England’s AA accepts £495 million sub-class A1, A4 notes for exchange

By Angela McDaniels

Tacoma, Wash., Nov. 29 – AA plc subsidiary AA Bond Co. Ltd. announced the results of its exchange offer, set pricing in the exchange offer and disclosed the final acceptance amount in its tender offer.

The exchange offer began Nov. 17 and ended at noon ET on Nov. 28.

Holders tendered £318.49 million principal amount of 4.7201% sub-class A1 fixed-rate notes due 2018/2043 and £195 million principal amount of 3.781% sub-class A4 fixed-rate notes due 2019/2043 in the exchange offer.

The company will accept £300 million of the sub-class A1 notes at a proration factor of 94.74% and all of the tendered sub-class A4 notes.

Per £1,000 principal amount of old notes, holders will receive £1,058.38 principal amount of new notes in exchange for the sub-class A1 notes and £1,055.43 principal amount of new notes in exchange for the sub-class A4 notes.

Holders will also receive accrued interest in cash. The settlement date is expected to be Dec. 6.

The exchange price for the sub-class A1 notes was set by reference to the 1¼% U.K. Treasury Gilt due July 22, 2018 and an exchange spread of 105 basis points. The reference yield is 0.092%, and the exchange yield is 1.142%.

The exchange price for the sub-class A4 notes was set by reference to the 1¾% U.K. Treasury Gilt due July 22, 2019 and an exchange spread of 145 bps. The reference yield is 0.187%, and the exchange yield is 1.637%.

The new notes have a 2 7/8% coupon and mature Jan. 31, 2022/Jan. 31, 2043. They will be issued at 99.91 to yield 2.893%. Pricing was set by reference to the 4% U.K. Treasury Gilt due March 7, 2022 and a final new issue spread of 225 bps.

The issuer will issue a total of £523,643,000 principal amount of new notes in the exchange offer. It issued an additional £176,357,000 for cash, the proceeds of which will be used to fund the tender offer.

All notes exchanged in the offer will be canceled.

Following settlement of the exchange offer, £175 million of sub-class A1 notes and £55 million of sub-class A4 notes will remain outstanding.

Tender offer

As previously reported, the company received tenders for £165,238,000 of its £735 million of 5½% class B2 notes due 2022/2043.

The company has accepted all of the tendered notes for purchase.

The purchase price is 101% of par plus accrued interest up to but excluding the settlement date, which is expected to be Dec. 6.

Following the settlement date, £569,762,000 principal amount of class B2 notes will remain outstanding.

Completion of the new note sale is a condition to settlement of the tender offer.

AA announced on Nov. 17 that it was offering to buy up to £200 million of the class B2 notes. The tender offer ended at 12 p.m. ET on Nov. 25.

For both the tender and exchange offers, the global coordinators and dealer managers are Credit Suisse Securities (Europe) Ltd. (+44 20 7883 8763 or liability.management@credit-suisse.com), Lloyds Bank plc (+44 20 7158 1721 or liability.management@lloydsbanking.com) and Royal Bank of Scotland plc (+44 20 7678 5282 or liability.management@rbs.com).

The dealer managers are Banco Santander, SA (+44 20 7756 6909 x6646, tommaso.grospietro@santandergcb.com or king.cheung@santandergcb.com), Barclays Bank plc (+44 20 3134 8515 or eu.lm@barclays.com) and J.P. Morgan Securities plc (+44 20 7134 2468 or emea_lm@jpmorgan.com).

The exchange agent is Lucid Issuer Services Ltd. (+44 20 7704 0880 or theaa@lucid-is.com).

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

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