CVRD subsidiary Vale Overseas buys $187 million 8 5/8% notes in tender

New York, Dec. 15 - Companhia Vale do Rio Doce said its wholly owned subsidiary, Vale Overseas Ltd., received valid tenders of $186.996 million or 62.33% of its $300 million outstanding principal amount of 8 5/8% enhanced guaranteed notes due 2007.

At the previous announcement Companhia Vale do Rio Doce said Vale Overseas had set pricing in the tender.

The company will pay $1,117.34 for the notes based on a reference yield of 2.941%. Pricing was set at 2 p.m. ET on Dec. 10.

The tender expired at 5 p.m. ET on Dec. 14.

As announced on Dec. 1, Vale, a unit of Rio de Janeiro-based iron ore company CVRD, determined 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 2 7/8% U.S. Treasury notes due Nov. 30, 2006.

The consideration per $1,000 principal amount of notes is equal to the present value on the settlement date for the offer of $1,000 principal amount of the securities plus interest payments from the last interest payment date until the maturity date, discounted using the bid-side yield of the reference security plus 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. Settlement is expected 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 also 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 or call collect 212 834-7279) is dealer manager, and JPMorgan Chase Bank is the depositary. J.P. Morgan Bank Luxembourg SA is Luxembourg agent. D.F. King & Co. Inc. is the information agent (800 290-6429 or 212 269-5550).

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