Liberty makes cash payment on exchangables, adjusts exchange ratios

By Tali David

Minneapolis, Aug. 19 - Liberty Interactive Corp.'s subsidiary Liberty Interactive LLC made an extraordinary cash distribution to holders of record on July 24 of its 4% senior exchangeable debentures due 2029 and 3.75% senior exchangeable debentures due 2030 and adjusted the exchange ratios.

The distribution date was Aug. 7.

The extraordinary distribution was made as a result of the closing of the merger transaction between Sprint Nextel Corp. and SoftBank Corp.

Stockholders of Sprint Nextel were given the option, for each share of Sprint Nextel series 1 common stock, to receive either (a) one share of common stock of a new corporation named Sprint Corp. or (b) cash in the amount of $7.65, subject to proration and reallocation.

Sprint announced that, in connection with the merger consideration election, it issued an aggregate of 850,899,628 shares of Sprint common stock and paid $16,639,999,897 in exchange for the 3,026,063,027 shares of Sprint Nextel series 1 common stock that were eligible to participate in the merger consideration election.

Under the indenture relating to the debentures, the merger consideration election constituted a "reference share offer" that requires a "reference share offer adjustment" to the number of reference shares underlying each debenture. Therefore, in addition to the extraordinary distribution, Liberty has made a "reference share proportionate reduction" to the number of reference shares underlying the debentures.

For the 4% debentures, the pre-merger exchange ratio (shares per bond) is 11.4743 for Sprint and 0.786 for CenturyLink; the post-merger exchange ratio is 3.2265 for Sprint and 0.786 for CenturyLink; the cash distribution per bond is $63.096; and the total cash distribution is $29,578,250.

For the 3.75% debentures, the pre-merger exchange ratio is 8.3882 for Sprint and 0.5746 for CenturyLink; the post-merger exchange ratio is 2.3587 for Sprint and 0.5746 for CenturyLink; the cash distribution per bond is $46.1258; and the total cash distribution is $21,217,832.

In accordance with the indenture, the principal amount of the debentures was reduced by the amount of each extraordinary cash distribution that Liberty pays on the debentures. In addition, the adjusted principal amount is to be further reduced on each successive semiannual interest payment date to the extent necessary to cause the semiannual interest payment on that date to represent the payment by Liberty, in arrears, of an annualized yield equal to the stated cash coupon rate on the adjusted principal amount of the debentures.

For the 4% debentures, the beginning adjusted principal amount per bond is $1,000; the principal adjustment per bond is $63.096; the ending adjusted principal amount per bond is $936.904; the beginning total principal outstanding is $468,782,000; and the ending total principal outstanding is $439,203,750.

For the 3.75% debentures, the beginning adjusted principal amount per bond is $1,000; the principal adjustment per bond is $46.1258; the ending adjusted principal amount per bond is $953.8742; the beginning total principal outstanding is $459,999,000; and the ending total principal outstanding is $438,781,168.

Englewood, Colo.-based Liberty Interactive owns interests in electronic retailing, media, communications and entertainment businesses.

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