Outlook 2019: Multi-billion-dollar tenders, exchanges lead liability management in 2018

By Wendy Van Sickle

Columbus, Ohio, Dec. 31 – Telecom, financial and oil and gas names were among issuers that conducted some of 2018’s biggest liability management exercises.

As in the previous year, some issuers held multiple jumbo liability management maneuvers in excess of $1 billion apiece, although that trend appeared to be less pronounced than in 2017.

Some of the year’s biggest liability management deals were offers to exchange notes for new ones that had the same coupon and maturity as existing notes but that substituted the existing issuer for a new one. In each of those large note swaps, the issuers offered a like principal amount of new notes plus a $1.00 cash payment for each $1,000 of existing notes traded.

Petrobras holds tenders

Emerging markets issuer Petroleo Brasiliero SA (Petrobras) held a pair of tenders in which it offered to pay up to $4 billion apiece for multiple series of its notes and a third in which it offered to pay up to $1.5 billion for eight additional series.

On March 15, the issuer offered to make a total payment of up to $4 billion, excluding accrued interest, for six series of its notes due from 2020 to 2023.

BB Securities Ltd., BTG Pactual US Capital, LLC, HSBC Securities (USA) Inc., J.P. Morgan Securities LLC, BofA Merrill Lynch., MUFG and Santander Investment Securities Inc. were the dealer managers.

Global Bondholder Services Corp. was the information agent.

On May 21, the Rio de Janeiro-based oil and gas company announced a same-sized offer for 11 series of notes.

Banco Bradesco BBI SA, Banco Safra SA, Cayman Islands Branch, Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Morgan Stanley & Co. LLC, Scotia Capital (USA) Inc. and Standard Chartered Bank were the dealer managers and Global Bondholder Services served as the information agent.

Finally, on Dec. 6, the company announced it would spend up to $1.5 billion in a tender for eight series of its notes. In that offer, the company said it would make a payment of up to $1 billion for four series of notes and up to $500 million for the other four series.

Those offers are set to run through Jan. 4.

BB Securities Ltd., Credit Agricole Securities (USA) Inc., Itau BBA USA Securities, Inc., JPMorgan, BofA Merrill Lynch and Mizuho Securities USA LLC are the dealer managers.

Global Bondholder Services is the information agent and depositary.

Verizon in multiple tenders

Verizon Communications Inc. also carried out a trio of liability management offers.

In March, the New York-based telecommunications company launched a cash tender offer for up to $3 billion of notes from 13 series. The notes were divided into two groups, with Verizon offering up to $1.5 billion for each group.

However, when the dust settled Verizon accepted tenders totaling $1.9 billion of the group 1 notes and $971.749 million of the group 2 notes.

Citigroup, Goldman Sachs & Co. LLC and JPMorgan were the lead dealer managers.

Global Bondholder Services was the information agent.

In June, the New York City-based telecommunications company launched a tender and exchange offer for 13 series.

Verizon issued $4.25 billion of new notes to settle the exchange and accepted all $485.19 million of the notes validly tendered under the cash tender offer.

Global Bondholder Services was the information agent.

In its third big liability management move of the year, Verizon tendered for eight series of notes on Sept. 5, offering a purchase price of up to $2.5 billion. Verizon took in about $1.73 billion tenders under that offer.

Citigroup, JPMorgan, RBC Capital Markets, LLC and Wells Fargo Securities, LLC were the lead dealer managers.

Global Bondholder Services was the tender agent and information agent.

BP’s exchange offer

Three other of the biggest liability management operations of the year were exchanges offering a like amount of notes and $1 in cash per $1,000 principal amount of notes, including one from BP plc, which offered to exchange up to $10.6 billion of 23 series of notes issued by BP Capital Markets plc.

The offer opened on Nov. 14.

BP said holders had tendered $18,167,533,000 of the notes issued by BP Capital Markets America Inc. as of the early deadline on Nov. 28.

The company offered a combination of a like amount of new notes to be issued by BP Capital Markets America plus the $1 in cash for each $1,000 principal amount of notes tendered by the early deadline.

Barclays, BofA Merrill Lynch and Goldman Sachs were the dealer managers. D.F. King & Co., Inc. was the exchange agent.

BP Capital Markets America is a Chicago-based aviation and marine fuels provider and subsidiary of London-based oil and gas company BP plc, which guarantees the notes.

Disney, 21st Century notes

Walt Disney Co. also offered a like principal amount of notes and $1 in cash per $1,000 principal amount in its offer to exchange any and all of the $18,128,740,000 outstanding notes issued by 21st Century Fox America, Inc. for new notes issued by TWDC Holdco 613 Corp.

TWDC is a direct, wholly owned subsidiary of Disney formed for the purpose of Disney’s acquisition of Twenty-First Century Fox.

Disney’s offer to exchange the 36 series of securities with maturities from 2019 to 2095 was announced on Oct. 5.

The new notes will have the same coupon and maturity as the existing notes.

Disney’s exchange offer is set to expire on Jan. 15.

Global Bondholder Services is the exchange agent and information agent.

TWDC Holdco 613, on behalf of 21st Century Fox America, is concurrently soliciting consents to some proposed amendments to each of the indentures governing the 21st Century Fox America notes to eliminate substantially all of the restrictive covenants, release the guarantee provided by 21st Century Fox and limit the reporting covenants.

The entertainment and media company is based in Burbank, Calif.

Deutsche Bank exchange

Like BP and Disney, Deutsche Bank AG also held a large exchange, offering to trade multiple series of notes for new notes from another issuer plus $1 in cash per $1,000 of notes tendered by the early deadline.

The bank offered on May 2 to exchange eight series of notes for a like principal amount of a corresponding series of senior notes to be issued by Deutsche Bank AG, New York Branch.

The company later extended the cash incentive to all holders regardless of when their notes are tendered for exchange in the offer.

Holders exchanged $6,398,345,000 under that offer.

Deutsche Bank Securities was the dealer manager, and Global Bondholder Services was the exchange agent and information agent.

In a separate liability management exercise, Deutsche Bank tendered for its €1.25 billion 1.75% notes due 2028 and its €1.5 billion 1.125% notes due 2025 in an offer that ended on Nov. 27.

The Frankfurt-based banking and financial services company accepted for purchase all €385.4 million of the 2028 notes and €229.5 million of the 2025 notes tendered under that offer.

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