Are there any secondary market effects on the pricing of the remaining notes after the tender offer?

Short answer:

Yes – a cash‑tender offer of this size normally creates a noticeable ripple in the secondary market for the notes that are not being bought. The price at which First Quantum Minerals (FQM) is willing to retire a large slice of its 9.375 % senior secured second‑lien notes sets a new reference point (a “floor” or “benchmark”) for the remaining issue, and the market reacts to the changed supply‑demand balance, the implied valuation of the notes and the perception of credit risk. Below is a step‑by‑step breakdown of the typical secondary‑market effects you can expect for the residual notes after the tender offer is announced and, later, when it is executed.

1. What the tender offer actually does

Because the offer is for a maximum $250 M, it will not necessarily cover the entire issue; the remaining notes will still be outstanding after the tender is completed.

2. Immediate secondary‑market reaction (the day of the announcement)

2.1. Price convergence toward the tender price

• If the tender price is above the current market price – investors will bid up the secondary‑market price of the notes, trying to capture the premium. The market price will often trade just a few basis points below the tender price, reflecting the cost of executing the tender (e.g., transaction fees, timing risk).
• If the tender price is below the current market price – the market will re‑price the notes downward, as the tender price signals that the issuer believes the notes are over‑valued relative to its own cost of capital.

2.2. Liquidity boost

• The announcement creates a liquidity window: holders who want to exit can submit tender instructions, while those who wish to stay can sell on the open market. This heightened activity narrows bid‑ask spreads for the notes.

2.3. Yield compression or expansion

• Yield compression (price rise) occurs when the tender price is a premium; the effective yield on the remaining notes falls because the market price is higher while the coupon stays at 9.375 %.
• Yield expansion (price fall) occurs when the tender price is a discount; the effective yield rises.

2.4. Credit‑risk perception shift

• A sizable tender to retire debt is often read as a credit‑strengthening move. Rating agencies may view the reduced leverage positively, prompting a upward drift in credit spreads (i.e., tighter spreads) for the residual notes.

3. Post‑tender execution (once the cash offer is consummated)

3.1. Supply reduction

• The total principal outstanding falls by the amount tendered (up to $250 M). A smaller issue means less supply on the market, which, all else equal, pushes the price of the remaining notes higher (or at least stabilises it) because investors now have a scarcer, more “premium”‑priced security.

3.2. Re‑calibration of the reference price

• The settlement price of the tender (the cash price per $100 of principal) becomes the new “reference” for the secondary market. Market participants will price the residual notes relative to that settlement price:
  • If the settlement price was a premium → the remaining notes will likely trade at a similar premium (or a slight discount if the market expects further redemptions).
  • If the settlement price was a discount → the remaining notes will trade at a discount to par, reflecting the issuer’s willingness to retire debt cheaply.

3.3. Potential “run‑off” effect

• Some investors may view the tender as a partial “run‑off” of the issue, expecting that the issuer could launch a second tender later. This speculation can add volatility to the secondary price, especially if the remaining principal is still sizable.

3.4. Spread tightening

• With a lower leverage ratio and a cash‑flow relief from the reduced interest‑expense, the credit spread (yield over Treasuries) on the residual notes often tightens. Empirically, for similar senior secured second‑lien notes, spreads can narrow by 20–50 bps after a comparable tender.

4. Quantitative illustration (hypothetical)

Assume the following pre‑announcement market data for the 9.375 % notes:

Scenario A – Tender price = $101.00 (premium)

Scenario B – Tender price = $96.00 (discount)

The exact magnitude will depend on the size of the remaining issue, the depth of the order‑book, and broader market conditions (e.g., Treasury curve, risk‑off sentiment).

5. Take‑away points for investors holding or considering the residual notes

Final Verdict

Yes – the tender offer will have a clear secondary‑market impact on the pricing of the remaining 9.375 % senior secured second‑lien notes. The direction and magnitude of that impact hinge on the cash price set by the tender (premium vs. discount), the size of the remaining principal, and the market’s interpretation of the debt‑reduction as a credit‑strengthening move. In practice, you can expect:

• Price convergence toward the tender price (upward if premium, downward if discount).
  
• Yield adjustment reflecting the new price level.
  
• Tighter credit spreads if the tender is viewed as a balance‑sheet improvement.
  
• Reduced supply leading to a price floor and potentially lower volatility after the tender is completed.
  

Monitoring the actual tender price, the amount actually redeemed, and any subsequent statements from rating agencies will give you the most precise read on the post‑tender pricing dynamics.