Brazil's Embraer prices exchange offer for 6.375% notes due 2017, 2020

By Susanna Moon

Chicago, Sept. 12 - Embraer SA said it priced the exchange offer and consent solicitation for the $380.1 million of outstanding 6.375% notes due 2017 and $500 million 6.375% notes due 2020 issued by Embraer Overseas Ltd.

In the exchange offer, Embraer Overseas will issue new 5.696% notes due Sept. 16, 2023. The notes will be guaranteed by Embraer.

For each $1,000 principal amount, the total exchange value was set at $1,120.31 for the notes due 2017 and $1,118.31 for the notes due 2020, according to a company press release.

Pricing for the exchange offer was set at 2 p.m. ET on Sept. 12 using the bid-side yield on the 2.5% Treasury note due Aug. 15, 2023 minus a fixed spread of 29 basis points for the notes due 2017 and plus a spread of 133 bps for the notes due 2020.

The yield was 2.606% for the 2017 notes and 4.226% for the 2020 notes.

The total payment includes a $50.00 premium for each $1,000 of notes tendered by the early deadline, 5 p.m. ET on Sept. 11.

The coupon on the new notes was set at 5.696%, which is equal to the sum of the bid-side yield of 2.896% on the 2.5% U.S. Treasury note due Aug. 15, 2023 plus 280 bps.

The company also will pay accrued interest up to but excluding the settlement date, which will be Sept. 16 for early tendered notes.

The exchange offer will run until 11:59 p.m. ET on Sept. 25. The offer began on Aug. 29.

Early tenders update

As of the early tender date, investors had tendered 54% of both series of notes, or $144 million principal amount of 2017 notes and $331.5 million principal amount of 2020 notes.

Based on the exchange ratios, Embraer said it expects to issue about $532 million principal amount of new notes in exchange for notes tendered so far.

Tendered notes may no longer be withdrawn, as of the early tender deadline.

The offer is conditioned on the issue of at least $300 million of new notes.

The company previously said it is soliciting consents to amend the notes to modify or eliminate provisions, including restrictive covenants, events of default and other provisions.

The solicitation is conditioned on securing the consents of holders representing at least a majority of the outstanding notes.

The exchange offer is being offered only to holders who are qualified institutional buyers under Rule 144A and non-U.S. persons under Regulation S.

D.F. King & Co., Inc. (attn: Elton Bagley, 800 207-3158 or embraer@dfking.com) is the exchange agent and information agent.

Embraer is an aircraft manufacturer based in Sao Jose dos Campos, Brazil.

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