 95.32%, of the outstanding $250 million of 7% senior notes due 2041.

The company said that the withdrawal rights for the exchange offers and consent solicitations expired at 5 p.m. ET on June 24, and that deadline is not being extended, so holders may no longer withdraw the notes or revoke consents as of this date.

The offers to exchange the aggregate $3.5 billion of notes are being conducted in connection with the company’s merger with Lorillard, Inc., the parent company of Lorillard Tobacco, which was completed on June 12.

Holders exchanging Lorillard Tobacco notes in the offers will receive Reynolds American notes with interest provisions, maturity dates and interest payment dates identical to those being exchanged.

Settlement is expected July 15. The supplemental indenture will become effective upon execution and delivery by the parties thereto, but the amendments will not become operative under Reynolds American has accepted and exchanged and/or paid for the tendered Lorillard notes, the filing said.

Consent solicitations

Reynolds said previously that it was soliciting consents to eliminate substantially all of the restrictive covenants and a bankruptcy event of default for the issuer and the guarantor of the Lorillard Tobacco notes as well as to eliminate the requirement under the Lorillard indenture that the guarantor of the notes continue to provide Lorillard noteholders with financial statements and other financial information.

The company also was seeking to relieve the issuer of the Lorillard notes of any requirement that the issuer offer to repurchase the notes upon change-of-control events combined with credit ratings events.

Lorillard noteholders who tendered their notes were deemed to have delivered consents to all of the proposed amendments. Holders could not tender their notes without delivering consents or deliver consents without tendering their notes.

The exchange offers were conditioned on the completion of the merger, which has been satisfied

In the merger, Lorillard Tobacco merged merge with and into Reynolds’ wholly owned subsidiary, R.J. Reynolds Tobacco Co., which is assuming Lorillard Tobacco's obligations under the notes.

Following the transaction, the Lorillard Tobacco notes are guaranteed only by R.J. Reynolds Tobacco Holdings, Inc., which has assumed Lorillard's obligations as guarantor under the notes.

The exchange offers are not conditioned upon the tender of any minimum amount of any series of the outstanding Lorillard Tobacco notes or the receipt of the needed consents in any of the consent solicitations.

Reynolds American is a Winston-Salem, N.C.-based manufacturer and seller of cigarettes and other tobacco products.

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