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Discover Bank Announces Pricing Terms Of Exchange Offer

Discover Bank (the “Bank”) announced today the pricing terms of its private offer to exchange its outstanding notes referenced in the table below (the “Bank Notes”) for new senior notes of its parent company Discover Financial Services (“DFS”) due November 21, 2022 (the “DFS Notes”) and cash (the “Exchange Offer”), determined as of 11:00 a.m., New York City time, on November 1, 2012 (the “Price Determination Date”) in accordance with the terms set out in the Bank’s confidential offering memorandum dated October 19, 2012 (the “Confidential Offering Memorandum”) and the related letter of transmittal.

The interest rate on the DFS Notes will be 3.850%. The yield on the DFS Notes will be 3.874% and the “DFS Notes Value” of the DFS Notes will be $998.03, which has been determined by reference to the bid-side yield on the 1.625% U.S. Treasury due August 15, 2022 as of the Price Determination Date, which was 1.724%.

The total exchange price to be received in the Exchange Offer (the “Total Exchange Price”) for each $1,000 principal amount of Bank Notes validly tendered, and not validly withdrawn, prior to 5:00 p.m., New York City time, on November 1, 2012 (the “Early Participation Date”) is set forth in the table below. The Total Exchange Price includes the early exchange premium of $50.00 per $1,000 principal amount of Bank Notes (the “Early Exchange Premium”) validly tendered, and not validly withdrawn, prior to the Early Participation Date. The Total Exchange Price has been determined in accordance with the procedures set forth in the Confidential Offering Memorandum. Holders of Bank Notes who validly tender Bank Notes after the Early Participation Date and whose Bank Notes are accepted in the Exchange Offer will receive the Total Exchange Price less the Early Exchange Premium (the “Exchange Price”).

The table below shows the Total Exchange Price and Exchange Price per $1,000 principal amount of Bank Notes accepted in the Exchange Offer.

CUSIP Number

 

Title of Security

 

Reference U.S. Treasury Security

 

Reference UST Yield

 

Fixed Spread (basis points)

 

Exchange Offer Cap

 

Exchange Price

 

Early Exchange Premium

 

Total Exchange Price

25466AAA9

8.70%SubordinatedNotes Due2019

 

1.625% dueAugust 15,2022

1.724% + 135 $500,000,000 $1,301.53 $50.00 $1,351.53

The Total Exchange Price will be paid in the following manner:

  • $1,000 principal amount of DFS Notes; plus,
  • $353.50 in cash, which is equal to (a) the Total Exchange Price minus (b) the DFS Notes Value.

The Exchange Price will be paid in the following manner:

  • $1,000 principal amount of DFS Notes; plus,
  • $303.50 in cash, which is equal to (a) the Exchange Price minus (b) the DFS Notes Value.

In addition to the Total Exchange Price or Exchange Price, holders whose Bank Notes are accepted for exchange will be paid accrued and unpaid interest on such Bank Notes to but not including the settlement date, described below.

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