Arconic takes in tenders for $1.96 million more 6½% notes, $8.15 million 6¾% notes

By Susanna Moon

Chicago, May 3 – Arconic Inc. announced the results of three separate cash tender offers being made by Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC.

Investors had tendered another $1,961,000 of 6½% notes due 2018 and $8,152,000 of 6¾% notes due 2018 since the original early tender deadline of 5 p.m. ET on April 18.

Arconic accepted all of those notes for purchase with settlement set for May 4, according to a company update on Wednesday.

The company said on April 5 that Citigroup and Credit Suisse were offering to purchase any and all of Arconic’s $250 million 6½% notes due 2018 and $750 million 6¾% notes due 2018 tendered before the early tender deadline, which was later extended to 11:59 p.m. ET on May 2.

The companies also were offering to purchase an aggregate principal amount of Arconic’s $750 million 5.72% notes due 2019, up to $500 million less the amount purchased in the offers for the 2018 notes.

The total purchase price for each $1,000 principal amount was $1,058.91 for the 6½% notes, $1,063.63 for the 6¾% notes and $1,075.76 for the 5.72% notes, according to a notice on April 19.

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

The reference yield was 1.181% for each series.

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

Holders who tender notes after the early tender date will receive the tender offer price, or the total amount less the early tender premium.

The three offers are capped at $1 billion principal amount. The 2019 offer originally required that the aggregate amount of early tenders for the 2018 notes be less than $500 million.

Early tender results

As of the original early tender date, investors had tendered $147.94 million of the 6½% notes, $397,034,000 of the 6¾% notes and $383,757,000 of the 5.72% notes.

The companies accepted for purchase all of the 6½% notes and 6¾% notes and $250 million of the 5.72% notes tendered as of the original early tender date, with settlement on April 20.

Citigroup and Credit Suisse then waived the offer condition for the 2019 notes and amended the purchase amount.

Because the cap has been reached for the 2019 notes, however, no more of those notes were purchased in the offer.

The offers closed at 11:59 p.m. ET on May 2. Withdrawal rights expired at 5 p.m. ET on April 18.

The purchasers previously said they 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 companies 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 previous release.

Global Bondholder Services Corp. (866 924-2200 or 866 430-3774) 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).

The company also said on April 27 that it planned to exchange the Alcoa Corp. common stock that it owns for debt of the company that is held by Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC.

The agreement covers 12,958,767 Alcoa shares, Arconic’s entire holding of Alcoa stock.

Those shares will then be sold by Citigroup and Credit Suisse to the public in a secondary offering.

Citigroup and Credit Suisse will also be underwriters for the secondary sales of stock, which may occur in one or more transactions.

Alcoa stock closed at $36.49 on April 25.

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

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