Nutritional Sourcing cuts minimum in Dutch auction tender for 10 1/8% notes

New York, Feb. 28 - Nutritional Sourcing Corp. said it has lowered the minimum required response to its tender offer for a portion of its outstanding 10 1/8% senior secured notes due 2009 to $14 million.

As of 5 p.m. ET on Feb. 28, the company had tenders of $14.291 million notes.

The expiration was also extended to 5 p.m. ET on March 7 from 5 p.m. ET on Feb. 28.

As announced on Jan. 28, Nutritional Sourcing, a Coral Gables, Fla.-based company that operates supermarkets and video rental stores in Puerto Rico and the U.S. Virgin Islands, said the maximum amount it has available to fund the purchase of the notes is $42 million; accordingly, it will accept for purchase less than all of the outstanding notes.

The notes will be purchased via a modified Dutch auction-style tender offer. Nutritional Sourcing is offering to purchase the notes for cash, at a purchase price designated by the holder of between $715 and $745 per $1,000 principal amount of notes. It will accept offers in the order of lowest to highest offer prices, continuing until it has spent $42 million as a total purchase price, excluding accrued interest costs.

The company will pay to each noteholder whose offer is accepted the clearing price - i.e., the highest price offered for notes and accepted by the company - even if that price is higher than the price offered by the noteholder. Under this procedure, all offers of notes below the figure chosen as the clearing price will be accepted and all offers above the clearing price will be rejected.

However, should acceptance of all offers at the clearing price cause the total purchase price - not including interest - to exceed $42 million, the company will allocate its acceptance of offers at the clearing price among all such offers on a pro-rata basis; holders of notes being tendered in denominations under $1,000 would be given priority.

The company originally said the offer requires the valid tender of at least a simple majority of the total principal amount of notes outstanding, excluding any notes owned by the Nutritional Sourcing or any of its affiliates - but has now waived this condition. Noteholders who tender their notes will be considered to have consented to a proposed indenture amendment, which would permit the company to discontinue its reporting to the Securities and Exchange Commission and making such reports available to the noteholders. The amendment will not become effective unless a majority of the notes are purchased via the tender offer but will be binding on all noteholders should it become effective. The company will not a pay a separate consent payment to tendering noteholders.

Nutritional Sourcing said it is amending and restating its senior credit facility with Westernbank of Puerto Rico to provide an additional $45 million in funding for this transaction, including the amount needed to pay the accrued interest on the notes and any related expenses. The amendment to the notes' indenture and restatement of the credit facility will become effective only if the notes are purchased under the terms of the tender offer.

Wilmington Trust Co. of Delaware is the depositary for the offer, and D.F. King Co. Inc. is the information agent.

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