Lorillard Tobacco Planning Benchmark US Debt Offering

NEW YORK -Lorillard Tobacco Co. of Greensboro, N.C., is planning to sell a two-part bond offering in the U.S. debt market Monday, according to a person familiar with the deal.

The deal includes a five- and 30-year tranche and is expected to be benchmark in size, or at least $500 million. The company added the 30-year tranche midday Monday after originally disclosing only the five-year tranche Monday morning.

Preliminary price guidance suggests a risk premium of 225 basis points to 237.5 basis points over Treasurys for the five-year piece and 300 basis points to 312.5 basis points over Treasurys for the 30-year piece.

The offering includes a change-of-control provision, which is designed to safeguard investors against event risk if the issuer is taken over in a leveraged buyout or undergoes some other fundamental corporate change. The covenant is triggered at a premium price of $101.

Pricing is expected later Monday via lead bookrunners Barclays Capital (BCS, BARC.LN), Goldman Sachs Group Inc. (GS) and Wells Fargo Securities (WFC), supported by J.P. Morgan Chase & Co. (JPM) and Royal Bank of Scotland Group PLC (RBS, RBS.LN).

Proceeds will be used for general corporate purposes, which include repurchasing outstanding debt.

The deal has been rated Baa2 by Moody’s Investor Service and BBB- by Standard & Poor’s.

The last time Lorillard Tobacco issued U.S. debt was in April 2010 for $1.0 billion, according to data provider Dealogic. The current offering is only the third time Lorillard Tobacco has tapped the U.S. debt market since Dealogic began keeping records in 1995.

Lorillard Tobacco is a subsidiary of Lorillard Inc. (LO), the third-largest cigarette maker in the U.S. The company manufactures five cigarette brands, including the menthol-flavored brand Newport, which accounted for 90% of the company’s sales revenue in the 2010 fiscal year.

Last Monday, Lorillard Inc. reported second-quarter profits jumped more than 10% year-to-date due to higher cigarette-sales volumes and prices, according to the earnings release.

Lorillard Tobacco hasn’t yet responded to a request for comment.

By Nicole Hong, Dow Jones Newswires
212-416-3760
nicole.hong@dowjones.com

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