Norfolk Southern prices exchange offers for seven series, accepts $612.86 million notes

By Wendy Van Sickle

Columbus, Ohio, Nov. 14 – Norfolk Southern Corp. announced pricing of its exchange offers for seven series of notes on Tuesday evening, after announcing earlier in the day that investors had tendered for exchange $737,546,000 of notes as of the early deadline at 5 p.m. ET on Nov. 13.

The company said that it will accept $612,857,000 of the notes tendered by the early deadline. Norfolk Southern expects to deliver $749,997,000 of new notes and pay $58,060,901.40 cash for those tendered notes, including accrued interest.

No additional tenders will be accepted after the early deadline, the company said.

All of the notes tendered from six of the series were accepted, and tenders of the lowest-priority series – the 4.8% notes due 2043 – were accepted at a proration factor of 62.6%.

Pricing was set at 11 a.m. ET on Nov. 14 using the bid-side yield of the reference U.S. Treasury security plus the fixed spread.

Norfolk Southern will pay interest on the new notes at a rate of 3.942%, which is equal to the yield on the bid-side price of the 3% U.S. Treasury note due May 15, 2047 plus a fixed spread of 110 basis points.

The early tender results and the total exchange considerations per $1,000 principal amount of tendered notes are as follow, with the notes listed in order of priority acceptance levels:

• $240,995,000 of the $425,113,000 6% notes due 2105 for $1,328.70, set using the 3% Treasury note due May 15, 2047 plus 165 bps; none of the premium over par will be paid in cash;

• $30,000 of the $225,252,000 7.9% notes due 2097 for $1,700.88, set using the 3% Treasury note due May 15, 2047 plus 175 bps; none of the premium over par will be paid in cash;

• $4,614,000 of the $126,345,000 6% notes due 2111 for $1,302.22, set using the 3% Treasury note due May 15, 2047 plus 175 bps; none of the premium over par will be paid in cash;

• $77,695,000 of the $256.69 million 7.05% notes due 2037 for $1,481.13, set using the 3% Treasury note due May 15, 2047 plus 75 bps; 4% of the premium over par will be paid in cash;

• $32,288,000 of the $316,316,000 7.25% notes due 2031 for $1,448.54, set using the 2.25% Treasury note due Aug. 15, 2027 plus 70 bps; 25% of the premium over par will be paid in cash;

• $49,064,000 of the $368,199,000 7.8% notes due 2027 for $1,389.51, set using the 2.25% Treasury note due Aug. 15, 2027 plus 65 bps; 78% of the premium over par will be paid in cash; and

• $332.86 million of the $500 million 4.8% notes due 2043 for $1,180.89, set using the 3% Treasury note due May 15, 2047 plus 85 bps; 85% of the premium over par will be paid in cash; the tender sub-cap is $100 million. Tenders of this series were accepted for exchange at a proration factor of 62.6% for a total amount of notes accepted from this series of $208,171,000.

Each total exchange consideration includes a $30.00 early tender premium for each $1,000 principal amount of notes tendered by the early deadline.

Holders also will receive accrued interest to but excluding the settlement date.

Tenders may not be withdrawn after the early tender deadline.

Settlement is expected to occur on Nov. 16.

The exchange is scheduled to remain open until 11:59 p.m. ET on Nov. 28, although additional tenders are not being accepted.

The company was initially holding exchange offers for cash and up to $600 million principal amount of the company's new notes due 2047, but Norfolk Southern lifted the cap on the amount of new notes to be issued in the exchange to $750 million, according to an earlier company update on Tuesday.

The exchange offers opened on Oct. 30.

The exchange was contingent on the issue of at least $300 million principal amount of new notes.

The company said it will not receive any cash proceeds from the exchange offers.

The offers are only made to holders who are qualified institutional buyers under Rule 144A or those who are not U.S. persons under Rule 902.

D.F. King & Co., Inc. (800 431-9645, 212 269-5550, nsc@dfking.com or dfking.com/norfolksouthern) is the information agent.

Norfolk Southern is a Norfolk, Va.-based freight railroad company.

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