Petco to pay maximum price in tender for 10¾% notes

New York, Jan. 23 - Petco Animal Supplies Inc. (B2/B) said it will pay the maximum price of $1,200 per $1,000 principal amount in its tender offer for up to $50 million principal amount of its 10¾% senior subordinated notes due 2011.

The San Diego retailer of pet food and supplies said that $58.9 million of the notes were tendered by the expiration date of midnight ET on Jan. 22.

As a result, Petco will buy $50 million of the notes on a pro rata basis.

"The successful completion of the repurchase of this subordinated debt continues the de-leveraging of our balance sheet," said James Myers, Petco's executive vice president and chief financial officer, in a news release. "As has been our practice in the past, we will look to identify strategic opportunities in fiscal 2004 and beyond to reinvest the resulting cost savings in our business in order to position Petco to continue to deliver consistent growth."

Petco announced on Dec. 22 that it had begun a modified Dutch auction tender offer for up to $50 million principal amount of its $170 million of outstanding 10¾% notes.

Petco said that it is offering to purchase the notes for cash at a purchase price of between $1,180 and $1,200 per $1,000 principal amount of notes tendered, plus accrued and unpaid interest up to, but not including, the date of purchase.

The final purchase price was determined via the modified Dutch auction procedure. Petco accepted tenders in the order of lowest to highest tender prices specified by tendering holders within the range between the minimum and maximum prices. It selected as its purchase price the single lowest price that will purchase $50 million of notes.

Under the pro ration rules, Petco accepted first all notes tendered at prices below the purchase price, then notes tendered at the purchase price on a pro rata basis.

Morgan Stanley & Co. Inc. is dealer manager (800 624-1808 or collect at 212 761-1893). Mackenzie Partners Inc. is information agent (800-322-2885). U.S. Bank NA is depositary for the offer.

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