El Paso $500 million mandatory convertibles talked at 8.75-9.25% yield, up 18-22%

By Ronda Fears

Nashville, Tenn., June 17 - El Paso's $500 million of three-year mandatory convertibles are talked to yield 8.75% to 9.25% with an 18% to 22% initial conversion premium.

The deal is set to price after the close Thursday via joint book-running lead managers Credit Suisse First Boston and JPMorgan.

There is a $75 million greenshoe available.

Along with the convertible, the energy company is selling 45 million shares of common stock that could fetch close to $1 billion.

Wachovia Securities convertible analyst Kimberlee Brody estimates the new El Paso mandatory is about 2.12% cheap at the midpoint of price talk, assuming a credit spread of 300 basis points over Treasuries and 48% volatility in the stock. Also factored in was the nearly 4% common dividend yield on El Paso stock.

El Paso shares closed up 50c to $22.33.

The El Paso 0% convertible bond due 2021 was unchanged at 40.5 bid, 40.625 offered.

The El Paso 4.75% convertible preferred due 2028 closed up 0.27 point to 36.67 on the NYSE, and was quoted up 0.35 point to 36.75 bid, 38.5 offered by a dealer.

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