Co-operative Group gets needed consents for 7 5/8% debentures, sets tender offer pricing

By Jennifer Chiou

New York, April 17 - Co-operative Group Ltd. announced the receipt of the necessary consents in the solicitation for its £50 million of 7 5/8% first-mortgage debenture stock due 2018.

Holders voted at a meeting at 5 a.m. ET on April 16 in London.

According to a society filing with the London Stock Exchange, the company has received tenders for £29,191,467 of the debenture stock, leaving £20,808,533 outstanding.

Co-operative also set the pricing terms as follows: 1.939% purchase yield; 125.329% purchase price; and 1.439 benchmark security rate.

The purchase yield was determined at 9 p.m. ET on April 17 using the 5% U.K. Treasury stock due March 2018 plus 50 basis points.

As reported, the society was seeking consents to delete the covenant that requires its total consolidated borrowings not to exceed 125% of its tangible consolidated net worth.

According to the society, the "entire basis upon which the financial covenant was constructed" changed when, as a consequence of the recapitalization of Co-operative Bank plc in December, the society's shareholding in the bank was reduced to 30%. The bank will therefore not be included in the full-year 2013 consolidated accounts of the society.

Holders who granted consents to remove the covenant could either keep their debenture stock and receive improved terms or tender their debenture stock for cash.

To holders who consent to the covenant removal and choose to keep their debenture stock, the society is offering to increase the coupon by 125 bps beginning June 30, to pay a 5% premium at maturity and to insert a covenant that will oblige it to make annual valuation reports available to the debenture stockholders.

To holders who consent and choose to tender their debenture stock, the purchase price will equal the value of all remaining payments of principal and interest (before the amendments are enacted) up to and including the scheduled maturity date discounted to the settlement date at a discount rate equal to the purchase yield, minus accrued interest. The society will also pay accrued interest.

In both cases, the society is also offering an earlybird cash payment of 25 bps to holders who provide irrevocable voting instructions by the early deadline, noon ET on April 4.

The final deadline was 5 a.m. ET on April 14.

The settlement date is expected to be April 25.

The society previously said a special committee of the Association of British Insurers that holds about 77% of debenture stock plans to vote in favor of the extraordinary resolution either specifically or by participating in the tender offer.

The dealer manager was UBS Ltd. (44 20 7567 0525 or mark-t.watkins@ubs.com). The registrar was Computershare Investor Services plc (870 889 4026).

Co-operative Group is a Manchester, England-based consumer cooperative with a range of retail businesses. It began the offer on March 24.

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