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Principal Raises $900 Million in Bond Sale for AFP Cuprum Deal

Principal Financial Group Inc., the seller of life insurance and retirement products that is acquiring Chile’s AFP Cuprum SA, issued $900 million of bonds in three parts to help fund the purchase.

Principal sold $300 million each of 1.85 percent, five-year debt yielding 125 basis points more than similar-maturity Treasuries, 3.125 percent notes due in May 2023 at a relative yield of 155 basis points and 4.35 percent bonds with a May 2043 maturity at a 165 basis-point spread, according to data compiled by Bloomberg. The sale was initially marketed at $800 million, according to a person familiar with the transaction.

Proceeds will help fund a tender offer for Cuprum shares, the Des Moines, Iowa-based company said today in a regulatory filing. Principal is acquiring Chile’s fourth-largest pension manager for $1.5 billion as it looks to add fee income from Latin America. The new bonds will be redeemed at 101 cents on the dollar if the deal is not completed by Nov. 19, 2013.

Principal last sold debt in September, issuing $500 million of 1.125 percent, three-year securities at a spread of 80 basis points, Bloomberg data show. The bonds were quoted at 100.7 cents on the dollar to yield 0.88 percent Nov. 9, according to prices compiled by Bloomberg.

The new bonds were rated BBB+ at Standard & Poor’s, Bloomberg data show. They may be graded A3 by Moody’s Investors Service, according to the person, who asked not to be identified citing lack of authorization to speak publicly. Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc. and UBS AG managed the sale, Bloomberg data show.

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