Reynolds American wraps offer to swap out $3.5 billion Lorillard notes

By Susanna Moon

Chicago, July 13 – Reynolds American Inc. announced the results of the tender offers for seven series of senior notes issued by Lorillard Tobacco Co.

Investors had tendered the following amount of notes by the end of the offer at 5 p.m. ET on July 10, according to a press release:

• $414,793,000, or 82.96%, of the outstanding $500 million of 3.5% senior notes due 2016;

• $447,092,000, or 89.42%, of the outstanding $500 million of 2.3% senior notes due 2017;

• $668,689,000, or 89.16%, of the outstanding $750 million of 8.125% senior notes due 2019;

• $641,462,000, or 85.53%, of the $750 million of 6.875% senior notes due 2020;

• $473,689,000, or 94.74%, of the $500 million of 3.75% senior notes due 2023;

• $240,197,000, or 94.7%, of the outstanding $250 million of 8.125% senior notes due 2040; and

• $238,302,000, or 96.08%, of the outstanding $250 million of 7% senior notes due 2041.

Settlement has been set for July 15.

As previously announced, in exchange for each $1,000 principal amount, the company will issue $1,000 of new senior notes plus a consent payment of $2.50 to holders who tendered their notes for exchange by the consent deadline of 5 p.m. ET on July 10, which was extended from 5 p.m. ET on June 24 to coincide with the end of the offer.

Before the change, the company had planned to issue $1,000 of new senior notes plus the consent payment only to holders who tendered by the original consent payment deadline and $970 for those who tendered after that.

Reynolds said on June 25 that it had received tenders for a majority of the outstanding principal amount of each of the seven series of senior notes.

As previously noted, the offers to exchange the aggregate $3.5 billion of notes were conducted in connection with the company’s merger with Lorillard, Inc., the parent company of Lorillard Tobacco, which was completed on June 12.

Holders exchanging Lorillard Tobacco notes in the offers will receive Reynolds American notes with interest provisions, maturity dates and interest payment dates identical to those being exchanged.

Consent solicitations

Reynolds previously said it was soliciting consents to eliminate substantially all of the restrictive covenants and a bankruptcy event of default for the issuer and the guarantor of the Lorillard Tobacco notes as well as to eliminate the requirement under the Lorillard indenture that the guarantor of the notes continue to provide Lorillard noteholders with financial statements and other financial information.

The company also was seeking to relieve the issuer of the Lorillard notes of any requirement that the issuer offer to repurchase the notes upon change-of-control events combined with credit ratings events.

Lorillard noteholders who tendered their notes were deemed to have delivered consents to all of the proposed amendments. Holders could not tender their notes without delivering consents or deliver consents without tendering their notes.

The exchange offers were conditioned on the completion of the merger, which was satisfied.

In the merger, Lorillard Tobacco merged with and into Reynolds’ wholly owned subsidiary, R.J. Reynolds Tobacco Co., which is assuming Lorillard Tobacco’s obligations under the notes.

Following the transaction, the Lorillard Tobacco notes are guaranteed only by R.J. Reynolds Tobacco Holdings, Inc., which has assumed Lorillard’s obligations as guarantor under the notes.

The exchange offers were not conditioned upon the tender of any minimum amount of any series of the outstanding Lorillard Tobacco notes or the receipt of the needed consents in any of the consent solicitations.

Reynolds American is a Winston-Salem, N.C.-based manufacturer and seller of cigarettes and other tobacco products.

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