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Will Tender Offer Reduce Eastman Chemical’s Interest Expense?

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Eastman Chemical update on its tender offer

Eastman Chemical (EMN), which intends to redeem $400 million worth of its notes via a cash tender offer, provided an update on these proceeds. As per the latest update, approximately $857 million of notes were validly tendered and there was no withdrawal of any tender until 5:00 PM on November 15, 2016.

The offer includes a premium of $30 per $1,000 principal amount of notes if tendered on or before the early tender date of November 15. Eastman also increased its tender cap for its 7.5%-8% debentures due 2024 from $10 million to $10.7 million and increased the tender cap applicable to its 4.5% notes due in 2021 from $50 million to $65.0 million. The above table gives the details of Eastman Chemical’s tender offer.

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As a result of this increase, Eastman will now redeem ~$425 million of its notes. However, the tender offer will expire on November 29, 2016. This tender offer might help to bring down Eastman Chemical’s interest expense. To facilitate the tender offer, Eastman Chemical has offered 1.5% notes worth 200 million euros due in 2023 and 1.9% notes worth 500 million euros due in 2026.

Eastman Chemical stock price

As of November 18, 2016, Eastman Chemical closed at $74.18, down 1.4% for the week. Eastman traded 9.3% above the 100-day moving average price of $67.88. On a year-to-date basis, the stock is down 9.9%. Eastman Chemical underperformed the First Trust Materials AlphaDEX Fund (FXZ), which rose 2.0% for the week ended November 18, 2016. Investors can get indirect exposure to Eastman Chemical through the First Trust Materials AlphaDEX Fund, which has invested 2.9% of its portfolio in Eastman Chemical as of November 18, 2016. The other top holdings of the fund include the Mosaic Company (MOS), USG (USG), and Packaging Corporation of America (PKG) with weights of 3.7%, 3.6%, and 3.4%, respectively.

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