Outlook 2018: Repeat tenders, note-for-note exchanges mark 2017 in liability management

New York, Dec. 29 – Notable liability management trends in 2017 included issuers that carried out repeated transactions and note-for-note exchanges by investment-grade issuers.

As in the year before, there were numerous giant exercises by issuers looking to manage their liabilities.

Greece tops year

One of the year’s biggest offers was from the Hellenic Republic, the formal name for Greece.

It began an offer on Nov. 15 to exchange €29.58 billion of designated securities due from 2023 to 2042 for six series of benchmark notes due in 2023, 2028, 2033, 2037 and 2042.

The exchange was part of a broader program by the issuer to manage its liabilities.

According to the sovereign’s announcement, the purpose of the offers was to align the terms of the issues “with market standards for sovereign issuers in order to normalize the republic’s yield curve and provide the market with a limited series of benchmark securities which are expected to have significantly greater liquidity than the existing series of designated securities.”

BNP Paribas, Citigroup Global Markets Ltd., Deutsche Bank AG, London Branch, Goldman Sachs International Bank, HSBC Bank plc and Merrill Lynch International were the dealer managers.

Lucid Issuer Services Ltd. was the information and exchange agent.

Bank of America’s self-tender

In the United States, Bank of America Corp. began exchange offers for 20 series of senior notes on Dec. 4.

The notes were grouped by maturity. For those due from 2018 to 2020, the issuer was offering new fixed/floating-rate senior notes due December 2023. For those due from 2022 to 2047, holders were offered new fixed/floating-rate senior notes due December 2028.

An overall limit of $12 billion was set for the new notes to be issued.

Bank of America was dealer manager and D.F. King & Co., Inc. was information agent.

Bank of America is a financial services company based in Charlotte, N.C.

Verizon in multiple tenders

Combining both of the year’s notable trends, Verizon Communications Inc. carried out multiple liability management offers, some in the form of note-for-note exchanges.

The transactions included an exchange and tender offer announced on Jan. 25 made up of two related offers to repurchase 18 series of its outstanding notes, one set consisting of any-and-all exchange offers and the other cash tender offers.

In the exchange portion, Verizon offered a combination of newly issued Verizon notes and, for some of the note series, cash. Based on the response, Verizon issued $9 billion of new notes.

The second part comprises 18 separate cash tender offers organized in three groups.

Citigroup, Credit Suisse, Goldman Sachs, Santander and Wells Fargo were the dealer managers while Global Bondholder Services Corp. was information agent.

Next, on March 13, Verizon announced cash tender offers for 30 series of notes with $10.73 billion outstanding.

Barclays, BofA Merrill Lynch, Morgan Stanley & Co. LLC and RBC Capital Markets, LLC were the dealer managers.

Global Bondholder Services was again information agent.

Then in July Verizon tendered for up to $2.1 billion of 29 series of notes and separately began tender and exchange offers under Rule 144A for 17 series of its and subsidiary GTE LLC’s notes.

Verizon used a waterfall method to accept notes. There was a $3 billion cap on the total cash Verizon offered to purchase old notes and a $4 billion cap on the principal amount of new notes issued in exchange for old notes.

Goldman Sachs & Co. LLC, JPMorgan, Mizuho Securities and Wells Fargo Securities were dealer managers for both parts. Global Bondholder Services once more was information agent.

In October Verizon carried out an offer for three series of euro-denominated notes and one series of sterling notes.

Barclays, Credit Suisse and JPMorgan were dealer managers. Lucid Issuer Services Ltd. was tender agent.

Finally, on Nov. 16 Verizon began 31 separate tenders to spend up to $1 billion by way of a waterfall method to purchase outstanding series of notes. And it also began separate offers and consent solicitations to exchange 18 series of the notes issued by its wholly owned subsidiaries for new notes issued by Verizon.

Verizon is a New York-based telecommunications company.

Wal-Mart tenders twice

Wal-Mart Stores, Inc. was also a repeat visitor. In June it offered to pay up to $2 billion for four series of dollar notes and up to £500 million for three series of sterling securities.

Barclays, J.P. Morgan Securities LLC and Mizuho Securities USA LLC were dealer managers.

Global Bondholder Services was information agent.

In October the company began a cash tender offer for 13 series of its outstanding debt securities.

The maximum aggregate purchase price was set at $8.5 billion.

The discount retailer is based in Bentonville, Ark.

Petrobras tenders, exchanges

From emerging markets issuers, Petroleo Brasiliero SA (Petrobras) began an offer in January for several series of notes that started at $2 billion and was upsized twice, ending at $6 billion.

Banco Bradesco BBI SA, Citigroup Global Markets Inc., HSBC Securities (USA) Inc., Itau BBA USA Securities, Inc. and Morgan Stanley & Co. LLC were dealer managers. Global Bondholder Services Corp. was information agent.

Petrobras followed that offer with a second transaction in September in which it offered to exchange five series of notes for new notes in five separate offers or to purchase them for cash.

Citigroup, BB Securities, Credit Agricole, HSBC, JPMorgan, Merrill Lynch and Santander were dealer managers.

Petrobras is an energy company based in Rio de Janeiro.

AT&T runs exchange

In one of the bigger note-for-note exchanges, AT&T Inc. on Oct. 30 began two exchange offers under Rule 144A – like many of the exchanges – for 46 series of notes.

The maturity extension exchange was separated into two pools, one for 11 series of outstanding notes that would result in the issuance of up to $4 billion of new notes due 2028, the other for seven series of notes that would result in the issuance of up to $4 billion of new notes due 2030.

In a second series of offers, AT&T was offering to exchange 21 series of notes issued by its wholly owned subsidiaries for new notes of the same tenor and interest amount and cash or for a new series of notes due 2046 issued by AT&T. Additionally, seven series of notes issued by AT&T were also eligible to be exchanged for the new 2046 notes.

Credit Suisse, Deutsche Bank, Goldman Sachs, Wells Fargo, Barclays and Bank of America were dealer managers.

Russia uses auction

In September, VTB Capital plc launched a cash tender offer for Russia’s $3,466,398,000 of 11% bonds due 2018 and $10,715,179,211.28 of 7½% bonds due 2030.

Funding came from an offering of new notes, which was capped at $4 billion.

The purchase price was determined through a modified Dutch auction procedure.

In the event, $6,552,956,936 of the 7½% bonds were accepted and none of the 11% bonds.

The purchase price was set at $592 per $1,000 principal amount.

Bank GPB International SA, JSC Sberbank CIB and VTB Capital were dealer managers. Lucid Issuer Services Ltd. was the tender agent.

Talen’s five offers

Although they were all much smaller in size, Talen Energy Supply, LLC carried out no fewer than five tender offers during the year.

In March it offered to buy $900 million from three series of notes, then carried out exchanges in July and September followed by two tenders in November.

iHeart’s long-running offer

iHeartCommunications, Inc. was notable for an entirely different reason: its distressed exchange for five series of priority guarantee notes began in March and was extended no fewer than 18 times to allow negotiations with noteholders.

As the year ended it had still not been successfully concluded.

An exchange by Becton, Dickinson & Co. for C.R. Bard, Inc.’s three series of notes, which began in May, also saw many extensions, in its case a total of 11.

However, the exchange, being carried out in conjunction with the acquisition of Bard by Becton Dickinson was successfully concluding in the final days of the year as the merger closed.

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