November 27, 2013 / 4:03 PM / 4 years ago

Tim Hortons sets debt offering to fund share buyback

TORONTO, Nov 27 (Reuters) - Tim Hortons Inc said on Wednesday it is selling about C$450 million ($426.9 million) in senior unsecured 10-year notes as part of a plan to fund a previously announced share buyback by the coffee and doughnut chain.

The C$1 billion share buyback program was announced earlier this year in response to pressure from two activist investors.

The notes will sold through a private placement expected to close before the end of the month. The coupon on the notes, which come due on Dec. 1, 2023, has been priced at 4.52 percent, the Oakville, Ontario-based company said.

Tim Hortons said it plans to use proceeds from the offering to pay down outstanding debt under a bridge credit facility that it took on last month to help fund its expanded share repurchase program.

In August, Tim Hortons’ board of directors approved a C$900 million increase in debt to fund the program.

Early this year, U.S. hedge funds Scout Capital Management and Highfields Capital urged Tim Hortons to increase debt levels to fund a share buyback, address concerns about its U.S. expansion, and name directors to the board who have more financial expertise.

In response, Tim Hortons expanded its buyback program and named two new directors: Sherri Brillon, chief financial officer at Encana Corp, and Thomas Milroy, group head of BMO Capital Markets.

Shares in Tim Hortons have surged 33 percent over the last 12 months, and about 10 percent since April, when Reuters broke the news about activist interest in the company.

Tim Hortons last month secured a one-year, C$400 million revolving bank facility to provide interim financing to fund its share buyback program. At the time, the company said it expected to obtain longer-term financing for a part of the C$900 million increase in the buyback program.

Earlier this month, Tim Hortons said it had reached private agreements with certain shareholders to buy back 2.12 million shares under the existing buyback program. These purchases are expected to close by Nov. 27.

The senior unsecured note offering is being made via a syndicate of dealers that includes RBC Dominion Securities, TD Securities and Scotia Capital Inc as joint bookrunners, along with Citigroup Global Markets Canada.

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