El Paso $750 million convertible preferreds talked at 4.375% to 4.875%, up 25% to 30%

By Sara Rosenberg

New York, April 5 - El Paso Corp. launched $750 million of convertible perpetual preferred stock Tuesday that was talked to price with a 4.375% to 4.875% dividend and 25% to 30% initial conversion premium, according to a market source.

The Rule 144A deal is scheduled to price after the close Thursday via joint leads Bank of America and Deutsche Bank. Also in the syndicate are Citigroup, Credit Suisse First Boston, Morgan Stanley, Merrill Lynch, Goldman Sachs, ABN Amro, BNP Paribas, Scotia Capital, SG Cowen, Hypo and Fortis.

The issue will be non-callable for five years, then with a 130% hurdle through maturity.

There is a $150 million greenshoe.

El Paso, a Houston-based energy company, plans to use proceeds to redeem the $300 million of outstanding 8.25% cumulative preferred stock of its subsidiary, El Paso Tennessee Pipeline Co., and to prepay its Western Energy Settlement obligations, estimated to be approximately $442 million. Cash on hand will be used if any further amounts are needed to pay the obligations.

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