AT&T tenders for up to $1.25 billion 7.30% notes due 2011

By Paul Deckelman

New York, March 7 - AT&T Corp. said it has begun a cash tender offer for up to $1.25 billion of its outstanding 7.30% notes due 2011, which currently carry an interest rate of 9.05%.

AT&T is estimated to have about $2.75 billion of the notes outstanding.

The company set an early tender deadline of 5 p.m. ET on March 18. It said pricing for the tender offer would be set at 2 p.m. ET on March 21, and the tender offer will expire at midnight ET on April 4, with all deadlines subject to possible extension.

AT&T, a Bedminster, N.J.-provider of long-distance and other telecommunications services, is to be acquired by SBC Communications Inc. in a recently announced $16 billion merger.

The company said that the total consideration it will pay for notes validly tendered by the early tender deadline and not subsequently withdrawn will be determined on the pricing date using a formula that includes a 150 basis point fixed spread over the yield at that time of a designated reference security, the U.S. Treasury 4% note due Feb. 15, 2015, calculated to the maturity date of the 7.30% notes.

The total consideration will include an early tender premium of $15 per $1,000 principal amount of notes, payable only to those holders tendering their notes by the early tender deadline. Holders tendering their notes after the early tender deadline will not receive the early tender premium as part of their consideration. All tendering holders whose notes are accepted for purchase will also receive accrued and unpaid interest up to but not including the settlement date, which is two business days after the expiration, or April 6, subject to possible extension.

The tender offer is not contingent upon the company's receipt of any minimum principal amount of notes. If the total principal amount of notes validly tendered and not properly withdrawn exceeds $1.25 billion, the company will accept notes for purchase on a pro-rata basis.

Merrill Lynch & Co. (call 888 654-8637) and UBS Securities LLC (call 888 722-9555, ext. 4210) are dealer managers for the tender offer. Global Bondholder Services Corp. is the information agent for the offer as well as the depositary (call 212 430-3774 or 866 924-2200).

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