South Africa to accept more than $1.2 billion notes in exchange, tender offers

By Angela McDaniels

Seattle, May 16 - The Republic of South Africa said that based on preliminary results, it expects to accept tenders for $662.146 million of notes and to accept $555.544 million of notes submitted for exchange during exchange and tender offers for six series of bonds that expired on May 15.

Specifically, the republic expects to accept for exchange $477.423 million of its $1.5 billion 9 1/8% notes due May 19, 2009 and $78.121 million of its $237 million 8½% notes due June 23, 2017.

These notes will be exchanged for new dollar-denominated 5 7/8% notes due May 30, 2022, which were priced at 99.635 for a yield of 5.912% based on the U.S. 4½% Treasury note due May 15, 2017 plus 120 basis points.

For each 9 1/8% note exchanged, holders will receive one 5 7/8% note priced at $996.35 plus $79.61 in cash for a total purchase price of $1,075.96.

For each 8½% note exchanged, holders will receive one 5 7/8% note priced at $996.35 plus $238.43 in cash for a total purchase price of $1,234.78.

In addition, South Africa expects to accept tenders for $410.788 million of the 9 1/8% notes, $18.090 million of the 8½% notes and €171.566 million of its €500 million 7% notes due April 10, 2008.

In total, $1,217,690,290 of notes are expected to be accepted for exchange or tender.

Because the offer was oversubscribed, the republic will not accept any tenders or exchanges for its $1 billion 7 3/8% notes due April 25, 2012 or $1 billion 6½% notes due June 2, 2014 or any tenders for its €1.25 billion 5¼% notes due May 16, 2013.

Previously, South Africa said notes would be accepted in the following order of priority: 9 1/8% notes, 7% notes, 8½% notes, 5¼% notes, 7 3/8% and 6½% notes.

The tender consideration per $1,000 or €1,000 principal amount of notes is $1,075.96 for the 9 1/8% notes, $1,234.78 for the 8½% notes and €1,022.13 for the 7% notes.

The republic will also pay accrued interest on all notes tendered or exchanged up to but excluding the settlement date, which is slated for May 30.

The payouts were determined using the 4½% Treasury due April 30, 2009 and 28 bps for the 9 1/8% notes, the 4 5/8% Treasury due Feb. 15, 2017 and 64 bps for the 8½% notes and one-year Euribor minus 15 bps for the 7% notes.

The offers are part of efforts to enhance the profile of the country's international debt, according to a news release.

The news release added that, as a whole, the transaction will have no impact on the amount of South Africa's debt in the international markets.

The information and exchange agent is Bondholder Communications Group (contact Rachel Andrews 888 385-2663 or call collect 212 809-2663; 44 20 7382 4580).

The Luxembourg exchange agent is Deutsche Bank Luxembourg SA (00352 421 22 639 or fax 00352 47 31 36).

The joint dealer managers are Barclays Capital Inc. (866 307-8991 or call collect 212 412-4072; 44 20 7773 5484) and Citigroup Global Markets Inc. (800 558-3745 or call collect 212 723-6106; 44 20 7986 8969).

In addition, the republic priced $444.456 million of the new 5 7/8% notes for cash in an underwritten offering with Barclays Capital Inc. and Citigroup Global Markets Inc. as joint bookrunners.

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