UnitedHealth accepts tenders of $775 million of several note series

By Susanna Moon

Chicago, Feb. 8 - UnitedHealth Group Inc. said it completed the modified Dutch auction cash tender offers to purchase up to $575 million of its intermediate-term notes and up to $200 million of its short-term notes.

The tender offers expired at midnight ET on Feb. 5.

As of the expiration date, UnitedHealth received tenders for $474 million principal amount of its short-term notes and $586 million principal amount of its intermediate-term notes.

Based on the tender caps and the proration terms, UnitedHealth accepted $200 million of the short-term notes and $575 million principal amount of the intermediate-term notes, for a total amount of $833 million plus $14 million in accrued interest.

Short-term notes

The breakdown is as follows for the short-term notes:

• $44,502,000 principal amount accepted of the $750 million of 5.25% notes due 2011, with a purchase price of $1,044.36, based on the yield to maturity of 1.188% and a clearing spread of 35 basis points;

• $97,896,000 principal amount accepted of the $450 million of 5.5% notes due 2012, with a purchase price of $1,092.73, based on the yield to maturity of 2.038% and a clearing spread of 120 bps;

• $16,387,000 principal amount accepted of the $550 million of 4.875% notes due 2013 (Cusip 91324PBH4), with a purchase price of $1,066.61, based on the yield to maturity of 2.568% and a clearing spread of 120 bps;

• $41,215,000 principal amount accepted of the $450 million of 4.875% notes due 2013 (Cusip 91324PAE2), with a purchase price of $1,074, based on the yield to maturity of 2.418% and a clearing spread of 105 bps.

The reference yield is 0.838% for the 5.25% notes and 5.5% notes and 1.386% for the 4.875% notes.

Intermediate-term notes

The breakdown is as follows for the intermediate-term notes:

• $77,674,000 principal amount accepted of the $250 million of 4.75% notes due 2014, with a purchase price of $1,066.05, based on the yield to maturity of 2.988% and a clearing spread of 63 bps;

• $110,585,000 principal amount accepted of the $500 million of 5% notes due 2014, with a purchase price of $1,073.09, based on the yield to maturity of 3.248% and a clearing spread of 89 bps;

• $84,404,000 principal amount accepted of the $500 million of 4.875% notes due 2015, with a purchase price of $1,070.08, based on the yield to maturity of 3.368% and a clearing spread of 101 bps;

• $149,406,000 principal amount accepted of the $750 million of 5.375% notes due 2016, with a purchase price of $1,069.02, based on the yield to maturity of 4.085% and a clearing spread of 39 bps;

• $59,391,000 principal amount accepted of the $500 million of 6% notes due 2017 (Cusip 91324PAW2), with a purchase price of $1,090.67, based on the yield to maturity of 4.535% and a clearing spread of 84 bps; and

• $93,540,000 principal amount accepted of the $250 million of 6% notes due 2017 (Cusip 91324PBC5), with a purchase price of $1,086.77, based on the yield to maturity of 4.655% and a clearing spread of 96 bps.

"We are pleased with the results of our debt tender offers. The tender offers are part of UnitedHealth Group's ongoing asset-liability management program and enhance our financial strength and flexibility as we move forward," G. Mike Mikan, executive vice president and chief financial officer of UnitedHealth Group, said in a press release.

UnitedHealth announced on Feb. 4 the Treasury reference yields for calculating the purchase prices in its modified Dutch auction cash tender offers.

The short-term notes include the company's:

• 5.25% notes' purchase price calculated using the yield to maturity of the 1% Treasury due Dec. 31, 2011;

• 5.5% notes' purchase price calculated using the 1% Treasury due Dec. 31, 2011;

• 4.875% notes' purchase price calculated using the 1.125% Treasury due Dec. 15, 2012; and

• 4.875% notes' purchase price calculated using the 1.125% Treasury due Dec. 31, 2012.

The reference yield was 0.838% for the 5.25% notes and 5.5% notes and 1.386% for the 4.875% notes.

The intermediate-term notes include the company's:

• 4.75% notes' purchase price calculated using the 2.625% Treasury due Dec. 31, 2014;

• 5% notes' purchase price calculated using the 2.625% Treasury due Dec. 31, 2014;

• 4.875% notes' purchase price calculated using the 2.625% Treasury due Dec. 31, 2014;

• 5.375% notes' purchase price calculated using the 3.375% Treasury due Nov. 15, 2019;

• 6% notes' purchase price calculated using the 3.375% Treasury due Nov. 15, 2019; and

• 6% notes' purchase price calculated using the 3.375% Treasury due Nov. 15, 2019.

The reference yield was 2.358% for the 4.75% notes, 5% notes and 4.875% notes and 3.695% for the remaining notes.

The reference yields were set at 2 p.m. ET on Feb. 3.

The clearing spread premium for each series was the lowest single premium at which the company is able to accept tendered notes within the tender caps.

The payouts include an early participation amount of $30 per $1,000 principal amount of notes tendered by 5 p.m. ET on Jan. 22.

The company previously said that it would pay accrued interest.

The offers began on Jan. 6 and expired at midnight ET on Feb. 5.

As of 5 p.m. ET on Jan. 22, the company had received tenders for approximately $472 million of the short-term notes and approximately $570 million of the intermediate-term notes, including:

• $107,564,000 principal amount, or 14.3%, of the 5.25% notes due 2011;

• $207,827,000, or 46.2%, of the 5.5% notes due 2012;

• $75,361,000, or 13.7%, of the 4.875% notes due 2013 (Cusip 91324PBH4);

• $80,931,000, or 18.0%, of the 4.875% notes due 2013 (Cusip 91324PAE2;

• $79,223,000, or 31.7%, of the 4.75% notes due 2014;

• $108,278,000, or 21.7%, of the 5% notes due 2014;

• $80,187,000, or 16.0%, of the 4.875% notes due 2015;

• $149,589,000, or 19.9%, of the 5.375% notes due 2016;

• $60,434,000, or 12.1%, of the 6% notes due 2017 (Cusip 91324PAW2); and

• $92,784,000, or 37.1%, of the 6% notes due 2017 (Cusip 91324PBC5).

On Jan. 25, the company increased the cap for the intermediate-term notes from $550 million.

The company said the offers will improve the matching of floating-rate assets and liabilities on its balance sheet and reduce its debt service cost.

UnitedHealth Group said it expected to use a combination of cash on hand and the proceeds from an issue of commercial paper to fund the purchase.

Bank of America Merrill Lynch (888 292-0070 or call collect 980 388-4603), Citi (800 558-3745 or call collect 212 723-6106), J.P. Morgan (866 834-4666 or call collect 212 834-3424) and RBS (877 297-9832 or call collect 203 897-6145) are the dealer managers. Global Bondholder Services Corp. (212 430-3774 or 866 470-4200) is the information agent and depositary.

The diversified health care company is based in Minnetonka, Minn.

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