Home Properties to price $175 million 20-year exchangeables, talked at 3.875%-4.125%, up 18%-22%

By Kenneth Lim

Boston, Oct. 17 - Home Properties Inc. plans to price on Wednesday $175 million of 20-year exchangeable senior notes, talked at a coupon of 3.875% to 4.125% and an initial exchange premium of 18% to 22%.

The exchangeables, which will be offered at par, are slated to price after the market closes.

The notes will be issued by operating partnership Home Properties LP and exchangeable into common stock of the listed company.

There is an over-allotment option for a further $25 million.

Merrill Lynch is the bookrunner of the Rule 144A offering.

The notes will be non-callable for the first five years and may be put in years five, 10 and 15.

There will be a contingent conversion hurdle at 130% of the conversion price.

The notes will have full dividend protection via a conversion ratio adjustment and change-of-control protection in the form of a make-whole premium.

Home Properties, a Rochester, N.Y.-based real estate investment trust that focuses on residential apartment communities in the United States, said it will use about $58 million of the proceeds to concurrently buy back stock and another $70 million to repay an outstanding revolving loan. The rest of the proceeds will be used for general corporate purposes.

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