National Rural accepts $339.73 million of 8% notes in Dutch exchange

By Jennifer Chiou

New York, Oct. 10 - National Rural Utilities Cooperative Finance Corp. said it accepted tenders for $339,725,000 aggregate principal amount of its $1 billion of 8% medium-term series C notes due 2032 in the modified Dutch auction exchange offer for the securities.

As previously reported, the company was offering a combination of new 4.023% collateral trust bonds due Nov. 1, 2032 and cash in exchange for up to $339,621,000 principal amount of 8% notes. The cap was increased from $300 million on Sept. 24.

Settlement is anticipated for Oct. 16.

At the offer deadline of midnight ET on Oct. 9, the company said it received tenders for $491,952,000 of the old notes.

For the accepted securities, participating holders will receive a total of $379,372,000 aggregate principal amount of the collateral trust bonds and $133,405,795 in cash, plus an additional $3,397,250 for accrued interest.

Accepted notes will be retired and canceled.

As noted, the reference yield is 2.898%, which is the yield to maturity of the 3% Treasury due May 15, 2042 at 11 a.m. ET on Sept. 25. The exchange yield is 4.148%.

The total exchange consideration is $1,509.40 per $1,000 of notes, which was calculated using the reference yield plus a 125 basis points spread set via a modified Dutch auction procedure. The company will pay 74% of the total exchange consideration in the form of new bonds and 26% in cash.

Each tendering holder had to specify a bid spread in excess of the reference yield that the holder would be willing to accept as the basis for determining the total exchange consideration. Holders who tendered their notes without specifying a bid spread were deemed to have specified the maximum spread. The minimum bid spread was 112.5 bps, and the maximum bid spread was 137.5 bps.

Holders who tendered their notes by the early participation deadline, 5 p.m. ET on Sept. 24, are eligible to receive the total exchange consideration, which includes an early participation amount of $30.00 per $1,000 principal amount of 8% notes. The exchange consideration less the early participation amount is $1,479.40.

Holders had tendered $491.8 million of the notes as of the early participation deadline.

The exchange offer was conditioned on holders tendering enough 8% notes to result in at least $250 million of new bonds being issued.

The company previously said it is pursuing the exchange offer to improve its overall cost of funding.

D.F. King & Co., Inc. (800 488-8075, collect for banks and brokers at 212 269-5550 or e-mail NRUCFC@dfking.com) was the information agent for the exchange offer.

National Rural Utilities Cooperative Finance is a market lender for electric cooperatives based in Dulles, Va. It launched the offer on Sept. 12.

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