England’s AA unit offers sub-class A5 notes in exchange for two series

By Susanna Moon

Chicago, Nov. 17 – AA plc’s subsidiary AA Bond Co. Ltd. began an exchange offer for its £475 million 4.7201% sub-class A1 notes due 2018/2043 and its £250 million 3.781% sub-class A4 notes due 2019/2043.

The issuer is offering to exchange up to £300 million principal of the sub-class A1 notes and any and all of the sub-class A4 notes for new sterling-denominated sub-class A5 notes due 2022/2043, according to a notice.

At the same time, the issuer “will be approaching investors in the market” for a new notes offering, with proceeds to be lent to AA Senior Co. Ltd. and may be used to fund the purchase of £735 million 5½% class B2 secured notes due 2022/2043, the release noted.

If issued, the new cash notes will be immediately fungible with the new exchange notes.

Pricing for the exchange will be set for each £1,000 principal amount using a reference security plus a spread as follows:

• For the 4.7201% notes, pricing will be based on the 1.25% U.K. Treasury gilt due July 22, 2018 plus 105 basis points; and

• For the 3.781% notes, pricing will be based on the 1.75% U.K. Treasury gilt due July 22, 2019 plus 145 bps.

In exchange, the issuer is offering new sub-class A5 notes due Jan. 31, 2022/Jan. 31, 2043 with pricing to be set using the 4% U.K. Treasury gilt due March 7, 2022. The exchange is contingent on the issue of at least £300 million of the new notes.

The exchange is being made as part of AA Senior Co. Ltd.’s liability management program to optimize debt maturities and cost of debt, the company said.

The minimum new issue spread, on the basis of which the final new issue spread will be fixed, will be announced by Nov. 23.

The new notes will be issued in the denominations of £100,000 and in integrals of £1,000 after that.

The exchange will remain open until noon ET on Nov. 28. Pricing will be set by 11 a.m. ET on Nov. 29.

The global coordinators and dealer managers are Credit Suisse Securities (Europe) Ltd. (+44 0 207 883 8763 or liability.management@credit-suisse.com), Lloyds Bank plc (+44 0 207 158 1721 or liability.management@lloydsbanking.com) or Royal Bank of Scotland plc (+44 0 207 678 5282 or liability.management@rbs.com).

The dealer managers are Banco Santander, SA (+44 0 207 756 6909 / x6646 or tommaso.grospietro@santandergcb.com / king.cheung@santandergcb.com), Barclays Bank plc (+44 0 203 134 8515 or eu.lm@barclays.com), J.P. Morgan Securities plc (+44 0 207 134 2468 or emea_lm@jpmorgan.com). The exchange agent is Lucid Issuer Services Ltd. (+44 0 20 7704 0880, Thomas Choquet, theaa@lucid-is.com).

AA is a Basingstoke, England-based company that provides roadside assistance.

© 2015 Prospect News.
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