PPL says $99.4 million 7¾% PEPS exchanged

New York, Jan. 16 - PPL Corp. said holders tendered 3.974 million or $99.36 million of its 7¾% Premium Equity Participating Security units into its exchange offer.

The response is 17.28% of the 23 million or $575 million outstanding.

Holders will receive $0.375 in cash per $25 par unit plus new 7¾% PEPS units with different remarketing provisions.

PPL said it was carrying out the exchange to reduce future interest expense.

The response rate is down slightly from the 4.006 million PEPS tendered at the last report on Dec. 29 and 4.025 million reported on Dec. 18.

As previously announced, the Allentown, Pa., electricity generator was offering the new PEPS on a one-for-one basis for the existing PEPS plus $0.375 in cash per PEPS.

The new PEPS will consist of a fixed-income security plus a forward sales contract to buy PPL's common stock in May 2004. On remarketing, the fixed-income security will become a senior unsecured debt obligation of PPL Capital Funding Inc., guaranteed on a senior basis by PPL.

The existing PEPS consist of an identical forward sales contract but are combined with a five-year trust preferred security.

Based on PPL's current ratings, the fixed-income security in the new PEPS would have an investment-grade rating while the trust preferreds in the old PEPS would be junk rated.

PPL said it expects the interest rate on the new fixed-income securities at remarketing to be lower than that on the trust preferreds.

The new fixed-income securities will be remarketed in an attempt to generate proceeds of 100.50% of the $25 par at a floating rate based on three-month Libor plus a spread. The rate may be lower than, the same as or higher than the current 7.29% on the fixed-income portion of the PEPS. If the remarketing succeeds, holders will receive $0.0625 per $25 PEPS.

The trust preferreds in the existing PEPS pay a minimum of 7.29% after remarketing. Holders will receive any proceeds above 100.25% of the $25 par.

Morgan Stanley is dealer manager for the offer, and JPMorgan Chase Bank is the exchange agent. The information agent is Innisfree M&A Inc. (877 825-8777, banks and brokers call collect at 212 750-5833).

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