Reynolds American to start exchange offer for $1.45 billion R.J. Reynolds Tobacco Holdings notes

By Jennifer Chiou

New York, May 11 - Reynolds American Inc. announced plans to begin an exchange offer for up to the $1.45 billion principal amount of subsidiary R.J. Reynolds Tobacco Holdings, Inc.'s 7 7/8% notes due 2009, 6½% notes due 2007, 7¼% notes due 2012, 7.3% notes due 2015 and 6½% notes due 2010.

Holders who elect to exchange their securities will receive the same amount of Reynolds American notes with identical interest rates and maturities.

However, the notes to be issued by Reynolds American will be jointly and unconditionally guaranteed by Reynolds American and its domestic subsidiaries, other than R.J. Reynolds.

The new notes will be secured by Reynolds American principal property and by the assignment of the company's security interest in indirect subsidiary R.J. Reynolds Tobacco Co. stock. The company added that the security for the notes may be released under certain circumstances.

In April, Standard & Poor's placed R.J. Reynolds' note ratings on negative watch after priority obligations ahead of the securities increased as a result of proposed senior secured credit facilities at Reynolds American.

The Winston-Salem, N.C.-based manufacturer and marketer of cigarettes and other tobacco products is also soliciting consents to amend the notes' indentures to eliminate substantially all of the restrictive covenants and one of the events of default.

The company added it will not pay any consent fee in the offer or consent solicitation.

The exchange is conditioned on, among other things, the closing of Reynolds American's previously announced agreement to acquire a to-be-formed holding company that will own Conwood Company, LP, Conwood Sales Company, LP, Rosswil LLC and Scott Tobacco LLC.

The offer is anticipated to end before June 30.

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