Peabody Energy tenders for 8 7/8% and 9 5/8% '08 notes

Peabody Energy Corp. said Thursday (Feb. 27) that it was beginning a cash offer to purchase any and all of its $317.098 million of outstanding 8 7/8% senior notes due 2008 and of its $392.219 million of outstanding 9 5/8% senior subordinated notes due 2008.

Peabody, a St. Louis-based coal producer, set an early tender deadline of 5 p.m. ET on March 12, and said the offer would expire at 5 p.m. ET on March 27, with both deadlines subject to possible extension.

The company said that the total consideration to be paid for each note validly tendered and accepted for payment prior to the early tender deadline would be 104.75% of the principal amount for the 8 7/8% notes (i.e. $1,047.50 per $1,000 principal amount) and 105.125% of the principal amount for the 9 5/8% notes (i.e. $1,051.25 per $1,000 principal amount). All tendering holders of either series of notes will also receive accrued and unpaid interest up to, but not including, the settlement date.

The total consideration for each note tendered includes an early tender premium of 3% ($30 per $1,000 principal amount), payable for those notes tendered by the early tender deadline. Holders tendering their notes after that deadline but before the expiration of the tender offer will receive the total consideration minus the early tender premium, for a total of 101.75% of the principal amount for the 8 7/8% notes ($1,017.50 per $1,000 principal amount) and 102.125% of the principal amount for the 9 5/8% notes ($1,021.25 per $1,000 principal amount), plus interest for both series.

Tenders of notes made prior to the early tender deadline may not be properly withdrawn, unless the company reduces the tender offer consideration or the early tender premium or is otherwise required by law to permit withdrawal. Tenders of notes made any time after that may be properly withdrawn at any time until the scheduled expiration.

The tender offer will be conditioned upon the consummation by Peabody of a new $600 million revolving credit facility and a new $600 million bank term loan, and issuance of $500 million of new senior debt. Peabody plans to use a portion of the net proceeds from these financings to fund the purchase of the two series of outstanding notes under the terms of the tender offer.

Assuming the tender offer is consummated, Peabody intends to call any remaining outstanding notes for redemption on May 15, 2003, at a redemption price of 104.438% of the principal amount ($1,044.38 per $1,000 principal amount) for the 8 7/8% notes and 104.813% of the principal amount ($1,048.13 per $1,000 principal amount) for the 9 5/8% notes, plus, for each series, interest accrued and unpaid up to, but not including, the redemption date.

Lehman Brothers Inc. (call collect at 212-528-7581 or toll-free at 800-438-3242, attention: Emily Shanks) is the dealer manager for the tender offer. The information agent is D.F. King & Co. Inc. (call collect at 212-269-5550 or toll-free at 800-967-7574).

Citgo Petroleum plans 7 7/8% '06 note repurchase

Citgo Petroleum Corp. (B3/B+) said on Thursday (Feb. 27) that it plans to repurchase $50 million of its 7 7/8% senior notes due 2006, using a portion of the proceeds of its recent bond sale.

Citgo - a Tulsa, Okla.-based crude oil refining subsidiary of Petroleos de Venezuela SA, the Venezuelan national oil company, said in an 8-K filing with the Securities and Exchange Commission that it had received approximately $535 million in net proceeds of from the Feb. 20 sale of $550 million principal amount of new 11 3/8% senior notes due, 2011 as well as $200 million from a borrowing under a secured term loan agreement with a group of lenders dated as of Feb. 17.

Besides using a portion of the proceeds to redeem the 7 7/8% notes, Citgo also said that it would use the balance of the funds for general corporate purposes. It added that it could and might use the balance of the net proceeds from the senior notes to pay a portion of a dividend up to $500 million to PDV America, Inc., its direct parent corporation, to provide funds for the repayment of PDV America, Inc.'s 7 7/8% senior notes due this coming Aug. 1, if Citgo is permitted to make that dividend under the indenture governing the new notes.

Citgo said that pending the application of the net proceeds from the senior notes as described, it expect to use a portion of those proceeds from the note offering to repay its revolving bank loans.

It currently expects to use the funds from the borrowing under the term loan agreement for general corporate purposes.

Quest Diagnostics gets consents from Unilab 12¾% '09 noteholders

Quest Diagnostics Inc. said on Thursday (Feb. 27) that it had received the requisite amount of consents to proposed indenture changes from the holders of Unilab Corp.'s 12¾% senior subordinated notes due 2009, as part of Quest's previously announced tender offer for those notes.

Quest said that as of the now-expired consent deadline for the offer at 5 p.m. ET on Wednesday (Feb. 26), it had received consents from the holders of $100.8 million principal amount of the notes, or 100% of the outstanding amount, allowing the tender offer, which expires early next month, to continue.

Merrill Lynch & Co. (contact the Liability Management Group, at either 888 ML4-TNDR or 212 449-4914) is dealer-manager for the tender offer and the consent solicitation. The information agent is Georgeson Shareholder Communications Inc. (call toll-free at 866 283-1946; banks and brokerage firms call 212 440-9800). The depositary is HSBC Bank USA.

AS PREVIOUSLY ANNOUNCED: Quest Diagnostics, a Teterboro, N.J.-based provider of medical diagnostic testing, information and services, said on Feb. 6 that it had begun a cash tender offer for any and all of the outstanding $100.8 million principal amount of Unilab's 12¾% notes. The tender offer was begun in connection with Quest Diagnostics' previously announced agreement to acquire Unilab (Quest announced on Feb. 26, that it had acquired Unilab via a separate equity tender for Unilab's shares for $297 million in cash, plus 7.4 million Quest common shares).

Quest said the bond tender offer would expire at 12 midnight ET on March 6, subject to possible extension, and initially set 5 p.m. ET on Feb. 20 as the consent deadline, but subsequently extended it to 5 p.m. ET on Feb. 26; the consent solicitation portion of the offer expired as scheduled at that time without further extension.

The company said it would purchase the outstanding notes at a price to be determined two business days prior to the expiration date of the tender offer ([tentatively, March 4) using a formula based on a 50-basis point fixed spread over the yield to maturity of the reference security - the 1.875% U.S. Treasury Notes due Sept. 30, 2004 - at that time.

The purchase price would also include a $30 per $1,000 principal amount consent payment for those holders tendering their notes by the consent deadline. Quest said it was seeking the consent of the noteholders to certain proposed amendments to the notes' indenture, aimed at eliminating substantially all of the restrictive provisions of the indenture. It said that it would consider holders tendering their notes by the consent deadline to have agreed to the indenture changes, making them eligible to receive the consent payment. It further said that tendered notes could not be withdrawn and consents could not be revoked after the end of the consent period.

All tendering holders will also receive accrued and unpaid interest on their notes. Payment for validly tendered notes is expected to be made promptly following the expiration of the tender offer. Quest plans to finance the tender offer with a combination of cash on hand and borrowings under a $450 million amortizing term loan facility.

The company said the tender offer would be subject to a number of conditions and contingencies, including the successful completion of the acquisition of Unilab by Quest Diagnostics and the now-fulfilled requirement of receipt of consents from a majority of the outstanding noteholders.

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