Farmers gives tender offer pricing, early results for three series

By Toni Weeks

San Luis Obispo, Calif., Oct. 29 - Farmers Insurance Exchange, Fire Insurance Exchange and Truck Insurance Exchange announced the early tender results for three series of notes and also modified the tender offer expiration date and financing condition.

As announced earlier, 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 the 7.05% notes and Farmers Exchange Capital's 7.2% trust surplus note securities.

According to a company news release, the company took in $96,549,000 of its $300 million of 8.625% surplus notes due 2024, $125,041,000 of its $500 million of 7.05% trust surplus note securities and $11,535,000 of its $150 million of 7.2% trust surplus note securities by the early tender deadline of 5 p.m. ET on Oct. 28.

The tender offers will now expire at midnight ET on Nov. 12, extended from Nov. 6. Settlement is expected Nov. 14.

The companies modified the pricing terms for Farmers Exchange Capital's outstanding 7.05% trust surplus note securities on Oct. 21.

As already noted, 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.

The total consideration for each series of notes was determined by reference to the fixed spread over the yield to maturity of a reference Treasury security at 2 p.m. on Oct. 29. Pricing was previously scheduled for Oct. 24 and the early deadline for Oct. 23.

The total consideration per $1,000 principal amount is as follows:

•$1,355.37, or 185 basis points over the 2.5% Treasury note due Aug. 15, 2023, for the 8.625% surplus notes;

• $1,252.08, or 215 bps over the 2.5% Treasury note due Aug. 15, 2023, for the 7.05% trust notes; and

• $1,166.26, or 240 bps over the 2.875% Treasury note due May 15, 2043, for the 7.2% trust surplus notes.

The spread for the 7.05% trust notes was originally 225 bps.

The total consideration includes an early tender payment of $50.00 per $1,000 principal or liquidation amount of notes.

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

The tender offers are now conditioned on the issuance of at least $335 million of surplus notes, decreased from the $350 million originally announced. Farmers Exchange Capital II priced a $335 million offering of 6.151% trust surplus note securities on Tuesday, according to the release. 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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