Altria tenders for $2 billion notes; 2018, 2019 due dates get priority

By Susanna Moon

Chicago, Aug. 6 - Altria Group, Inc. said it began a cash tender offer for up to $2 billion principal amount of its senior notes.

Pricing for the offer will be set using a reference security plus a fixed spread at 11 a.m. ET on Aug. 20.

The following notes have a priority acceptance level of 1:

• $3.1 billion of 9.7% notes due 2018 based on the 0.5% U.S. Treasury notes due July 31, 2017 plus 135 basis points and

• $2.2 billion of 9.25% notes due 2019 based on the 1.75% U.S. Treasury notes due May 15, 2022 plus 80 bps.

The following notes have a priority acceptance level of 2:

• $1.5 billion of 9.95% notes due 2038 based on the 3.125% U.S. Treasury notes due Feb. 15, 2042 plus 235 bps and

• $1.5 billion of 10.2% notes due 2039 based on the 3.125% U.S. Treasury notes due Feb. 15, 2042 plus 240 bps.

The company will accept for purchase all the notes with a priority acceptance level of 1 before accepting any priority 2 notes. If the tendered amount of priority level 1 notes exceeds the offer cap, the notes will be purchased on a prorated basis. In that case, no priority level 2 notes will be purchased. There is also a purchase sublimit of $500 million for the priority 2 notes.

The total purchase price will include a $30 premium per $1,000 principal amount of notes tendered by the early deadline at 5 p.m. ET on Aug. 17.

Holders also will receive accrued interest up to but not including the payment date.

Tendered notes may be withdrawn at any time before the early tender deadline.

The tender offer will expire at midnight ET on Aug. 31.

The tender offer is conditioned on the issuance of the new notes before the end of the offer. Altria began an underwritten public offering of new notes with proceeds to be used to fund the offer and for general corporate purposes.

Citigroup Global Markets Inc. (800 558-3745 or call collect 212 723-6106), J.P. Morgan Securities LLC (866 834-4666 or call collect 212 834-2494) and Morgan Stanley & Co. LLC are the lead dealer managers. Global Bondholder Services Corp. (866 387-1500 or, for banks and brokers, call collect 212 430-3774) is the information agent and depositary.

The offer will permit Altria to reduce its debt scheduled to mature, according to a company press release. Altria said it expects these transactions to reduce the weighted average coupon rate and future interest expense of its consolidated debt.

Altria is a tobacco company based in Richmond, Va.

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