Succession event in tender for IAC's 7% notes due 2013 maintains value of credit default swaps

By Paul A. Harris

St. Louis, July 21 - A "succession event" that will see Interval Acquisition Corp. take over from IAC/InterActiveCorp will maintain the value of the credit default swaps (CDS) pegged to those bonds, a source familiar with the deal told Prospect News on Monday.

Without that succession event the swaps would have lost their value.

Swaps holders who agreed to buy Interval's new 9½% notes due 2016, which are being offered in exchange for the 7% notes due 2013, will see their swaps succeed into the new 9½% notes.

The company had originally intended to sell the new bonds due 2016 in the high-yield new issue market.

However, in opting for the exchange transaction, and increasing the tender price for the 7% notes due 2013 to Treasuries plus 100 basis points, IAC succeeded in getting a coupon significantly lower than conditions in the high-yield primary market would have likely allowed.

For instance, last week, in two other high-yield deals also related to spin offs of IAC entities, Ticketmaster priced $300 million of eight-year senior notes at par to yield 10 ¾%, and HSN, Inc. priced $240 million of 11 ¼% eight-year senior notes at 99.352 to yield 11 3/8%.

As part of a modification unveiled Friday to a previously announced tender offer, some holders of IAC's 7% senior notes due 2013 will exchange their notes for $300 million of 9½% senior unsecured notes due 2016 to be issued by Interval Leisure Group, Inc.

Investors may exchange their notes after the spin off of Interval, according to a company press release.

The tender continues for the remained of IAC's 7% notes.

After being increased on Friday, the payout for each $1,000 principal amount of notes will be determined based on the present value on the settlement date of all future cash flow to Jan. 15, 2013, based on the bid-side yield on the 3 5/8% Treasury note due Dec. 31, 2012 plus 100 basis points minus accrued interest, down from 215 bps.

The total payment will include a consent fee of $30 per $1,000 principal amount for notes tendered by the consent deadline.

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