Altria's $2 billion tender offer oversubscribed at early deadline

By Angela McDaniels

Tacoma, Wash., Aug. 20 - Altria Group, Inc. has already received tenders for $3,705,501,000 of notes, according to a company news release.

On Aug. 6, the company began a cash tender offer for up to $2 billion principal amount of its senior notes. The early tender deadline was 5 p.m. ET on Aug. 17, and the offer will end at midnight ET on Aug. 31.

As of the early tender deadline, holders had tendered

• $1,734,101,000 principal amount of the company's $3.1 billion of 9.7% notes due 2018;

• $1,282,485,000 principal amount of its $2.2 billion of 9.25% notes due 2019;

• $283,917,000 principal amount of its $1.5 billion 9.95% notes due 2038; and

• $404,998,000 principal amount of its $1.5 billion 10.2% notes due 2039.

The 9.7% notes and 9.25% notes have a priority acceptance level of one, and the 9.95% notes and 10.2% notes have a priority acceptance level of two.

Because the offer is already oversubscribed, the company will accept only a portion of the priority one notes on a prorated basis and will not accept any priority two notes.

For each $1,000 principal amount, the company will pay $1,435.83 for the 9.7% notes and $1,421.02 for the 9.25% notes. These amounts include a $30.00 early tender payment for each note tendered by the early tender deadline.

The company will also pay accrued interest up to but excluding the settlement date, which is expected to be Sept. 4.

The payment would have been $1,665.86 for the 9.95% notes and $1,693.62 for the 10.2% notes, both including the $30.00 early tender payment.

Pricing for the offer was set at 11 a.m. ET on Aug. 20. The total consideration is intended to result in a yield to maturity equal to the sum of the yield to maturity of the applicable reference Treasury, calculated based on the bid-side price of that Treasury at the pricing time, plus a fixed spread.

The reference Treasury for the 9.7% notes is the 0.5% Treasury due July 31, 2017, and the fixed spread is 135 basis points. The reference Treasury for the 9.95% notes is the 1.75% Treasury due May 15, 2022, and the fixed spread is 80 bps.

For the 9.95% notes and 10.2%, the reference Treasuries were the 3.125% Treasury due Feb. 15, 2042. The spread was 235 bps for the 9.95% notes and 240 bps for the 10.2% notes.

On Aug. 9, Altria completed a $2.8 billion offering of senior notes, satisfying the tender offer's financing condition. The tender offer is subject to the satisfaction or waiver of certain other conditions.

Citigroup Global Markets Inc. (800 558-3745 or 212 723-6106), J.P. Morgan Securities LLC (866 834-4666 or 212 834-2494) and Morgan Stanley & Co. LLC are the lead dealer managers. Global Bondholder Services Corp. (866 387-1500 or, for banks and brokers, call 212 430-3774) is the information agent and depositary.

Altria is a tobacco company based in Richmond, Va.

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