By Paul Deckelman
New York, Oct. 8 - Williams Companies Inc. said Wednesday that it would tender for a total of $1.641 billion of outstanding bond debt in an effort to cut its debt load and annual interest expense and also to lower the administrative costs associated with having a wide assortment of debt issues outstanding.
Williams was estimated to have about $13 billion of total debt as of the end of the second quarter.
Like many other companies which produce and ship natural gas, generate electricity or trade energy, Tulsa, Okla.-based pipeline operator Williams' shares and bonds were battered in the wake of the 2001 collapse of Enron Corp., and it has been trying since then to cut costs by unloading non-core assets and reducing debt.
Williams announced a cash tender offer for any and all of the $1.4 billion outstanding principal amount of its 9¼% notes due 2004, and separately announced tender offers for another $241 million face amount of its own debentures and bonds that had originally been issued by Transco Energy Co. and Mapco Inc., both of which were later acquired by Williams.
Included in the latter category are a total of $108 million in three series of debentures issued by Williams under a 1990 indenture - its $37.012 million of 8 7/8% debentures due 2012, its $24.875 million of 10 ¼% debentures due 2010, and its $46.4 million of 9 3/8% debentures due 2021. Williams is also tendering for approximately $27 million of 9 7/8% debentures due 2020 that were originally issued by Transco, and a total of $106 million of various tranches of Series B Medium Term Notes due 2003-2022, originally issued by Mapco.
News of the tender offers pushed Williams bonds up in Wednesday trading, although the main issue being tendered for - Williams' 9¼% '04 notes - did not move much, as they were already trading around the level at which the company expects to take them out.
The 9¼% notes were heard to have firmed slightly to 102.5 bid from previous levels around 102.125. Its 8 7/8% debentures due 2012 rose to 94.5 bid from 93 earlier; its 10¼% debentures due 2020 improved to 84 bid from 82.25; and its 9 3/8% notes due 2021 likewise fattened to 106.5 bid from 105. Transco's 9 7/8% debentures gained half a point to close at 94.5.
Traders said that the news also helped boost Williams issues which aren't being tendered for. One trader, noting that Williams recently "has rebounded very sharply," quoted all of the company's paper up at least three-quarters of a point to a full point, on average. He saw Williams' 8¾% bonds due 2032 having "gone out pretty strong," moving up to 104.5 bid, 105.5 offered from prior levels around 103, while its 7 5/8% bonds due 2019 went home at 98.75 bid. 99.5 offered, up about a point on the session.
"I guess it was just psychological, it all moved up," he said.
Williams set 5 p.m. ET on Oct 20 as the early tender deadline in its tender for its 9¼% notes, and as the consent deadline in the tender offers for the various other securities (Williams is seeking consent of the holders of these securities to proposed indenture changes that would eliminate certain restrictive covenants and events of default.) It said it would set the prices it would pay for the various securities other than the 9¼% notes at 2 p.m. ET on Oct. 22, and set 5 p.m. ET on Nov. 6 as the expiration deadline for all of the tender offers, and said the final settlement date for all of the tenders would likely be on Nov. 10. All deadlines are subject to possible extension.
Williams, a Tulsa, Okla.-based energy company, said that it would pay holders of the 9¼% notes who tender their notes by the early tender deadline $1,025.50 per $1,000 principal amount of notes tendered, which includes a $30 per $1,000 early tender premium, and would receive their consideration on the early settlement date, expected to be two business days after the early tender deadline. Holders tendering after the early tender deadline would receive $995.50 per $1,000 principal amount for their notes, on the final settlement date. All tendering noteholders will receive accrued and unpaid interest up to, but not including, the appropriate settlement date.
The company said that it would determine the prices it would pay for the various other notes it is tendering for based on a formula using a fixed spread over the yield to maturity of the various respective reference securities as of 2 p.m. ET on Oct. 22, the pricing date (see table 1). Holders tendering before the consent deadline (and thus consenting to the proposed indenture changes) would receive a $30 per $1,000 principal amount consent payment as part of their consideration, while holders tendering after the consent deadline would not. All tendering holders will also receive accrued and unpaid interest up to, but not including, the final settlement date.
Williams said that tenders of the 9¼% made prior to the early tender deadline may not be withdrawn, unless Williams reduces the tender offer consideration or the early tender payment or is otherwise required by law to permit withdrawal. It said that tenders of the various other securities made after the consent deadline may be properly withdrawn at any time until the offer expiration, while tenders of notes made prior to the consent deadline may be withdrawn at any time before the consent deadline, but not afterward, unless Williams reduces the tender offer consideration or the consent payment or is otherwise required by law to permit withdrawal.
It said that the tender offers are conditioned upon general tender offer conditions described in the official offers to purchase, and said that none of the tender offers would be conditioned upon the completion of the others. The tender offers for the various other securities (for which Williams is also seeking noteholder consents) are not conditioned upon receiving the company receiving the minimum required consents to amend the respective indentures.
Lehman Brothers Inc. will serve as the lead dealer manager (call 212 528-7581 or toll-free at 800-438-3242). Banc of America Securities LLC, Citigroup Global Markets Inc. and J. P. Morgan Securities Inc. will serve as co-dealer managers, and D.F. King & Co. Inc. will serve as the information agent (call 212 269-5550 or toll-free at 800 431-9643).
| Principal outstanding | Security | Reference security | Spread
|
|
|
| Transco notes
|
| $26.733 million | 9.875% due 2020 | 5.375% due Feb. 15, 2031 | 2.100%
|
|
|
| Mapco Notes
|
| $10 million | 8.85% due 2003 | T-Bill due Nov. 12, 2003 | 0.000%
|
| $5 million | 8.87% due 2004 | 3.625% due March 31, 2004 | 0.500%
|
| $7 million | 8.85% due 2004 | 3.625% due March 31, 2004 | 0.500%
|
| $10 million | 8.78% due 2004 | 2% due Nov. 30, 2004 | 0.875%
|
| $10 million | 8.60% due 2005 | 1.5% due Feb. 28, 2005 | 1.100%
|
| $10 million | 8.70% due 2005 | 1.5% due July 31, 2005 | 1.250%
|
| $10 million | 8.20% due 2006 | 7% due July 15, 2006 | 1.500%
|
| $3 million | 8.45% due 2007 | 6.25% due Feb. 15, 2007 | 1.600%
|
| $2 million | 8.25% due 2007 | 4.375% due May 15, 2007 | 1.700%
|
| $3 million | 8.25% due 2007 | 4.375% due May 15, 2007 | 1.700%
|
| $3.5 million | 8.43% due 2008 | 3.25% due Aug. 15, 2008 | 1.800%
|
| $3 million | 8.55% due 2011 | 4.25% due Aug. 15, 2013 | 1.700%
|
| $2.5 million | 8.63% due 2013 | 4.25% due Aug. 15, 2013 | 2.000%
|
| $4 million | 8.48% due 2013 | 4.25% due Aug. 15, 2013 | 2.000%
|
| $5 million | 8.40% due 2014 | 4.25% due Aug. 15, 2013 | 2.100%
|
| $16 million | 8.80% due 2022 | 5.375% due Feb. 15, 2031 | 2.100%
|
| $1 million | 8.70% due 2022 | 5.375% due Feb. 15, 2031 | 2.100%
|
| $1.3 million | 8.72% due 2022 | 5.375% due Feb. 15, 2031 | 2.100%
|
|
|
| Williams notes
|
| $37.012 million | 8.875% due 2012 | 4.15% due Aug. 15, 2013 | 1.900%
|
| $24.875 million | 10.25% due 2020 | 5.375% due Feb. 15, 2031 | 2.100%
|
| $46.144 million | 9.375% due 2021 | 5.375% due Feb. 15, 2031 | 2.100%
|
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