Kansas City Southern de Mexico sets prices to be paid in tender offers

By Angela McDaniels

Tacoma, Wash., April 23 - Kansas City Southern subsidiary Kansas City Southern de Mexico, SA de CV determined the prices it will pay in the tender offers for its $300 million of 8% senior notes due 2018, $185 million of 6 5/8% senior notes due 2020 and $200 million of 6 1/8% senior notes due 2021, according to a company news release.

The company is offering to buy any and all of the 8% notes and 6 5/8% notes and a maximum amount of the 6 1/8% notes.

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 each $1,000 principal amount of notes, the total consideration is $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 5 p.m. ET on April 23, the early tender deadline.

Holders will also receive accrued interest up to but excluding the applicable settlement date. The early settlement date is expected to be May 3 for the 8% notes and 6 5/8% notes, and the final settlement date for the 6 1/8% notes is expected to be May 8.

As of the early tender deadline, holders had tendered $237,202,000 of the 8% notes, $180.97 million of the 6 5/8% notes and $181,872,000 of the 6 1/8% notes.

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.

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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