Farmers Insurance announces tender offers for three series of notes

By Angela McDaniels

Tacoma, Wash., Oct. 9 - Farmers Insurance Exchange, Fire Insurance Exchange and Truck Insurance Exchange began tender offers for three series of notes, according to a company news release.

Farmers Insurance Exchange began a tender offer for its outstanding 8.625% surplus notes due 2024, and the three exchanges began a tender offer for up to $550 million liquidation amount, less any amount accepted in the 8.625% notes tender offer, of Farmers Exchange Capital's outstanding 7.05% trust surplus note securities and 7.2% trust surplus note securities.

All tendered 8.625% notes will be accepted for purchase, and all tendered 7.05% trust notes will be accepted for purchase before any 7.2% trust notes are accepted.

There are currently outstanding $300 million principal amount of 8.625% notes, $500 million liquidation amount of 7.05% trust notes and $150 million liquidation amount of 7.2% trust notes.

The tender offers will expire at midnight ET on Nov. 6.

Holders must tender their notes before 5 p.m. ET on Oct. 23 to receive the total consideration, which will include an early tender payment of $50 per $1,000 principal or liquidation amount of notes.

The total consideration for each series of notes will be determined by reference to the fixed spread over the yield to maturity of a reference Treasury security at 2 p.m. ET on Oct. 24.

The reference Treasury is the 2.5% Treasury note due Aug. 15, 2023 for the 8.625% notes and the 7.05% trust notes and the 2.875% Treasury note due May 15, 2043 for the 7.2% trust notes. The fixed spread is 185 basis points for the 8.625% notes, 225 bps for the 7.05% trust notes and 240 bps for the 7.2% trust notes.

Based on the yield to maturity of the reference Treasuries at 2 p.m. ET on Oct. 8, the hypothetical total consideration is $1,343.86 for the 8.625% notes, $1,225.90 for the 7.05% trust notes and $1,154.12 for the 7.2% trust notes.

The exchanges will also pay accrued interest or accumulated distributions, as applicable, up to but excluding the settlement date.

The tender offers are conditioned on the issuance of at least $350 million of surplus notes. The proceeds of the notes and cash on hand will be used to fund the tender offers.

The dealer managers are Citigroup Global Markets Inc. (800 558-3745 or 212 723-6106) and RBS Securities Inc. (203 897-6145 or 877 297-9832). The information agent and depositary is Global Bondholder Services Corp. (212 430-3774 for banks and brokers or 866 807-2200).

The exchanges, their subsidiaries and their affiliates make up the Farmers Insurance Group of Companies, an insurance group based in Los Angeles.

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