Southern Star accepts tenders for 98.29% of 8½% notes, 88.65% of 7 3/8% notes

By Jennifer Chiou

New York, April 21 - Southern Star Central Corp. said it accepted tenders from holders of $176,915,000 or 98.29% of its 8½% senior secured notes due 2010 and holders of $155,135,000 or 88.65% of the 7 3/8% senior notes due 2006 issued by wholly owned subsidiary Southern Star Central Gas Pipeline Inc.

The offers expired at 11:59 p.m. ET on April 20.

Southern Star added it expects to accept an additional $5,000 of 8½% notes after the initial settlement date.

The company said it will pay $1,078.11 per $1,000 principal amount for the 8½% notes $1,013.03 for the 7 3/8% notes, including the $30.00 consent payment.

Pricing was fixed at 2 p.m. ET on April 6.

Southern Star began a tender offer for the notes and a consent solicitation to amend the indentures governing the notes to eliminate substantially all of the covenants and certain events of default on March 24.

The consent deadline was 5 p.m. ET on April 5.

For each $1,000 principal amount of 8½% notes, the company said it will pay the present value of $1,042.50 - the amount payable on the notes on Aug. 1, 2007, the first call date - plus interest to the call date, discounted using the yield to maturity of the 3 7/8% Treasury due July 31, 2007 plus 50 basis points.

For each $1,000 principal amount of 7 3/8% notes, Southern Star Central Gas Pipeline will pay the present value of $1,000 - the amount payable on the notes at maturity on Nov. 15, 2006 - plus interest up to maturity, discounted using the yield to maturity of the 3.5% Treasury due Nov. 15, 2006 plus 15 bps.

In both cases, accrued interest up to but excluding the purchase date will be subtracted.

Each offer is conditioned upon proceeds of a new debt financing by Southern Star or its subsidiary. The tender offers were not conditioned on each other.

The tender for the 8½% notes was conditioned on the receipt of tenders from holders of at least 90% of the notes and the companies obtaining consents from holders of at least a majority of 7 3/8% notes.

Lehman Brothers Inc. (800 438-3242 or call collect 212 528-7581) and Credit Suisse Securities (USA) LLC (800 820-1653 or call collect 212 538-0652) are the dealer managers and solicitation agents. D. F. King & Co., Inc. (800 758-5378 or call collect 212 269-5550) is the information agent.

The Owensboro, Ky., company owns Southern Star Central Gas Pipeline, Inc., an interstate natural gas company.

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