Lufthansa plans five-year bonds exchangeable into JetBlue to yield 0.75%-1.5%, up 32.5%-37.5%

By Rebecca Melvin

New York, March 29 - Lufthansa Malta Blues LP, a subsidiary of Deutsche Lufthansa AG, launched an offering of five-year bonds exchangeable into shares of JetBlue Airways Corp. in euros to yield 0.75% to 1.5% with an initial conversion premium of 32.5% to 37.5%, according to a market source.

Deutsche Lufthansa will guarantee the Regulation S notes, which are being underwritten by Goldman Sachs International, Morgan Stanley & Co., UBS AG.

The notes are exchangeable into up to 46.7 million shares of JetBlue common stock. Lufthansa has an option to give investors exercising their exchange rights cash instead of JetBlue shares.

Pricing was expected late Thursday, with settlement seen April 5.

JetBlue will not receive any of the proceeds from the sale of the notes.

Lufthansa at present owns around 15.7% in JetBlue, which equates to an amount that would imply a deal size of €240 million to €250 million, according to Barclays Capital convertibles research in London.

Lufthansa is the flag carrier of Germany and the largest airline in Europe in terms of overall passengers carried, and JetBlue is a low-cost carrier based in Forest Hills, N.Y.

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