 Brandywine Global •
ClearBridge Investments •
Legg Mason Global Equities Group •
Permal •
QS Investors
Royce & Associates •
Western Asset Management
Joseph A. Sullivan
Chief Executive Officer
Peter H. Nachtwey
Chief Financial Officer
June 23, 2014
If the wind will not serve, take to the oars.
-Latin proverb
Debt Restructuring
Issuer Free Writing Prospectus
Filed Pursuant to Rule 433
Registration Statement No. 333-193321 |
 Current
Capital Structure •
$650M of 5.500% notes due 2019
•
$400M of 5.625% notes due 2044
•
Both note offerings favorably received by the market
•
The 2044 notes issued at an attractive coupon
•
Each offering improved debt capital structure and credit profile
2019 Notes
•
7 year notes issued in May 2012 in a very different environment: no
comparable LM securities outstanding at the time and a less robust credit
story resulting in less favorable terms for the notes:
–
Coupon significantly higher than our current credit profile and market conditions
warrant (5.5% vs current trading yield of <3.0% for these notes due to
a combination of
lower
rates,
tighter
corporate
spreads
and
improved
LM
credit
metrics)
–
Certain non-standard covenants for investment grade credits
•
Ability to refinance now at current low interest rates
Page 1
•
Significant progress made to date to improve capital structure, replacing $1.5B of
privately offered convertible notes and short term bank debt with long term
publicly traded fixed rate notes |
 Capital
Structure Considerations •
We have an opportunity to implement an enhanced long term capital structure with
leverage remaining neutral: –
$550M of upsized 30-year debt
•
“Permanent" debt capital at today's favorable rates to finance core
needs, which include regulatory capital requirements and seed capital
–
$250M
of
new
10-year
debt
•
Provides flexibility to de-lever down the road and to take advantage of strong
demand in this tenor •
Meaningful
interest
expense
savings
over
the
term
as
compared
to
current
debt
–
$250M of new 5-year debt swapped to floating
•
Provides flexibility to de-lever in the future if we choose to do so
•
Expected
to
generate
incremental
near
term
interest
expense
savings
as
compared
to
current
debt
•
Our cash balances provide a natural hedge against rising rates
•
Extending debt maturities out to 10 and 30 years further enhances credit profile
and increases financial flexibility –
Strong cash generation and extended maturities provides maximum flexibility for
projected corporate and strategic initiatives
Page 2 |
 Page 3
Post January 2014 Notes Offering and Illustrative Debt Restructuring
Prior to 2012 Notes Offering
Post 2012 Notes Offering
Capital Structure Summary
1,250 |
 Summary
•
Actions
–
Retire all 2019 notes by exercise of make whole call
–
New financing:
–
Reopen 30-year notes for $150M
–
Issue $250M of new 10-year notes
–
Issue $250M of new 5-year notes
–
Swap $250M of newly issued 5-year notes to floating
•
Improving our capital structure at this time presents a number of compelling
benefits, including:
–
Refinancing high coupon debt at current low interest rates
–
Improving our capital structure to enhance financial flexibility
–
Reducing refinancing risk in 2019
–
Putting in place debt with standard, investment-grade covenants
•
The
call
premium,
plus other non-cash charges associated with retiring the 2019 Notes,
are
anticipated
to
approximate
$105-110M
and
are
expected
to
be
offset
by
interest
savings over the life of the debt
–
The higher the increase in rates between now and 2019, the greater the
benefit •
The
call premium
will
not
impact
future
plans
to
use
cash
generated
for
share
buybacks
and
additional
seed
investments,
or to
potentially fund
possible new
acquisitions
Page 4 |
 About This
Presentation The issuer has filed a registration statement, including a
prospectus, with the SEC for the offering to which this communication relates.
Before you invest, you should read the prospectus in that registration
statement and other documents the issuer has filed with the SEC for more
complete information about the issuer and this offering. You may get these
documents for free by visiting EDGAR on the SEC Web site at www.sec.gov.
Alternatively, the Joint Book-Running Managers in the offering will arrange to
send you the prospectus if you request it by contacting J.P. Morgan Securities
LLC collect at (212) 834-4533 or Citigroup Global Markets Inc. at (800)
831-9146. This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities in any jurisdiction to any
person to whom it is unlawful to make such offer or solicitation in such
jurisdiction. Page 5 |