Arconic tenders for three series of notes via Citigroup, Credit Suisse

By Marisa Wong

Morgantown, W.Va., April 5 – Arconic Inc. announced that Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC have begun three separate cash tender offers for its outstanding debt securities.

Citigroup and Credit Suisse are offering to purchase any and all of Arconic’s $250 million 6½% notes due 2018 and $750 million 6¾% notes due 2018 if tendered at or prior to the applicable early tender date. The purchasers are also offering to purchase an aggregate principal amount of Arconic’s $750 million 5.72% notes due 2019, up to $500 million less the amount tendered and accepted in the offers for the 2018 notes.

The purchasers will not accept for purchase more than $1 billion aggregate principal amount of notes across the three offers, according to a news release.

The purchasers intend to negotiate to sell the notes to Arconic for cash or to exchange the notes for shares of Alcoa Corp. common stock held by Arconic. As part of their negotiation with Arconic to sell or exchange the notes, the purchasers may offer to consent to proposed amendments to the terms of the indentures governing the notes.

The amendments would reduce the minimum notice period required for a redemption of the notes to three business days from 30 days and eliminate or modify some or all restrictive covenants, events of default and other provisions contained in the indentures.

If the purchasers purchase a sufficient amount of notes to deliver the required consents, and the company executes supplemental indentures to effect the proposed changes, the amendments will not be operative until the purchasers have completed a sale or an exchange of the notes to the company. In addition, the purchasers will not offer to consent to proposed amendments to the terms of any note indenture if that series has been or will be purchased on a prorated basis under the offers, according to the release.

The offers will expire at 11:59 p.m. ET on May 2.

Holders must tender their notes by 5 p.m. ET on April 18, the early tender date, to be eligible to receive the total consideration.

The total consideration will be determined using a fixed spread over the yield based on the bid side price of a reference Treasury security, namely the 1.25% Treasury due March 31, 2019, calculated as of 2 p.m. ET on April 19. The fixed spread is 15 basis points for the 6½% notes due 2018 and 35 bps for the other two series.

The total consideration will include an early tender premium of $30.00 per $1,000 principal amount of notes.

Holders who tender notes after the applicable early tender date will be eligible to receive the tender offer consideration, which will be the total consideration less the early tender premium.

The purchasers have the option to accept for purchase some or all notes tendered by the applicable early tender date and pay for those notes on an early settlement date, currently expected to be April 20.

If the total amount of 2018 notes tendered as of the early tender date is $500 million or more, the purchasers will not accept for purchase any 2019 notes.

If the total amount of 2018 notes tendered as of the early tender date is less than $500 million, then the purchasers may pay for any and all of those 2018 notes and some or all of the 2019 notes that are tendered up to the 2019 notes offer cap at the applicable early settlement date, subject to proration. In that case, the purchasers may extend the early tender date for the 2019 notes offer (but not the related withdrawal deadline) and may retain all 2019 notes previously tendered until the final settlement date for the 2019 notes offer, which is expected to be May 4.

The amounts of each series of notes that are purchased on any settlement date will be determined according to acceptance priority level. The 6½% notes due 2018 have priority level 1, the 6¾% notes due 2018 priority level 2 and the 5.72% notes due 2019 priority level 3.

At each settlement date, all notes tendered having a higher acceptance priority level will be accepted before any notes tendered having a lower acceptance priority level are accepted. However, notes tendered after the applicable early tender date with a higher acceptance priority level will be accepted before any other notes having a lower acceptance priority level that were tendered on or before that date and not accepted for purchase as a result of the 2019 offer cap being exceeded.

If purchasing all of the tendered notes would cause the overall maximum purchase amount or the 2019 offer cap to be exceeded on any settlement date, the amount of that series of notes purchased on that settlement date will be prorated.

Withdrawal rights will expire at 5 p.m. ET on April 18.

The purchasers may extend or amend the offer deadlines without extending the withdrawal deadline. The purchasers may also increase or decrease the offer caps.

Each offer is being made independently of the other offers.

In addition to conditions for all of the offers, the 2019 offer is conditioned on the aggregate amount of early tenders for the 2018 notes being under $500 million.

Global Bondholder Services Corp. (866 924-2200 or 430-3774) is the depositary and information agent. There are no dealer managers for the offers.

Additional information on the offers can also be obtained from Citigroup (800 558-3745 or 212 723-6106) and Credit Suisse (800 820-1653 or 212 538-1862).

Formerly known as Alcoa Inc., Arconic is an aluminum company based in New York.

© 2015 Prospect News.
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