Equity Office receives consents to amend 4% exchangeables

By Jennifer Chiou

New York, Jan. 10 - Equity Office Properties Trust announced that its subsidiary EOP Operating LP received the required consents to amend its $1.5 billion of 4% exchangeable senior notes due 2026.

As already reported, the consent solicitation for the 4% notes is being conducted in connection with the company's previously announced merger agreement with affiliates of the Blackstone Group.

The proposed amendments to the note indenture would eliminate substantially all of the restrictive covenants, eliminate some events of default and modify some provisions, including covenants related to mergers and consolidations.

The amendments would also terminate the obligations of Equity Office EOP Operating under the registration rights agreement related to the notes, except for obligations to pay liquidated damages upon registration defaults and to indemnify holders in some situations.

The company will pay consenting noteholders $1.25 per $1,000 principal amount of notes.

The solicitation expired at 5 p.m. ET on Jan. 9.

Settlement of the solicitation is subject to conditions including the receipt of needed consents, the completion of the merger and the satisfaction of the change of control condition, which would trigger the make-whole provisions of the indenture.

Assuming that the mergers close on Feb. 8, the exchange rate for the following 30 business days is expected to be 24.82 shares per $1,000 principal amount, so holders exchanging notes in that time would receive $1,203.77 in cash per $1,000 principal amount of notes.

Concurrently, Equity Office is conducting tender offers and consent solicitations for $8.4 billion of its unsecured debt securities.

On Wednesday it further extended the consent deadline in that tender offer, which includes its 7.25% notes due 2028, 7.50% notes due 2029 and 7.85% notes due 2031.

The early deadline is now 5 p.m. ET on Jan. 17, pushed back from Jan. 10 and Jan. 9.

The company said it has received consents from a majority of holders of the 1995 notes.

The offer ends at 8 a.m. ET on Feb. 8.

On Jan. 5, Equity Office Properties Trust's ad hoc committee of unsecured noteholders said it remains opposed to the Dec. 26 tender offer and consent solicitation and that it is continuing to gather signatures on its no-consent agreement, despite EOP's announcement of a minimum of par on the notes.

A majority in principal amount of notes under each of the 1997 and 2000 notes has already signed the no-consent agreement, Andrew Rosenberg, an attorney for the committee previously said.

The ad hoc committee said it believes that even under the amended terms, holders of 7.25% notes, 7.50% notes and 7.875% notes due 2031 would not receive their full contractual entitlements, according to a statement previously issued by the committee.

Under EOP's amended tender offer and consent solicitation terms, the total consideration for each series of notes is subject to a minimum price of $1,000 per $1,000 principal amount of notes and will be determined based on a spread of 70 basis points.

EOP said the changes were made to ensure that investors have the opportunity to receive at least par for notes tendered on or prior to the consent payment deadline. The amendments were also made in response to changes in prices for U.S. Treasury securities since Dec. 26.

The total consideration includes a consent payment of $50.00 per $1,000 principal amount of notes other than internotes and a consent payment of $10.00 per $1,000 principal amount of the internotes identified in the offer to purchase.

Goldman, Sachs & Co. (877 686-5059 or collect 212 357-0775) and Merrill Lynch, Pierce, Fenner & Smith Inc. (888 654-8637 or 212 449-4914) are the lead dealer managers and solicitation agents. Banc of America Securities LLC; Bear, Stearns & Co. Inc.; Citigroup Global Markets Inc.; Deutsche Bank Securities Inc.; and Morgan Stanley & Co. Inc. are also acting as dealer managers and solicitation agents.

Global Bondholder Services Corp. (212 430-3774 or 866 924-2200) is the information agent.

Chicago-based Equity Office owns and manages commercial properties.

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