Terra Capital sets pricing in tender for 12 7/8%, 11½% notes; gets needed consents

By Laura Lutz

Washington, Jan. 25 - Terra Industries Inc. subsidiary Terra Capital, Inc. set pricing in its tender offer and consent solicitation for all $331.3 million combined principal amount of its 12 7/8% senior secured notes due 2008 and 11½% second-priority senior secured notes due 2010.

The company will pay $1,117.69 for each $1,000 principal amount of 12 7/8% notes and $1,075.04 per $1,000 principal amount of 11½% notes.

The payouts were determined using a fixed spread of 50 basis points plus the yield to maturity of the 3.125% Treasury due Oct. 15, 2008 for the 12 7/8% notes and the 3½% Treasury due May 31, 2007 for the 11½% notes.

Pricing was set at 2 p.m. ET on Jan. 25. The reference yields were 5.025% for the 12 7/8% notes and 5.159% for the 11½% notes.

Earlier on Jan. 25, the company said that it received the consents it needed to amend the notes. As of the consent deadline at 5 p.m. ET on Jan. 24, the company had received tenders and consents for $188.409 million, or 94.2%, of the 12 7/8% notes and $128.8 million, or 98.1%, of the 11½% notes.

The company was soliciting consents to amend the note indentures to eliminate most of the restrictive covenants and certain events of default.

The company also announced on Jan. 25 that all holders of either series of notes who submit tenders by the expiration of the tender offer at midnight ET on Feb. 7 will receive the full consideration for the notes, including the consent payment.

Previously, only holders who tendered prior to the early deadline were to have received the $20.00 consent payment that is already included in the payout.

Terra Capital intends to fund the offer with debt financing.

The tender offer is conditioned upon sufficient financing as well as a minimum tender condition.

Global Bondholder Services Corp. is the depositary and information agent (866 540-1500 or call collect 212 430-3774). Citigroup Corporate and Investment Banking, Liability Management Group is the dealer manager (800 558-3745 or call collect 212 723-6106).

Based in Sioux City, Iowa, Terra Industries produces nitrogen products.

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