Educational Funding of the South gets $1.22 billion of tenders so far

By Angela McDaniels

Tacoma, Wash., April 14 - Educational Funding of the South, Inc. said $1,219,812,500 principal amount of bonds had been tendered into its exchange offer and tender offer as of 12:01 a.m. ET on April 13, the early tender deadline.

Specifically, holders had tendered:

• $676,287,500 of its student loan-backed revenue bonds, senior series 2007-1 A-1, A-2 and A-3 (the Libor bonds);

• $494,925,000 of its Florida educational loan revenue bonds, senior series 2003FL-A1, 2003FL-A2, 2004FL-A1, 2004FL-A2, 2004FL-A3, 2004FL-A4, 2005FL-A1, 2005FL-A2, 2005FL-A3, 2005FL-A4, and student loan-backed revenue bonds, senior series 2007-1 A-6, 2007-1 A-7, 2007-1 A-8, 2007-1 A-9, 2007-1 A-10 and 2007-1 A-11 (the senior auction-rate bonds);

• $30.15 million of its student loan-backed revenue bonds, subordinated series 2007-1 B-1 (the subordinated auction-rate bonds); and

• $18.45 million of its Florida educational loan revenue bonds, junior-subordinated series 2003FL-C-1, 2004FL-C-1 and 2005FL-C-1 (the junior-subordinated auction-rate bonds).

The offers will expire at 12:01 a.m. ET on April 27.

Tender offer

In the tender offer, the company is offering 100.2% of par for the senior series 2007-1 A-1 Libor bonds and par for the remainder of the Libor bonds.

In each case, this payment includes a premium of 4% for notes tendered by the early tender deadline.

The company will also pay accrued interest up to but excluding the settlement date.

Exchange offer

In the exchange offer, the company is offering new floating-rate class A-2 notes in exchange for the existing senior auction-rate bonds and new floating-rate class B notes in exchange for the existing subordinated auction-rate bonds and junior-subordinated auction-rate bonds.

Holders will receive $1,000 principal amount of new notes in exchange for each $1,000 principal amount of senior auction-rate bonds or subordinated auction-rate bonds and $940 principal amount of new notes in exchange for each $1,000 principal amount of existing junior-subordinated auction-rate bonds.

In each case, the exchange amount includes a premium of $40 principal amount of new notes in exchange for each note tendered by the early tender deadline.

The company will also pay accrued interest (other than carry-over interest) up to but excluding the settlement date.

The company plans to issue new floating-rate class A-1 notes to some institutional investors and use some of the proceeds to fund the tender offer for the Libor bonds.

The total principal amount of the new floating-rate class A-1 notes is expected to be $362,174,000 to $382,174,000, the total principal amount of the new floating-rate class A-2 notes is expected to be $439,875,000 to $459,875,900, and the total principal amount of the new floating-rate class B notes is expected to be $26,918,000 to $46,918,000.

Each range is preliminary and subject to change. For the avoidance of doubt, the new floating-rate class A-1 notes will be issued in a principal amount that is equal to about 43% of the total principal amount of new floating-rate notes issued. The percentage will be 52% for the new floating-rate class A-2 notes and 4% for the new floating-rate class B notes.

The dealer managers are Morgan Stanley & Co. Inc. (212 761-0925) and RBC Capital Markets, LLC (212 618-7763). The information agent is D.F. King & Co., Inc. (212-269-5550 for banks and brokers, others call 800 848-2998). The exchange agent is Wells Fargo Bank, NA (800 344-5128, option 0).

The issuer is based in Franklin, Tenn.

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