Diageo gets tenders for $696 million 7.375% notes in exchange offer

By Jennifer Chiou

New York, May 13 - Diageo plc and Diageo Capital plc announced that they accepted tenders for $696 million of notes in the up to $1 billion exchange offer for Diageo Capital's 7.375% notes due 2014.

The exchange offer expired at 5 p.m. ET on May 12.

The company was offering an equal amount of new 4.828% notes due 2020 in addition to $180.13 in cash per $1,000 principal amount of tendered notes.

Like the 7.375% notes, the new notes will be issued by Diageo Capital and guaranteed by Diageo.

As already reported, the 4.828% coupon was calculated as 100 basis points over the 3.524% yield on the 3.625% Treasury security due Feb. 15, 2020 plus an additional 30.4 bps in respect of accrued interest on the 7.375% notes up to but excluding the settlement date. Because of this, holders will not receive a cash payment for accrued interest on the old notes at settlement, which is slated for May 14.

The total cash consideration was equal to the difference between:

• The discounted value from the settlement date to maturity of the remaining payments of principal and interest using a discount rate equal to the sum of the 1.736% bid-side yield of the 1.5% U.S. Treasury note due Dec. 31, 2013 plus a spread of 50 bps; and

• $1,000.

The total cash consideration included an early exchange premium of $50.00 for each note tendered by 5 p.m. ET on April 27, the early exchange date.

The offer began April 14 and was subject to the receipt of tenders for at least $500 million principal amount of notes.

Goldman Sachs & Co. (800 828-3182 or call collect 212 902-5128) and J.P. Morgan Securities Inc. (866 834-4666 or call collect 212 834-3424) were the dealer managers. Global Bondholder Services Corp. (866 857-2200 or call collect 212 430-3774) was the information agent.

Diageo produces alcoholic beverages and is based in London.

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