EDO $100 million convertibles talked at 5.25-5.75% yield, up 21-25%

By Ronda Fears

Nashville, Tenn., March 22 - EDO Corp.'s $100 million of five-year convertible subordinated notes are talked to yield 5.25% and 5.75% and with a 21% to 25% initial conversion premium. The Rule 144A deal is set to price next Wednesday via lead manager Salomon Smith Barney.

The five-year notes will be non-callable for three years. There is a $15 million greenshoe available.

The New York-based capital goods company makes electronic and other products for the aerospace and defense industry.

In 2001, EDO reported net sales rose 26% to $260 million and net income from continuing operations applicable to common shareholders totaled $14.5 million, up from $440,000. The company said results reflect the merger with AIL Technologies, entry into new markets and lower merger-related and other special charges.

EDO has no debt aside from the proposed convertible.

Analysts said the convertible modeled out about 5% cheap to fair value, assuming a credit spread of 700 basis points over the comparable Treasury note and 35% volatility in the stock.

While the company did not specify a use for proceeds, the company said in an SEC filing this week that it has made an offer on March 11 to purchase substantially all of the assets of a privately held defense electronics company that is currently in Chapter 11 bankruptcy for $70 million plus the assumption of some liabilities, including account payable.

EDO shares closed Friday down $1.47 to $26.81.

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