Fairfax Financial concludes tender offer for four note series; nearly $114.7 million tendered

By Paul Deckelman

New York, Dec. 21 - Fairfax Financial Holdings Ltd. said it has completed its previously announced tender offer for outstanding debt securities of Fairfax and its wholly owned subsidiary, TIG Holdings Inc., as well as the closing of its recent sale of $200 million of new notes, the proceeds of which are slated to fund the tender offer.

As of the expiration of the tender offer, which occurred as scheduled at midnight ET on Dec. 20 without extension, a total of $114.688 million principal amount of debt had been tendered by its holders, consisting of $11.142 million of the 8 1/8% TIG notes due 2005, $62.6 million of the 7 3/8% Fairfax notes due 2006, $36.496 million of the 6 7/8% Fairfax notes due 2008 and $4.45 million of the 8.597% TIG capital securities due 2027.

As previously announced, Fairfax Financial Holdings, a Toronto-based financial services holding company, said on Nov. 18 that it would pay up to $150 million in a cash tender offer for its own debt securities and those of its wholly owned subsidiary, TIG Holdings Inc.

The company set an early tender deadline of 5 p.m. ET on Dec. 2, a pricing time of 2 p.m. ET on Dec. 7 and an expiration of midnight ET on Dec. 20.

It set a priority ranking order among the four series of securities covered by the tender and said that pricing for three of the series covered by the tender would be based on a fixed spread over a designated reference U.S. Treasury security. The total consideration for each series of notes - payable only to those holders tendering their notes by the early tender deadline - would include an early tender payment of $40 per $1,000 principal amount of notes tendered and accepted by the company for payment.

It said the highest priority in the offer would be the $38.584 million of TIG's 8 1/8% notes due 2005. The price would be based on a 35 basis point fixed spread over the 1 5/8% Treasury due March 31, 2005.

Second priority in the offer would be Fairfax's $130.274 million of 7 3/8% notes due 2006. The price would be based on a 50 basis point fixed spread over the 1 5/8% Treasury due Feb. 28, 2006.

Third priority in the offer would be Fairfax's $99.2225 million of 6 7/8% notes due 2008. The price would be based on a 125 basis point fixed spread over the 2 5/8% Treasury due May 15, 2008.

And the fourth priority in the offer would be TIG's 8.597% capital securities due 2027. The price would be a fixed price of $850 per $1,000 principal amount, including the early tender payment if applicable.

The company said holders would also receive accrued interest up to but excluding the settlement date.

Fairfax said that the offer would be subject to various conditions, including the closing of Fairfax's previously announced issuance of $300 million of subordinated voting shares.

On Dec. 1, Fairfax announced plans to sell $150 million of its 7¾% senior notes due 2012, with the net proceeds from the offering to be used to purchase debt accepted for purchase under the tender offer. On Dec. 3, it announced the pricing of $200 million of new 7¾% senior notes due 2012 at an issue price of 99.

Farifax also said at that time that holders had tendered $112 million of notes by the early tender deadline, which expired as scheduled at 5 p.m. ET on Dec. 2 without extension - $11.1 million principal amount of TIG's 8 1/8% notes, $60.9 million of Fairfax's 7 3/8% notes, $35.6 million of Fairfax's 6 7/8% notes and $4.5 million of the 8.597% TIG capital securities.

On Dec. 7, Fairfax set the tender offer pricing for three of the four series of securities. It said the company would pay $1,017.14 per $1,000 principal amount for the TIG 8 1/8% notes, including the $40 early tender payment, $1,049.63 per $1,000 principal amount for Fairfax's 7 3/8% notes, including the $40 early tender payment and $1,071.25 per $1,000 principal amount for Fairfax's 6 7/8% notes, including the $40 early tender payment.

Banc of America Securities LLC was the dealer manager (contact High Yield Special Products at 888 292-0070 or call collect at 704 388-4813). D.F. King & Co. Inc. was the information agent (call 800 859-8509 or call collect 212 269-5550).

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