Chattem completes tender offer for 8 7/8% notes

New York, March 10 - Chattem Inc. (Ba3/B+) said that it had successfully completed its previously announced tender offer for its 8 7/8% senior subordinated notes due 2008, which expired as scheduled at midnight ET on March 9, without extension.

As of that deadline, a total of some $174.7 million of the notes, or about 85.4% of the outstanding principal amount, had been tendered by their holders and were accepted and paid. The figure was up slightly from the $174.5 million (85.3%) of the notes tendered by the Feb. 24 consent deadline. Final settlement of the additional notes tendered after the consent deadline was completed on Wednesday.

As previously announced, Chattem, a Chattanooga, Tenn., manufacturer of branded consumer products, said on Feb. 10 that it had begun a cash tender offer and consent solicitation for any and all its $204.538 million outstanding principal amount of 8 7/8% notes and had also begun soliciting noteholder consents to proposed indenture changes aimed at eliminating substantially all of the restrictive covenants and certain events of default.

It set a consent deadline of 5 p.m. ET on Feb. 24, and said the tender offer would expire at midnight ET on March 9, subject to possible extension.

The company said that it would pay $1,036.73 per $1,000 principal amount to holders tendering their notes by the consent deadline, which would include a consent payment of $30 per $1,000 principal amount. Holders tendering after the consent deadline but before the expiration deadline would receive $1,006.73 per $1,000 principal amount, with all tendering holders eligible to also receive accrued interest up to, but not including, the date of payment.

Chattem said it would need the consent of holders of a majority of the principal amount of the notes to the indenture amendment.

Holders could not tender without delivering consents or give consents with tendering.

The company's offer was subject to conditions, including the receipt of tenders of a majority of the principal amount of the notes outstanding, completion of the required financing, consent from the lenders under Chattem's credit facility and other customary conditions.

Chattem said it planned to fund the tender with proceeds from a long-term debt financing. On Feb. 13, Chattem announced plans to sell $200 million of new fixed- and floating-rate bonds and said that it would use the deal proceeds, along with borrowings under a new $50 million bank credit facility, to refinance existing debt. High-yield market syndicate sources said on Feb. 20 that Chattem had sold $125 million of new 7% senior subordinated notes due 2014 and $75 million of new floating-rate senior notes due 2010.

On Feb. 23, Chattem said that it had received the requisite consents - from the holders of more than a majority of the outstanding notes - to adopt the proposed indenture changes. Chattem said that along with the guarantor under the indenture, and SouthTrust Bank NA, in its capacity as indenture trustee, the company had executed a supplemental indenture incorporating the proposed changes, although it said that amendments would only become operative when the notes were accepted and payment for them made under the terms of the tender offer. It said that once the proposed amendments to the indenture become operative, they will be binding upon the holders of all of the notes, even including those not tendered into the offer.

On Feb. 26, Chattem said it had received tenders of $174.5 million of the 8 7/8% notes, or about 85.3% of the outstanding amount, by the consent deadline, and had also received the required amount of related noteholder consents. As of that deadline, the notes had been accepted for payment according to previously announced terms.

Banc of America Securities LLC (contact High Yield Special Products at 888 292-0070 or call collect 704 388-4813) was the dealer manager and solicitation agent. Global Bondholder Services Corp. (866 470-4200 or call collect 212 430-3774) was the information agent.

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