Vector Announces Proposed Offering Of Variable Interest Convertible Senior Notes

Vector Group Ltd. (NYSE: VGR) (“Vector” or the “Company”) today announced that it intends to offer and sell, subject to market and other conditions, $150 million aggregate principal amount (or up to an aggregate of $172.5 million aggregate principal amount if Jefferies & Company, Inc. (“Jefferies”), the underwriter of the offering, exercises its over-allotment option in full) of its Variable Interest Convertible Senior Notes due 2019 (the “Notes”) in a registered public offering (the “Notes Offering”).

The Company intends to use the net proceeds received from the Notes Offering for general corporate purposes, including in its existing tobacco business and in additional investments in real estate through its wholly owned subsidiary, New Valley LLC. The Company may also consider using a portion of the proceeds of the Notes Offering to address upcoming debt maturities.

Concurrently with the Notes Offering, the Company intends to lend to Jefferies (in such capacity the “Share Borrower”), pursuant to a share lending agreement, initially up to 7,000,000 shares of the Company’s common stock (the “Borrowed Shares”). Jefferies intends to offer in a registered public offering (i) up to 3,500,000 Borrowed Shares at a fixed price and (ii) from time to time after the completion of the fixed price share offering, up to an additional 3,500,000 Borrowed Shares at prices prevailing in the market at the time of sale or at negotiated prices (the “Borrowed Shares Offering”). The Share Borrower expects to return to the Company, shortly after the closing of the Notes Offering, up to 3,500,000 shares, thus reducing the number of shares outstanding under the share lending agreement by up to 3,500,000 shares. In addition, the Share Borrower may from time to time during the term of the share lending agreement borrow from the Company up to 1,000,000 additional shares of the Company’s common stock for additional offerings that may be made in subsequent offerings, on a delayed basis in transactions that may include block sales, sales in the over-the-counter market, sales pursuant to negotiated transactions or otherwise (the “Supplemental Shares”). The Share Borrower may not borrow Supplemental Shares from the Company more than twice during any twelve consecutive months and each borrowing of Supplemental Shares must be in an amount of at least 250,000 shares. The total number of shares of the Company’s Common Stock that the Share Borrower can borrow under the share lending agreement is limited to a maximum of 7,000,000 shares, but will be increased by 1,000,000 shares in the event any Supplemental Shares are to be sold in subsequent offerings. The Company is entering into the share lending agreement to facilitate hedging transactions related to the Notes Offering. The Company will not receive any proceeds from the Borrowed Shares Offering, but the Company will receive a nominal lending fee from the Share Borrower for the use of the Borrowed Shares, which the Company intends to use for general corporate purposes.

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