3i Group to price £425 million three-year convertibles, talked to yield 3.625% to 4.125%, up 25% to 30%

By Rebecca Melvin

New York, May 15 - 3i Group plc planned to price about £425 million of three-year unsecured convertible bonds, which were talked to yield between 3.625% and 4.125%, with an initial conversion premium of 25% to 30% above the volume weighted average price of 3i's ordinary shares during the placement period, according to a company release Thursday.

3i is issuing the bonds to refinance its existing €550 million of 1.375% convertible bonds that mature Aug. 1.

Dresdner Kleinwort and Lehman Brothers are joint bookrunners of the offering.

3i will also enter into call spread overlay agreements with the bookrunners, which are aimed at raising the effective conversion premium for the company to about 60% above the market reference price.

These agreements include the company's purchase of cash-settled call options at the conversion price of the bonds from the joint bookrunners relating to about 38.27 million shares, and the sale to the joint bookrunners of call options over about 38.27 million shares at the higher effective conversion premium.

The lower call options are cash settled for life, while the upper call options will be 50% cash settled initially, and 50% physically settled by the issue of shares by 3i on any exercise of these options.

Application will be made to the U.K. Listing Authority to list the bonds on the Professional Securities Market of the London Stock Exchange.

3i is a U.K. based venture capital and private equity firm.

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