Staples Announces Tender Offer for up to $750M of Its 9.750% Senior Notes due 2014
Staples (NASDAQ: SPLS) announced today that it plans to reduce its interest expense and increase its financial flexibility through a tender offer to purchase for cash up to $750 million in aggregate principal amount (the “Maximum Tender Amount”) of its outstanding 9.750% Senior Notes due 2014 (the “Notes”). The tender offer is being made upon, and is subject to, the terms and conditions set forth in the Offer to Purchase, dated January 7, 2013 (the “Offer to Purchase”) and the related Letter of Transmittal.
The following table sets forth some of the terms of the tender offer, which are more fully set forth in the Offer to Purchase and Letter of Transmittal:
Title of Security CUSIP Number Principal Amount Outstanding
Maximum Tender Amount Reference U.S. Treasury Security Bloomberg Reference Page Fixed Spread Early Tender Premium(1) Hypothetical Total Consideration 9.750% Senior Notes due 2014 855030AJ1 $1,500,000,000 $750,000,000 1.00% U.S. Treasury Note due January 15, 2014 BBT4 50 bps $30.00 $1,088.48 (2)
(1) Per $1,000 principal amount of Notes validly tendered.
(2) Based upon a Reference Yield (as defined below) of 0.181% as of 1:00 p.m., New York City time, on January 4, 2013 and the resulting tender offer yield of 0.681%; excludes accrued and unpaid interest. The Hypothetical Total Consideration includes the Early Tender Premium.
Staples reserves the right, but is under no obligation, to increase the Maximum Tender Amount at any time, subject to compliance with applicable law. If holders of Notes validly tender Notes in an aggregate principal amount in excess of the Maximum Tender Amount, Staples will accept for purchase an amount of Notes equal to such Maximum Tender Amount and will pay holders of such validly tendered Notes in accordance with the proration procedures set forth in the Offer to Purchase.
The tender offer will expire at 11:59 p.m., New York City time, on February 4, 2013 (such date and time, as it may be extended, the “Expiration Date”), unless extended or earlier terminated. Holders of Notes that are validly tendered at or prior to 5:00 p.m., New York City time, on January 18, 2013 (the “Early Tender Date”) and accepted for purchase will receive the Total Consideration (as defined below and in the Offer to Purchase), which includes the early tender premium (the “Early Tender Premium”) set forth in the table above. Holders tendering Notes after the Early Tender Date but before the Expiration Date will be eligible to receive only the tender offer consideration (the “Tender Offer Consideration”), which will equal the Total Consideration less the Early Tender Premium. Because Staples intends to accept for payment all Notes validly tendered before the Early Tender Date, subject to the Maximum Tender Amount and the other terms and conditions described in the Offer to Purchase, and will only prorate acceptance of such Notes if the aggregate amount of Notes tendered exceeds the Maximum Tender Amount, there is no assurance as to the amount of Notes, if any, that Staples will accept that are tendered after the Early Tender Date. No tenders submitted after the Expiration Date will be valid.
The settlement date for Notes validly tendered on or before the Early Tender Date will occur promptly following the Early Tender Date and is expected to be January 22, 2013. The settlement date, if necessary, for Notes validly tendered after the Early Tender Date and on or before the Expiration Date will occur promptly following the Expiration Date and is expected to be February 5, 2013, assuming that the Expiration Date is not extended. Staples will pay accrued and unpaid interest from and including the last interest payment date applicable to the Notes up to, but not including, the applicable settlement date for Notes accepted for purchase.
Tendered Notes may be withdrawn from the tender offer at or prior to 5:00 p.m., New York City time, on January 18, 2013 (such date and time, as it may be extended, the “Withdrawal Deadline”). Holders of Notes who validly tender their Notes after the Withdrawal Deadline but before the Expiration Date may not withdraw their Notes except in the limited circumstances described in the Offer to Purchase.
The “Total Consideration” for each $1,000 principal amount of Notes validly tendered at or prior to the Early Tender Date and accepted for purchase pursuant to the tender offer will be determined by reference to the fixed spread (the “Fixed Spread”) specified in the table above for the Notes over the yield (the “Reference Yield”) based on the bid-side price of the U.S. Treasury Security specified in the table above (the “Reference Treasury Security”), as calculated by Barclays Capital Inc. and BofA Merrill Lynch at 1:00 p.m., New York City time, on January 18, 2013. The Total Consideration also includes the Early Tender Premium.
The tender offer is conditioned upon the satisfaction of certain conditions, including the company's receipt of funds sufficient to pay the Total Consideration (and the Tender Offer Consideration as applicable) with respect to the Notes. Subject to applicable law, Staples may also terminate the tender offer at any time before the Expiration Date in its sole discretion.
If the tender offer is completed as planned, Staples expects to record a pre-tax charge of approximately $69 million during the fourth fiscal quarter of 2012 for the extinguishment of the related debt. The estimated charge assumes current market pricing and that $750 million of the Notes are tendered. The final charge will vary to the extent that the pricing and amount of Notes tendered differs from Staples' original assumptions.
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