Suburban lifts coupons and premium in exchange offer for Inergy notes

By Susanna Moon

Chicago, July 6 - Suburban Propane Partners, LP and Suburban Energy Finance Corp. extended the consent deadline and the expiration of the exchange offers for the $1.2 billion principal amount of 7% senior notes due 2018 and 6 7/8% senior notes due 2021 issued by Inergy, LP and Inergy Finance Corp.

The companies also raised the interest rates of the new notes and cash consent payment, according to a press release by Suburban Propane.

After more discussions with noteholders, Suburban said it is now offering to exchange any and all of the outstanding 7% notes and 6 7/8% notes issued by Inergy and Inergy Finance for a combination of $1 billion principal amount of new 7½% senior notes due 2018 and 7 3/8% senior notes due 2021, respectively, issued by Suburban, and $200.0 million in cash.

The amended interest rates of the new notes reflect a further increase from the amended rates announced on June 15. The interest rates are now 50 basis points more than those initially offered, the press release noted.

Suburban also revised the redemption provisions of the notes and some covenants.

In addition, Suburban is now offering to pay a total of $65.0 million in cash to holders of Inergy notes, on a pro rata basis, who deliver consents under the offer.

Assuming that consents are delivered for all $1.2 billion principal amount of the Inergy notes, the cash consent payment will be about $54.17 per $1,000 principal amount of Inergy notes. If consents are delivered for $1.0 billion of Inergy notes, the cash consent payment will be $65.00 per $1,000 of notes.

Suburban said it continues to reserve the right to lower the minimum tender condition of at least $1.0 billion principal amount of Inergy notes.

Deadline extensions

The consent deadline was extended to 5 p.m. ET on July 12, and the exchange offer is now set to end at 11:59 p.m. ET on July 26. Holders may no longer withdraw tendered notes.

The consent deadline was previously scheduled to expire at 5 p.m. ET on July 6, which was also the offer expiration. The consent deadline was originally set for May 16 and was extended to May 18, May 23, May 31, June 7, June 14, June 21, June 26 and June 28.

As previously noted, the exchange offers and consent solicitation are conditioned on the acquisition of Inergy, LP's retail propane operations.

As of 5 p.m. ET on July 5, investors had tendered about 44% of the Inergy notes. As of June 14, about 34% of the outstanding principle amount of Inergy notes had been tendered.

Previous consent changes

Along with the extension on June 15 the companies increased the consent payment and coupons of the new Suburban Energy notes and made other changes to the terms of the offers.

The Suburban companies had been prepared to pay a total of $50 million in cash to holders who deliver consents by the deadline. Before that, the total consent payment was previously set at $30 million.

Assuming that consents are delivered for all $1.2 billion of the Inergy notes, the cash consent payment would have been $41.67, up from $25.00, per $1,000 principal amount. Assuming that consents are delivered for $1 billion of the notes, the premium would have been $50, up from $30, per $1,000 of notes.

Suburban originally offered to pay a cash consent fee of $3.75 per $1,000 principal amount of notes.

As previously noted, Suburban is soliciting consents to amend the Inergy notes to delete all of the restrictive covenants, modify the covenants regarding mergers and consolidations and eliminate events of default. The amendments require the consent of a majority of holders of the outstanding principal amount of each series of Inergy notes.

Previous note terms

In exchange for tendered Inergy notes, the companies previously offered $1 billion principal amount of new 7¼% notes and 7 1/8% notes issued by Suburban Energy plus $200 million in cash. The coupon for the 2018 notes was increased from 7%, and the coupon on the 2021 notes was increased from 6 7/8%.

As noted before, each new series of notes will have substantially the same terms - except for the coupon, which was recently raised - as the corresponding series of outstanding Inergy notes for which they are being offered in exchange, including interest payment dates, optional redemption terms and maturity.

The offers, which began on May 3, were originally set to expire at 11:59 p.m. ET on May 31.

Suburban Propane initially announced the offers on April 26. It said that it received a commitment to increase its revolving credit facility to $400 million from $250 million and that it planned on issuing $1 billion of 7% senior notes due 2018 and 6 7/8% senior notes due 2021.

Global Bondholder Services Corp. (866 387-1500 or collect 212 430-3774) is the information agent for the exchange offers.

Inergy is a Kansas City, Mo., master limited partnership with operations that include the retail marketing, sale and distribution of propane. It also operates a natural gas storage business, a liquid petroleum gas storage business, a solution-mining and salt production company and a propane supply logistics, transportation and wholesale marketing business.

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