Devon launches tender offers, consent solicitations for five series

By Marisa Wong

Morgantown, W.Va., March 7 – Devon Energy Corp. said it has begun cash tender offers to purchase securities from five series, up to an aggregate purchase price of $1 billion.

The company is offering to repurchase the following securities, listed in order of acceptance priority level:

• 7.875% debentures due 2031, with $1,058,648,000 principal amount outstanding, issued by Devon Financing Co., LLC;

• 7.95% debentures due 2032, with $788,758,000 principal amount outstanding, issued by Devon Energy;

• 5.85% notes due 2025, with $485,232,000 principal amount outstanding, issued by Devon Energy;

• 5.6% notes due 2041, with $1.25 billion principal amount outstanding, issued by Devon Energy; and

• 3.25% notes due 2022, with $1 billion principal amount outstanding, issued by Devon Energy.

The 3.25% notes due 2022 are subject to a tender sub-cap of $250 million.

The tender offers will expire at 11:59 p.m. ET on April 3.

The company said it is also soliciting consents to some proposed amendments to the indentures governing the securities. The proposed amendments would, among other things, eliminate substantially all of the restrictive covenants, some affirmative covenants and events of default and other related provisions.

In order for the proposed amendments for a series of securities to become effective, (a) the amendments must be consented to by holders of a majority of the aggregate principal amount outstanding of that series and (b) all of the securities of that series that have been tendered must be accepted for purchase without proration.

Holders may not tender their securities without delivering consents.

The consent solicitations will expire at 11:59 p.m. ET on April 3.

Holders who tender their securities at or prior to 5 p.m. ET on March 20, the early tender date, will be eligible to receive the total consideration, which includes an early tender payment of $30 per $1,000 principal amount.

Holders who tender their securities after the early tender date will only be eligible to receive an amount equal to the total consideration less the early tender payment.

The total consideration for each $1,000 principal amount of securities will be determined using a fixed spread plus the yield to maturity based on the bid-side price of the applicable U.S. Treasury security.

The reference security is the 2.75% U.S. Treasury due Feb. 15, 2028 for the 7.875% debentures, 7.95% debentures and 5.85% notes; the 2.75% U.S. Treasury due Nov. 15, 2047 for the 5.6% notes; and the 2.625% U.S. Treasury due Feb. 28, 2023 for the 3.25% notes.

The fixed spread is 140 basis points for the 7.875% debentures and 7.95% debentures; 60 bps for the 5.85% notes and 3.25% notes; and 135 bps for the 5.6% notes.

Pricing will be set at 2 p.m. ET on March 21.

The company will also pay accrued interest from the applicable last interest payment date up to, but excluding, the settlement date, which is March 22 for early tendered securities and April 4 for any securities tendered after the early deadline that are accepted for purchase.

All securities tendered at or prior to the early tender date will have priority over securities tendered after the early deadline.

Tenders may be withdrawn at or prior to 5 p.m. ET on March 20.

Devon expects to fund the offers with cash flow generated from operations and the proceeds from previously completed asset sales and financing transactions.

The company said the tender offers are being made to reduce its outstanding debt, including the debt of its subsidiaries.

The tender offers and consent solicitations are not subject to minimum tender conditions.

Citigroup Global Markets Inc. (800 558-3745 or 212 723-6106), Credit Suisse Securities (USA) LLC (800 820-1653 or 212 538-1862) and Wells Fargo Securities, LLC (866 309-6316 or 704 410-4760) are the lead dealer managers and solicitation agents.

BMO Capital Markets Corp., Mizuho Securities USA LLC and Scotia Capital (USA) Inc. are co-dealer managers and solicitation agents.

D.F. King & Co., Inc. (800 967-4617 or 212 269-5550) is the tender and information agent.

Devon Energy is an oil and natural gas company based in Oklahoma City.

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