Tesco gives tender update for dollar notes, sets pricing for others

By Susanna Moon

Chicago, July 3 – Tesco plc announced the early results in the tender offers for six series of its notes in three currencies.

As announced June 19, the company is offering to buy up to $300 million of its $1.15 billion 6.15% senior securities due 2037 and in a separate tender up to £500 million less the amount spent in the dollar offer of euro- and sterling-denominated notes.

Investors had tendered $637,113,000 of the 6.15% notes as of the early deadline at 5 p.m. ET on June 30, and Tesco expects to purchase the notes using a proration factor of 47.9925%, according to a company update on Monday.

Settlement for early tendered notes is expected to occur on July 6.

The offer was set to continue until 11:59 p.m. ET on July 17; however, because the offer has been oversubscribed, the company said it does not expect to accept for purchase any notes tendered after the early deadline.

In the dollar offer, pricing will be set using a spread of 275 basis points over the 3% Treasury due Feb. 15, 2047.

The total includes an early tender premium of $50 per $1,000 principal amount that will only be paid to those holders who participate by the early tender deadline of 5 p.m. ET on June 30.

Pricing will be set at 11 a.m. ET on July 5.

Tesco will also pay accrued interest up to but excluding the settlement date.

The dealer managers are BNP Paribas (888 210-4358, 212 841-3059, +44 20 7595 8668 or liability.management@bnpparibas.com), Goldman Sachs & Co. LLC (800 828-3182, 212 902-5183, +44 20 7774 9862 or liabilitymanagement.eu@gs.com) and RBC Capital Markets, LLC (877 381-2099, 212 618-7822, +44 20 7029 7063 or liability.management@rbccm.com).

The information agent and tender agent is D.F. King & Co., Inc. (TescoPLC@dfkingltd.com, https://sites.dfkingltd.com/tescousoffer, 212 269-5550, 800 848-3416, +44 20 7920 9700 or +852 3953 7230).

In the euro and sterling offers, Tesco’s €600 million of 5.125% notes due 2047 have first priority.

Tesco set the acceptance amount for the first priority notes at £214,324,989, or €244,009,000, of the 2047 notes on Monday, with no pro rata scaling, according to a separate notice on Monday.

The purchase price for the 2047 notes was set at 106.966% of par using a spread of 315 bps over the interpolated mid-swap rate for a purchase spread of 1.535% and a purchase yield of 4.685%.

The company also accepted for purchase £54.65 million of its £279.2 million of 5.2% notes due 2057 using a scaling factor of 55% at a purchase price of 99.959% of par.

For the second priority notes, the purchase price was set using a spread of 345 bps over the 4.25% Gilt due Dec. 7, 2055 for a purchase spread of 1.752% and a purchase yield of 5.202%.

Pricing was set at 8 a.m. ET on Monday.

The company originally said it would buy up to £500 million equivalent of the notes less the sterling equivalent of the principal amount of notes purchased in the dollar offer.

The sterling notes had second priority and Tesco planned to buy to up £500 million of the notes less the sterling equivalent of the purchased in the dollar and euro offers.

Included in the offer were the company’s £200 million of 6% notes due 2029 to be purchased at a spread of 280 bps over the 6% Gilt due Dec. 7, 2028, its £200 million of 5.5% notes due 2033 to be purchased at a spread of 290 bps over the 4.25% Gilt due June 7, 2032, its £173 million of 4.875% notes due 2042 to be purchased at a spread of 300 bps over the 4.5% Gilt due Dec. 7, 2042 and its £279.2 million of 5.2% notes due 2057 to be purchased at a spread of 345 bps over the 4.25% Gilt due Dec. 7, 2055.

The issuer also noted that in the dollar offer, the acceptance amount is £231,089,200 based on the exchange rate of the offer deadline.

After settlement on July 6, the outstanding amount will be €355,991,000 of the 2047 notes, £200 million of the 2029 notes, £200 million of the 2033 notes, £173 million of the 2042 notes and £224.55 million of the 2057 notes.

Tesco will also pay accrued interest.

The tender ended at 11 a.m. ET on June 30.

The dealer managers are BNP Paribas (+44 20 7595 8668 or liability.management@bnpparibas.com), Goldman Sachs International (+44 20 7774 9862 or liabilitymanagement.eu@gs.com) and RBC Europe Ltd. (+44 20 7029 7063 or liability.management@rbccm.com).

The information and tender agent is D.F. King Ltd. (+44 20 7920 9700, +852 3953 7230, TescoPLC@dfkingltd.com or https://sites.dfkingltd.com/TescoEUROFFER).

Tesco is a Cheshunt, England-based grocery and retail chain.

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