Educational Funding of the South, Inc. Announces Amounts of Early Tender in Cash Tender Offer and Exchange Offer

FRANKLIN, Tenn., April 14, 2011 /PRNewswire/ -- Educational Funding of the South, Inc. ("Edsouth"), today announced that as of 12:01 A.M. on April 13, 2011 (the "Early Tender Deadline") $676,287,500* aggregate principal amount of its Student Loan-Backed Revenue Bonds, Senior Series 2007-1 A-1, A-2 and A-3 Bonds (collectively, the "Existing LIBOR Bonds"), $494,925,000 aggregate principal amount of its Florida Educational Loan Revenue Bonds, Senior Series 2003FL-A-1, 2003FL-A-2, 2004FL-A-1, 2004FL-A-2, 2004FL-A-3, 2004FL-A-4, 2005FL-A-1, 2005FL-A-2, 2005FL-A-3, 2005FL-A-4 Student Loan-Backed Revenue Bonds, Senior Series 2007-1 A-6, 2007-1 A-7, 2007-1 A-8, 2007-1 A-9, 2007-1 A-10 and 2007-1 A-11 (collectively, the "Existing Senior Auction Rate Bonds"), $30,150,000 aggregate principal amount of its Student Loan-Backed Revenue Bonds, Subordinate Series 2007-1 B-1 (collectively, the "Existing Subordinate Auction Rate Bonds") and $18,450,000 aggregate principal amount of its Florida Educational Loan Revenue Bonds, Junior-Subordinate Series 2003FL-C-1, 2004FL-C-1 and 2005FL-C-1 (collectively, the "Existing Junior-Subordinate Auction Rate Bonds" and together with the Existing Senior Auction Rate Bonds and the Existing Subordinate Auction Rate Bonds, the "Existing Auction Rate Bonds" and together with the Existing LIBOR Bonds, the "Existing Bonds") have been validly tendered and not withdrawn in Edsouth's previously announced offer to exchange (the "Exchange Offer") and to tender for cash (the "Cash Tender Offer," and together with the Exchange Offer, the "Offers").  The terms and conditions of the Offers are set forth in the Tender Offer Statement of Edsouth, dated as of March 28, 2011, as supplemented on April 1, 2011 (the "Tender Offer Statement").  Additionally, the deadline for holders of Existing Bonds to withdraw any Existing Bonds that are tendered has passed and previously tendered Existing Bonds can no longer be withdrawn and any subsequent tenders of Existing Bonds once validly made may not be withdrawn.

The Offers will expire at 12:01 a.m. New York City time, on April 27, 2011 (the "Expiration Date") unless extended or earlier terminated by Edsouth.    

Any properly tendered Existing Auction Rate Bonds that are ultimately accepted for exchange by Edsouth in the Exchange Offer will be accepted subject to the terms and conditions of the Exchange Offer as described in the Tender Offer Statement and subject to the selection methodology described therein, in exchange for certain of the new floating rate notes ("New Floating Rate Notes"), to be issued pursuant to an Indenture of Trust with Wells Fargo Bank, National Association, as indenture trustee, and The Bank of New York Mellon Trust Company, N.A., as eligible lender trustee (the "New Indenture"), and the payment of any accrued but unpaid interest (other than carry-over interest) on the Existing Auction Rate Bonds to but excluding the Settlement Date (as defined in the Tender Offer Statement).  Specifically, properly tendered Existing Senior Auction Rate Bonds if accepted for exchange will be exchanged for New Floating Rate Class A-2 Notes; properly tendered Existing Subordinate Auction Rate Bonds if accepted for exchange will be exchanged for New Floating Rate Class B Notes; and properly tendered Existing Junior-Subordinate Rate Bonds if accepted for exchange will be exchanged for New Floating Rate Class B Notes.  Prior to the Early Tender Deadline, the consideration for Existing Bonds that are accepted for exchange will be $1,000 principal amount of Existing Senior Auction Rate Bonds for each $1,000 principal amount of New Floating Rate Class A-2 Notes, $1,000 principal amount of Existing Subordinate Auction Rate Bonds for each $1,000 principal amount of New Floating Rate Class B Notes, and $1,000 principal amount of Existing Junior-Subordinate Auction Rate Bonds for each $940 principal amount of New Floating Rate Class B Notes plus, in each case, accrued and unpaid interest (other than carry-over interest) to but excluding the Settlement Date.  Holders of Existing Auction Rate Bonds that are validly tendered after the Early Tender Deadline but before the Expiration Date will receive for each $1,000 principal amount of Existing Senior Auction Rate Bonds, $960 principal amount of New Floating Rate Class A-2 Notes, for each $1,000 principal amount of Existing Subordinate Auction Rate Bonds, $960 principal amount of New Floating Rate Class B Notes and for each $1,000 principal amount of Existing Junior-Subordinate Auction Rate Bonds, $900 principal amount of New Floating Rate Class B Notes plus, in each case, accrued and unpaid interest (other than carry-over interest) to but excluding the Settlement Date.

Any properly tendered Existing LIBOR Bonds that are ultimately accepted for purchase by Edsouth for cash in the Cash Tender Offer will be accepted subject to the terms and conditions of the Cash Tender Offer as described in the Tender Offer Statement and subject to the selection methodology described therein. Prior to the Early Tender Deadline, the consideration for the Existing LIBOR Bonds that are properly tendered and accepted for purchase by Edsouth in the Cash Tender Offer will be any and all of the aggregate principal balance of Student Loan-Backed Revenue Bonds, Senior Series 2007-1 A-1 (the "Existing Senior LIBOR A-1 Bonds") for a purchase price of 100.2% of par plus accrued but unpaid interest to but excluding the Settlement Date, any and all of the aggregate principal balance of Student Loan-Backed Revenue Bonds, Senior Series 2007-1 A-2 (the "Existing Senior LIBOR A-2 Bonds") for a purchase price of par plus accrued but unpaid interest to but excluding the Settlement Date, and any and all of the aggregate principal balance of Student Loan-Backed Revenue Bonds, Senior Series 2007-1 A-3 (the "Existing Senior LIBOR A-3 Bonds") for a purchase price of par plus accrued but unpaid interest to but excluding the Settlement Date. After the Early Tender Deadline but prior to the Expiration Date, the consideration for the Existing LIBOR Bonds that are properly tendered and accepted for purchase by Edsouth in the Cash Tender Offer will be the aggregate principal balance of Existing Senior LIBOR A-1 Bonds for a purchase price of 96.2% of par plus accrued but unpaid interest to but excluding the Settlement Date, the aggregate principal balance of Existing Senior LIBOR A-2 Bonds for a purchase price of 96.0% of par plus accrued but unpaid interest to but excluding the Settlement Date, and the aggregate principal balance of Existing Senior LIBOR A-3 Bonds for a purchase price of 96.0% of par plus accrued but unpaid interest to but excluding the Settlement Date.  Edsouth will also issue New Floating Rate Class A-1 Notes to certain institutional investors and certain of the proceeds from the sale of the New Floating Rate Class A-1 Notes will be used to pay the consideration described above for the purchase of any Existing LIBOR Bonds accepted for purchase in the Cash Tender Offer.  The aggregate principal amount of the New Floating Rate Class A-1 Notes is expected to be approximately $362,174,000 to $382,174,000, the aggregate principal amount of the New Floating Rate Class A-2 Notes is expected to be approximately $439,875,000 to $459,875,900, and the aggregate principal amount of the New Floating Rate Class B Notes is expected to be approximately $26,918,000 to $46,918,000. Each such range is approximate, preliminary and subject to change and is based on various assumptions made about, among other things, the Offers and the conditions described in the Tender Offer Statement and general market conditions.  For the avoidance of doubt, the New Floating Rate Class A-1 Notes will be issued in a principal amount that is equal to approximately 43% of the principal amount of the total New Floating Rate Notes issued, the New Floating Rate Class A-2 Notes will be issued in a principal amount that is equal to approximately 52% of the principal amount of the total New Floating Rate Notes issued, and the New Floating Rate Class B Notes will be issued in a principal amount that is equal to approximately 4% of the principal amount of the total New Floating Rate Notes issued as reflected in the Preliminary Offering Memorandum attached as an exhibit to the Tender Offer Statement.

Edsouth's obligation to exchange New Floating Rate Notes for certain Existing Auction Rate Bonds or purchase for cash certain Existing LIBOR Bonds in the Offers is subject to a number of conditions that must be satisfied, which are set forth in the Tender Offer Statement.  The amount of Existing Bonds that are properly tendered and that are accepted for purchase or exchange by Edsouth in the Offers will be announced promptly following the Acceptance Date (as defined in the Tender Offer Statement).

Edsouth will promptly return any Existing Bonds that are not accepted for purchase or exchange in the Offers.

Existing Bonds may be tendered by transferring Existing Bonds through The Depository Trust Company's Automated Tender Offer Program by following the procedures set forth in detail in the Tender Offer Statement.  The terms of the Offers remain the same as outlined in the Tender Offer Statement, and the Tender Offer Statement and the related Letter of Transmittal remain in full force and effect.

Morgan Stanley & Co. Incorporated and RBC Capital Markets, LLC will act as the dealer managers for the Offers.  

D.F. King & Co., Inc. will act as the information agent.  Bondholders or their representatives may request copies of the Tender Offer Statement, the Preliminary Offering Memorandum and related documents, and submit any questions or requests for assistance to:

Wells Fargo Bank, National Association will act as the exchange agent and depository for the Offers.

This press release is for informational purposes only and is not an offer to purchase or a solicitation of an offer to purchase or exchange any Existing Bonds. The Offers may only be made pursuant to the terms of the Tender Offer Statement.  The Tender Offer Statement contains important information that should be read carefully in its entirety before any decision is made to tender or not tender Existing Bonds pursuant to the Offers.

About Educational Funding of the South, Inc.

Edsouth is a nonprofit, public-benefit corporation created in 1985 under the law of the State of Tennessee, organized for the purpose of promoting access to higher education by acquiring postsecondary education loans under Title IV of the Federal Higher Education Act of 1965.  Edsouth received its 501(c)(3) determination and operates as a 150(d) corporation in the states of Tennessee and Florida.  Its principal office is located at 501 Corporate Centre Drive, Suite 320, Franklin, Tennessee 37067.  Prior to January 1, 1996, Edsouth was known as Volunteer State Student Funding Corporation.  Edsouth has implemented various programs to assist eligible borrowers in financing the costs of post-secondary education at eligible schools, colleges and universities.  In addition to educational funding, Edsouth has several student outreach initiatives for the purpose of increasing awareness of college, career, and financial aid opportunities by providing free college and career planning resources and services for students and parents.

Forward-Looking Statements

Forward-looking statements in this release, such as the scheduled expiration of the Offers, are based on current expectations.  This press release contains forward-looking statements that involve a variety of business risks and other uncertainties that could cause actual results to differ materially.  Words such as "expects," "intends," "plans," "projects," "believes," "estimates" and similar expressions are used to identify these forward-looking statements.  These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict.  Forward-looking statements are based upon assumptions as to future events that may not prove to be accurate.  Actual outcomes and results may differ materially from what is expressed or forecast in these forward-looking statements.  Forward-looking statements speak only as of the date made.  There is no obligation to update any forward-looking statements to reflect the events or circumstances arising after the date as of which they are made.  As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on the forward-looking statements included in this release or that may be made elsewhere from time to time by, or on behalf of, Edsouth.

* For the Student Loan-Backed Revenue Bonds, Senior Series 2007-1 A-1, DTC recorded tendered bonds based on the original face amount of the bonds.  As a result, the principal amount shown by DTC as validly tendered and not withdrawn differs.

SOURCE Educational Funding of the South, Inc.

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