Altria prices tender for $2.6 billion and €1 billion of notes

New York, Feb. 27 - Altria Group, Inc. said it set pricing in its tender offer for $2.6 billion of notes and debentures and for €1 billion of bonds in connection with Altria's planned spinoff of Philip Morris International Inc.

For the company's $350 million of 7.65% notes due 2008, the payment is $1,017.39 per $1,000 principal amount, for the $500 million of 5.625% notes due 2008 it is $1,022.64, for the $1 billion of 7% notes due 2013 it is $1,173.80, for the $750 million of 7.75% debentures due 2027 it is $1,271.34, and for the €1.02 billion of 5.625% bearer bonds due 2008 it is €1,004.18.

Pricing was set at 2 p.m. ET on Feb. 27 for the dollar-denominated notes and 9 a.m. ET on Feb. 27 for the euro bonds.

The totals include the consent payment.

As of 11 a.m. ET on Feb. 27, Altria had received tenders and consents without tenders for 40.97% of the euro bonds and said it will accept all those securities for purchase. It said it will accept all tendered bonds and all consents, regardless of whether it reaches the required majority of the bonds and enters into a supplemental guarantee.

Altria previously announced that it had received enough consents to amend its dollar-denominated notes, according to a company news release.

Altria and its subsidiary, Altria Finance (Cayman Islands) Ltd., began the tender offer and consent solicitation on Jan. 31 in connection with Altria's planned spin off of Philip Morris International Inc.

The companies are soliciting consents to amend the indentures to clarify the application of certain provisions to the spin off. Altria said it believes the spin off is not prohibited by the indentures but wishes to eliminate any uncertainty by amending them.

Holders may either tender and deliver consents or deliver consents without tendering their securities.

As of Feb. 13, the consent deadline, the company had received tenders and consents for $249.14 million, or 71.18%, of the 7.65% notes; for $353.52 million, or 70.7%, of the 5.625% notes; for $939.70 million, or 93.97%, of the 7% notes; and for $710.45 million, or 94.73%, of the 7¾% debentures.

As a result, Altria has executed supplemental indentures for these notes, and the amendments will become operative once the tendered notes are accepted for payment.

Holders had delivered tenders and consents for €412.91 million, or 40.38%, of the 5.625% bearer bonds as of the consent deadline. The company needs consents from holders of a majority of the bonds to effect the amendments.

On Feb. 14, Altria and Altria Finance amended the offer so that all holders who deliver consents will receive the consent payment. Originally, only holders who delivered consent by the consent deadline would receive the payment.

For each $1,000 or €1,000 principal amount, the consent payment will be $1.00 for the 7.65% and 5 5/8% notes, $12.50 for the 7% notes, $25.00 for the 7¾% debentures and €1.00 for the 5 5/8% bearer bonds.

The tender payout for the notes was determined using the 5 1/8% Treasury due June 30, 2008 and a fixed spread of 15 basis points for the 7.65% notes; the 4 7/8% Treasury due Oct. 31, 2008 and 15 bps for the 5 5/8% notes; the 4¼% Treasury due Nov. 15, 2013 and 50 bps for the 7% notes; the 4¾% Treasury due Feb. 15, 2037 and 75 bps for the 7¾% debentures; and the 3¼% Bundesschatzanweisung due June 13, 2008 for the 5 5/8% bear bonds.

The company will also pay accrued interest to the payment date.

The offer for the dollar-denominated notes expires at 5 p.m. ET on Feb. 29, and the expiration time for the euro-denominated notes is 11 a.m. ET on Feb. 29.

New York-based Altria manufactures and sells tobacco products through its subsidiaries, Philip Morris International, Philip Morris USA Inc., John Middleton, Inc. and Philip Morris Capital Corp.

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