CVRD subsidiary Vale Overseas tenders for 8 5/8% notes due 2007

New York, Dec. 1 - Companhia Vale do Rio Doce said that its wholly owned subsidiary, Vale Overseas Ltd., has begun a cash tender offer for any and all of its $300 million outstanding principal amount of 8 5/8% enhanced guaranteed notes due 2007.

Vale will set the price that it will pay for the notes at 2 p.m. ET on Dec. 10 and said that the tender offer will expire at 5 p.m. ET on Dec. 14, subject to possible extension.

Vale, a unit of Rio de Janiero-based iron ore company CVRD, will determine the purchase price for the notes using a formula that includes an 18 basis point fixed spread over the yield of a designated reference security, the U.S. Treasury 2 7/8 notes due Nov. 30, 2006.

The consideration per $1,000 principal amount of notes tendered and accepted for payment by the company will be equal to the present value on the settlement date for the offer of $1,000 principal amount of the securities and the present value of the interest payments due on such principal amount from the last interest payment date until the maturity date, determined on the basis of a yield to the maturity date. This will be equal to the sum of (x) the bid-side yield of the reference security, plus (y) the fixed spread, minus accrued and unpaid interest from the last interest payment date to, but excluding, the settlement date, payable on the settlement date.

Tendering holders will also receive accrued and unpaid interest from the last interest payment date to but excluding the settlement date, payable on the settlement date. Settlement of the offer is expected to occur on the third business day following the expiration date.

CVRD said that it is taking advantage of its strong cash flow generation, solid balance sheet and financial position to repurchase the notes. It said that with this transaction, CVRD is acquiring a financial obligation in the global capital markets, which does not reflect pure CVRD credit, as the notes have credit enhancement. A benefit of this transaction is, therefore, to allow market participants to focus solely on the analysis of the company's solid financial position. CVRD further said that by reducing further its debt level, it is also strengthening its balance sheet, in pursuit of an investment-grade rating.

J.P. Morgan Securities Inc. (866 846-2874 in the United States, or 212 834-7279 outside the United States; call collect) will serve as dealer manager for the offer, and JPMorgan Chase Bank is the depositary for the offer. J.P. Morgan Bank Luxembourg SA is Luxembourg agent for the offer. D.F. King & Co. Inc. is the information agent for the offer (call 800 290-6429 or 212 269-5550).

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