Educational Funding of the South, Inc. Announces Commencement of Cash Tender Offer and Exchange Offer

FRANKLIN, Tenn., March 28, 2011 /PRNewswire/ -- Educational Funding of the South, Inc. ("Edsouth"), today announced that it has commenced offers to exchange (the "Exchange Offer") and to tender for cash (the "Cash Tender Offer," and together with the Exchange Offer, the "Offers") certain of the following outstanding Florida Educational Loan Revenue Bonds (the "Existing Bonds") issued under the Indenture of Trust, dated as of September 1, 2003, between Edsouth and Wells Fargo Bank, National Association, as successor trustee:  

Existing Bonds subject to Cash Tender Offer (collectively, the "Existing LIBOR Bonds"):

Existing Bonds subject to Exchange Offer (collectively, the "Existing Auction Rate Bonds"):

* CUSIP is a registered trademark of American Bankers Association.  None of the Corporation, the Dealer Managers, the Trustee or the Exchange Agent makes any representation as to, or takes responsibility for, the accuracy of such CUSIP numbers. CUSIP numbers are provided for convenience of reference only.

The Offers are part of a plan by Edsouth to refinance student loans securing its auction rate bonds.  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.  Edsouth's obligation to purchase or exchange Existing Bonds in the Offers is subject to the terms and conditions set forth in the Tender Offer Statement of Edsouth, dated as of March 28, 2011 (the "Tender Offer Statement").  

Edsouth will accept certain of the properly tendered Existing Auction Rate Bonds according to the terms and conditions of the Tender Offer Statement, subject to the 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, Edsouth will accept properly tendered Existing Senior Auction Rate Bonds in exchange for New Floating Rate Class A-2 Notes; Existing Subordinate Auction Rate Bonds in exchange for New Floating Rate Class B Notes; and Existing Junior-Subordinate Rate Bonds in exchange for New Floating Rate Class B Notes. Prior to 12:01 a.m., New York City time, on April 13, 2011 (the "Early Tender Date"), the consideration for the Exchange Offer 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.  After the Early Tender Date but prior to the Expiration Date, the consideration for the Exchange Offer will be $1,000 principal amount of Existing Senior Auction Rate Bonds for each $960 principal amount of New Floating Rate Class A-2 Notes,  $1,000 principal amount of Existing Subordinate Auction Rate Bonds for each $960 principal amount of New Floating Rate Class B Notes and  $1,000 principal amount of Existing Junior-Subordinate Auction Rate Bonds for each $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. The terms and conditions of the New Indenture and the New Floating Rate Notes are described in the Preliminary Offering Memorandum, dated March 28, 2011.

Edsouth will accept certain of the properly tendered Existing LIBOR Bonds for cash according to the terms and conditions of the Tender Offer Statement, subject to the selection methodology described therein. Prior to the Early Tender Date, the consideration for 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" and together with the Existing Senior LIBOR A-1 Bonds and the Existing Senior LIBOR A-2 Bonds, the "Existing Senior LIBOR Bonds") for a purchase price of par plus accrued but unpaid interest to but excluding the Settlement Date. After the Early Tender Date but prior to the Expiration Date, the consideration for 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 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.

Edsouth's obligation to exchange New Floating Rate Notes for certain Existing Auction Rate Bonds or purchase for cash certain Existing LIBOR Bonds is pursuant to a number of conditions that must be satisfied, which are set forth 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.

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.

Educational Funding of the South, Inc. Contact

Ron Gambill, Chairman & CEO: (615) 771-8505

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.

SOURCE Educational Funding of the South, Inc.