Viacom Sets $1.3B Bond Offering

Proceeds will be used to pay down debt
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Shortly after it said it received a letter from its controlling shareholder urging it to investigate a possible reunion with former corporate sister CBS, Viacom said it will issue $1.3 billion in debt to help pay off some of its existing obligations.

The move was widely expected. Viacom said earlier in the month when it announced plans to slash its dividend that it was also planning to issue debt.

National Amusements, the theater chain that holds Sumner Redstone’s 80% voting interest in Viacom, sent a letter to the cable programmer’s board of directors Thursday asking them to look into a merger with CBS. Viacom and CBS were once part of the same company, splitting up in 2006 in an effort to unlock value.

Viacom’s board said it will appoint a special committee of independent directors to investigate the matter.

The National Amusements letter caps what has been a volatile few months for Viacom. In May, Redstone ousted then-CEO Philippe Dauman from the trust that would control his shares in the event of his death or incapacitation. That set off a flurry of lawsuits and accusations by Dauman that Redstone’s daughter – and Viacom vice chair – Shari Redstone was unduly influencing her father. Dauman and Redstone settled their suits in August and Dauman agreed to step down as executive chairman and CEO.  Interim CEO Thomas Dooley, a former candidate for the CEO spot – said earlier this month that he would leave in November.

The debt issuance will be in two tranches -- $400 million in 2.25% senior notes due 2022 and $900 million in 3.45% senior notes due 2026. Viacom said it expects to close the sale of the senior notes on Oct. 4.  

Viacom said it plans to use the proceeds from the offerings to repay $400 million of its 2.5% senior notes due this December 2016, and $500 million of its 3.5% senior notes due April 2017 and borrowings under its commercial paper program.

The joint book-running managers for the offering are Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. LLC.

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