8-KMaterial AgreementsFinancial EventsOther Events+1

ALTRIA GROUP, INC. 8-K Report, Material Agreement (Feb 1, 2008)

Filed February 1, 2008For Securities:MO

Summary

Altria Group, Inc. (MO) filed an 8-K on February 1, 2008, reporting on significant financing and debt management activities. The company entered into a $4.0 billion 364-day Bridge Loan Agreement on January 28, 2008, intended for general corporate purposes, including the refinancing of existing debt and expenses related to tender offers. This agreement includes specific financial covenants that change upon the effectiveness of the previously announced spin-off of Philip Morris International Inc. (PMI). In conjunction with the impending spin-off, Altria also announced tender offers on January 31, 2008, to purchase up to $2.6 billion of USD-denominated notes and approximately €1.0 billion of EUR-denominated bonds. These tender offers are coupled with consent solicitations to amend the terms of the underlying debt instruments, aiming to clarify provisions related to the spin-off and alleviate any investor uncertainty. These actions indicate proactive financial management by Altria as it prepares for a major corporate restructuring.

Key Highlights

  • 1Altria secured a $4.0 billion 364-day Bridge Loan Agreement dated January 28, 2008, for general corporate purposes and debt refinancing.
  • 2The bridge loan agreement has specific financial covenants, including an earnings-to-fixed-charges ratio of 2.5:1 pre-spin-off, and post-spin-off debt-to-EBITDA and EBITDA-to-interest expense ratios.
  • 3On January 31, 2008, Altria launched tender offers to repurchase up to $2.6 billion in USD notes and approximately €1.0 billion in EUR bonds.
  • 4The tender offers are accompanied by consent solicitations to amend debt indentures and clarify provisions concerning the spin-off of Philip Morris International.
  • 5The company aims to eliminate any uncertainty regarding the spin-off's impact on its debt obligations.
  • 6The transactions reflect Altria's preparation for the upcoming spin-off of its international tobacco business.

Frequently Asked Questions

The $4.0 billion 364-day Bridge Loan Agreement is intended for general corporate purposes, including refinancing existing debt and covering expenses associated with tender offers and consent solicitations.

Prior to the spin-off of Philip Morris International, Altria must maintain an earnings before income taxes to fixed charges ratio of not less than 2.5 to 1. After the spin-off, Altria must maintain a consolidated debt to consolidated EBITDA ratio of not more than 2.5 to 1 and a consolidated EBITDA to consolidated interest expense ratio of not less than 4.0 to 1.

Altria is conducting these actions to proactively manage its debt in anticipation of the spin-off of Philip Morris International. The tender offers aim to repurchase outstanding notes and bonds, while the consent solicitations seek to amend the underlying debt agreements to clarify how certain provisions apply post-spin-off, thereby eliminating any investor uncertainty.

Altria is offering to purchase up to $2.6 billion of USD-denominated notes and approximately €1.0 billion of EUR-denominated bonds.