Farmers Insurance Exchange wraps tender offers for three note series

By Susanna Moon

Chicago, Nov. 13 - Farmers Insurance Exchange, Fire Insurance Exchange and Truck Insurance Exchange completed their previously announced tender offers at midnight ET on Nov. 12, with settlement set for Nov. 14.

Farmers Insurance Exchange ran a tender offer for its outstanding 8.625% surplus notes due 2024, and the three exchanges ran a tender offer for up to $550 million liquidation amount, less any amount accepted in the 8.625% notes tender offer, of the 7.05% notes and Farmers Exchange Capital's 7.2% trust surplus note securities.

By the end of the offer, holders had tendered $96,556,000 of the 8.625% notes, $125,041,000 of the 7.05% notes and $11,535,000 of the 7.2% notes.

As noted earlier, the company took in $96,549,000 of the 8.625% notes, $125,041,000 of the 7.05% notes and $11,535,000 of the 7.2% notes by the early tender deadline of 5 p.m. ET on Oct. 28.

The company announced the early tender results on Oct. 29, extended the tender offer and also modified financing condition.

The tender offers were originally set to end Nov. 6.

The companies modified the pricing terms for Farmers Exchange Capital's outstanding 7.05% trust surplus note securities on Oct. 21.

As already noted, all tendered 8.625% notes were to be accepted for purchase, and all tendered 7.05% trust notes were to be accepted for purchase before any 7.2% trust notes are accepted.

The total payment for each series of notes was set using a fixed spread over the yield to maturity of a reference Treasury security at 2 p.m. on Oct. 29.

The total payment per $1,000 principal amount is as follows:

•$1,355.37, or 185 basis points over the 2.5% Treasury note due Aug. 15, 2023, for the 8.625% surplus notes;

• $1,252.08, or 215 bps over the 2.5% Treasury note due Aug. 15, 2023, for the 7.05% trust notes; and

• $1,166.26, or 240 bps over the 2.875% Treasury note due May 15, 2043, for the 7.2% trust surplus notes.

The spread for the 7.05% trust notes was originally 225 bps.

The total payment includes an early tender amount of $50.00 per $1,000 principal or liquidation amount of notes.

The exchanges will also pay accrued interest or accumulated distributions up to but excluding the settlement date.

The tender offers were conditioned on the issuance of at least $335 million of surplus notes, decreased from the $350 million originally announced. Farmers Exchange Capital II priced a $335 million offering of 6.151% trust surplus note securities on Oct. 29. The proceeds of the notes and cash on hand will be used to fund the tender offers.

The dealer managers were Citigroup Global Markets Inc. (800 558-3745 or 212 723-6106) and RBS Securities Inc. (203 897-6145 or 877 297-9832). The information agent and depositary was Global Bondholder Services Corp. (212 430-3774 for banks and brokers or 866 807-2200).

The exchanges, their subsidiaries and their affiliates make up the Farmers Insurance Group of Companies, an insurance group based in Los Angeles.

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