Yum! Brands wraps tender offers for $550 million of five note series

By Susanna Moon

Chicago, Nov. 20 - Yum! Brands Inc. said investors had tendered $1,057,000,000 of notes in the offers for up to $550 million principal amount of five series of senior notes that expired at 11:59 p.m. ET on Nov. 19.

As the offer was oversubscribed, the company accepted for purchase $275 million of the tendered 6.875% senior notes due 2037, which was equal to the sub-cap for that series, and accepted $275 million of the 6.25% senior notes due 2018, according to a company press release.

Investors had tendered $370,872,000 of the 6.875% notes for a proration factor of 74% and $351,712,000 of the 6.25% notes for a proration factor of 78%.

The company did not accept for purchase any 6.25% senior notes due 2016, 5.3% senior notes due 2019 or 4.25% senior notes due 2015, the release noted.

The total purchase price for each $1,000 principal amount is $1,191.43 for the 6.875% notes and $1,185.94 for the 6.25% notes.

The total payment includes an early tender premium of $50 per $1,000 principal amount tendered by 5 p.m. ET on Nov. 4, the early tender date.

The company began the tender offers on Oct. 22 for up to $525 million principal amount of five series of senior notes, with the cap later increased on Nov. 5.

The notes covered by the offers are listed in order of priority acceptance level:

• $600 million 6.875% senior notes due 2037 with $275 million sub-cap, increased from $250 million on Nov. 5;

• $600 million 6.25% senior notes due 2018;

• $300 million 6.25% senior notes due 2016;

• $250 million 5.3% senior notes due 2019; and

• $250 million 4.25% senior notes due 2015.

Pricing, other details

Pricing for the offers was set at 2 p.m. ET on Nov. 5 using the bid-side price of a reference security plus a fixed spread as follows:

• For 6.875% notes, 2.875% U.S. Treasury note due May 15, 2043 plus 165 basis points;

• For 6.25% notes due 2018, 1.375% U.S. Treasury note due Sept. 30, 2018 plus 40 bps;

• For 6.25% notes due 2016, 0.625% U.S. Treasury note due Oct. 15, 2016 plus 25 bps;

• For 5.3% notes, 1.375% U.S. Treasury note due Sept. 30, 2018 plus 145 bps; and

• For 4.25% notes, 0.25% U.S. Treasury note due Sept. 30, 2015 plus 30 bps.

The hypothetical purchase price for each $1,000 principal amount was $1,202.55 for the 6.875% notes, $1,185.80 for the 6.25% notes due 2018, $1,127.59 for the 6.25% notes due 2016, $1,132.60 for the 5.3% notes and $1,065.66 for the 4.25% notes.

The hypothetical amounts were based on the reference yield of the securities as of 2 p.m. ET on Oct. 21 and a settlement date of Nov. 20.

The company also will pay accrued interest to but excluding the settlement date of Nov. 20.

The tender offers are not conditioned upon any minimum amount of notes being tendered.

Goldman, Sachs & Co. (800 828-3182 or 212 357-0215 collect) and J.P. Morgan Securities LLC (866 834-4666 or 212 834-4811 collect) are the lead dealer managers. D.F. King & Co., Inc. is the tender agent and information agent.

The tender offers are consistent with Yum! Brands' ongoing debt management strategy and aim to take advantage of historically low interest rates to issue senior notes at lower rates and use proceeds to buy back debt, reducing annual interest expense and extending the average maturity of its long-term debt, according to a previous press release.

Funding for the offers will come from an issue of senior notes due 2023 and 2043, according to a 424B5 filing with the Securities and Exchange Commission.

The fast food chain operator is based in Louisville, Ky.

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