UnitedHealth determines Treasury reference yields for tender offers

By Angela McDaniels

Tacoma, Wash., Feb. 4 - UnitedHealth Group Inc. announced the Treasury reference yields it will use in calculating the purchase prices in its modified Dutch auction cash tender offers.

The company is offering to purchase up to $575 million of its intermediate-term notes and up to $200 million of its short-term notes.

The short-term notes include the company's:

• $750 million of 5.25% notes due 2011, whose purchase price will be calculated using the yield to maturity of the 1% Treasury due Dec. 31, 2011 and an acceptable bid spread range of 25 basis points to 65 bps;

• $450 million of 5.5% notes due 2012, whose purchase price will be calculated using the 1% Treasury due Dec. 31, 2011 and an acceptable bid spread range of 110 bps to 150 bps;

• $550 million of 4.875% notes due 2013 (Cusip 91324PBH4), whose purchase price will be calculated using the 1.125% Treasury due Dec. 15, 2012 and an acceptable bid spread range of 110 bps to 150 bps;

• $450 million of 4.875% notes due 2013 (Cusip 91324PAE2), whose purchase price will be calculated using the 1.125% Treasury due Dec. 31, 2012 and an acceptable bid spread range of 95 bps to 135 bps.

The reference yield is 0.838% for the 5.25% notes and 5.5% notes and 1.386% for the 4.875% notes.

The intermediate-term notes include the company's:

• $250 million of 4.75% notes due 2014, whose purchase price will be calculated using the 2.625% Treasury due Dec. 31, 2014 and an acceptable bid spread range of 63 bps to 99 bps;

• $500 million of 5% notes due 2014, whose purchase price will be calculated using the 2.625% Treasury due Dec. 31, 2014 and an acceptable bid spread range of 89 bps to 125 bps;

• $500 million of 4.875% notes due 2015, whose purchase price will be calculated using the 2.625% Treasury due Dec. 31, 2014 and an acceptable bid spread range of 101 bps to 137 bps;

• $750 million of 5.375% notes due 2016, whose purchase price will be calculated using the 3.375% Treasury due Nov. 15, 2019 and an acceptable bid spread range of 39 bps to 75 bps;

• $500 million of 6% notes due 2017 (Cusip 91324PAW2), whose purchase price will be calculated using the 3.375% Treasury due Nov. 15, 2019 and an acceptable bid spread range of 84 bps to 120 bps; and

• $250 million of 6% notes due 2017 (Cusip 91324PBC5), whose purchase price will be calculated using the 3.375% Treasury due Nov. 15, 2019 and an acceptable bid spread range of 96 bps to 132 bps.

The reference yield is 2.358% for the 4.75% notes, 5% notes and 4.875% notes and 3.695% for the remaining notes.

The reference yields were set at 2 p.m. ET on Feb. 3.

The clearing spread premium for each series will be the lowest single premium at which the company will be able to accept tendered notes within the tender caps.

The payouts will include an early participation amount of $30 per $1,000 principal amount of notes tendered by 5 p.m. ET on Jan. 22.

The company added that it will pay accrued interest.

The offers began Jan. 6 and will end at midnight ET on Feb. 5.

As of 5 p.m. ET on Jan. 22, the company had received tenders for approximately $472 million of the short-term notes and approximately $570 million of the intermediate-term notes, including:

• $107,564,000 principal amount, or 14.3%, of the 5.25% notes due 2011;

• $207,827,000, or 46.2%, of the 5.5% notes due 2012;

• $75,361,000, or 13.7%, of the 4.875% notes due 2013 (Cusip 91324PBH4);

• $80,931,000, or 18.0%, of the 4.875% notes due 2013 (Cusip 91324PAE2;

• $79,223,000, or 31.7%, of the 4.75% notes due 2014;

• $108,278,000, or 21.7%, of the 5% notes due 2014;

• $80,187,000, or 16.0%, of the 4.875% notes due 2015;

• $149,589,000, or 19.9%, of the 5.375% notes due 2016;

• $60,434,000, or 12.1%, of the 6% notes due 2017 (Cusip 91324PAW2); and

• $92,784,000, or 37.1%, of the 6% notes due 2017 (Cusip 91324PBC5).

On Jan. 25, the company extended the deadline from Feb. 3 and increased the cap for the intermediate-term notes from $550 million.

The company said the offers will improve the matching of floating-rate assets and liabilities on its balance sheet and reduce its debt service cost.

UnitedHealth Group expects to use a combination of cash on hand and the proceeds from an issue of commercial paper to fund the purchase.

Bank of America Merrill Lynch (888 292-0070 or call collect 980 388-4603), Citi (800 558-3745 or call collect 212 723-6106), J.P. Morgan (866 834-4666 or call collect 212 834-3424) and RBS (877 297-9832 or call collect 203 897-6145) are the dealer managers. Global Bondholder Services Corp. (212 430-3774 or 866 470-4200) is the information agent and depositary.

The diversified health-care company is based in Minnetonka, Minn.

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