hutchison-launches-second-tender-for-short-bonds

Hutchison launches second tender for short bonds

The company is offering to buy back another $1.5 billion of bonds; this time from two issues maturing in 2010 and 2011.

Only a week after Hutchison Whampoa launched a tender for up to $1.5 billion worth of bonds from four outstanding issues, the Hong Kong conglomerate has announced a second offer for two separate bonds. Again the company says it is willing to buy back up to $1.5 billion worth of guaranteed bonds, which underscores how much value it attaches to being able to reduce its interest costs in the current environment. The fact that it is offering to pay above par is further evidence that it wants investors to accept the deal.

The latest tender is for two short-dated bonds, maturing in 2010 and 2011, respectively. Each of the two issues had an initial principal amount of $1.5 billion, but Hutchison has already been buying back part of these bonds in the open market, leaving about $1.37 billion of the 5.45% bonds due 2010 still outstanding and $1.46 billion of the 7% bonds due 2011s. The company said in a statement that it is willing to buy back up to $750 million from each of the two issues.

Unlike the first tender, which gives investors an opportunity to sell back their bonds at a fixed spread over Treasuries, the second tender will be conducted through a modified Dutch auction. This means that investors will be able to tender their bonds at a price of their own choosing (within a pre-set range) and Hutchison will accept the lowest price at which it will be able to buy back the desired amount of bonds.

The company is offering to pay between $103.5 and $104.125 per $100 of outstanding principal of the 2010s, which includes a $2 early tender premium for investors who submit their bonds before 5pm New York time on June 2. The offer for the 2011s ranges from $106.125 to $106.875 per $100 of principal and again includes a $2 early tender premium.

The offer will stay open until June 16. Morgan Stanley is arranging both tenders.

Hutchison's first tender is open to investors holding (in order of priority): the company's 7.5% bonds due 2027 with $500 million outstanding; its 7.45% bonds due 2033 with $1.5 billion outstanding; its 6.25% bonds due 2014 with $2 billion outstanding; and its 6.5% bonds due 2013 of which there are $3.5 billion outstanding. Based on the Treasury prices at launch, the company is willing to pay a premium to par or (in the case of the 2033s) just below par to buy back these bonds too. Investors who wish to receive the early tender premium of 3 cents on the dollar need to tender their bonds by May 21.

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