CP Ships $175 million overnight convertible talked at 3.75-4.25% yield, up 32.5-37.5%

Nashville, Feb. 18 - CP Ships Ltd. launched $175 million of 20.4-year convertible notes in an overnight transaction with price talk for a yield of 3.75% to 4.25% with a 32.5% to 37.5% initial conversion premium.

Morgan Stanley & Co. and RBC Capital Markets are joint lead managers of the Rule 144A deal, which is scheduled to price before Thursday's open. Co-managers are Citigroup Global Markets Inc. and Scotia Capital.

The senior subordinated notes, which mature June 30, 2024, will be non-callable until July 3, 2008, or for 5.4 years. There are puts on June 30, 2009, June 30, 2014 and June 30, 2019.

Settlement on the bonds will be in cash, stock or a combination of the two, at the issuer's option.

Holders will have dividend protection for annual cash dividends and distributions in excess of 16 cents per share.

There is a $25 million greenshoe available.

The London-based shipping company said it will use proceeds to reduce borrowings under its two secured revolving credit facilities.

CP Ships shares closed in the United States down 32 cents, or 1.68%, to $18.68.

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