Brazil's Gerdau sets pricing, gives early results in exchange, tender offer for 7¼%, 7% bonds

By Jennifer Chiou

New York, April 25 - Gerdau SA announced the early participation results in its exchange offer and concurrent cash tender offer for the $1.5 billion of 7¼% bonds due 2017 issued by wholly owned subsidiary GTL Trade Finance, Inc. and the $1.25 billion of outstanding 7% bonds due 2020 issued by wholly owned subsidiary Gerdau Holdings Inc.

As reported, the offers will end at 11:59 p.m. ET on May 8. The early tender and early exchange deadline was 5 p.m. ET on April 24.

Under the exchange offer, the two existing bond issues will be exchanged for up to $1.25 billion of new 10-year bonds jointly issued by GTL and Gerdau Holdings. The new Rule 144A and Regulation S bonds will be guaranteed by Gerdau SA, Gerdau Acominas SA, Gerdau Acos Longos SA and Gerdau Acos Especiais SA.

At the early exchange deadline, holders had tendered for exchange $384,795,000 principal amount of the 7¼% bonds and $587,783,000 principal amount of the 7% bonds.

The new bonds will bear interest at a rate of 5.893% per year.

For each $1,000 principal amount of existing bonds tendered, the exchange consideration is $1,153.07 of new bonds for the 7¼% bonds and $1,132.23 of new bonds for the 7% bonds.

The exchange price for the two series was calculated using the 2.75% Treasury due February 2024. The fixed spread was negative 8 basis points for the 7¼% bonds and plus 167 bps for the 7% bonds.

Based on the exchange ratios, Gerdau said it expects to issue $1,109,000,000 aggregate principal amount of new bonds in the exchange offer.

Tender offer details

Under the other offer, the company is tendering for up to $250 million total consideration of the two series, with priority given to GTL's bonds.

At the early tender deadline, holders had tendered $225,661,000 of the 7¼% bonds and $122,156,000 of the 7% bonds.

Because the total consideration to be paid in accepting the 7¼% bonds exceeds the cap, those bonds will be accepted on a pro rata basis and no 7% bonds will be accepted.

For each $1,000 principal amount, the total tender consideration is $1,143.16 for the 7¼% bonds. It was to be $1,122.17 for the 7% bonds.

The company calculated the tender consideration using the 2.75% Treasury due February 2024 for both the 7¼% bonds and the 7% bonds, with fixed spreads of 20 bps and 186 bps, respectively.

Gerdau will also pay accrued interest for tendered bonds.

D.F. King & Co., Inc. is the exchange agent, tender agent and information agent (800 207-3158 or gerdau@dfking.com).

Gerdau is a steel producer based in Porto Alegre, Brazil.

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