Evergreen Solar to price $300 million five-year convertibles to yield 3.5%-4%, up 27.5%-32.5%

By Rebecca Melvin

New York, June 24 - Evergreen Solar Inc. plans to price $300 million of five-year senior convertible notes after the close Thursday. The notes are being talked with a coupon of 3.5% to 4% and with an initial conversion premium of 27.5% to 32.5%, according to a market source.

There is a greenshoe of $45 million.

The offering is being made under a shelf registration via bookrunner Lehman Brothers Inc.

The notes have no calls or puts and will be convertible into cash up to their principal amount, with common stock for the remainder, if any, of the conversion value.

After deducting underwriting discounts and Evergreen Solar's estimated expenses related to the offering, including the cost of the capped call transaction and registered sale of borrowed shares of common stock, proceeds are expected to be used to complete the construction and equipping of its fully integrated solar panel manufacturing facility located in Devens, Mass., to begin construction of a manufacturing facility that will produce heat resistant string to be used in the manufacturing of Evergreen Solar's wafers and for general corporate purposes, including purchases of or prepayments for polysilicon and other raw materials, and working capital.

Concurrently with the notes, Evergreen Solar plans to enter into a capped call transaction with an affiliate of Lehman Brothers. The capped call transaction is expected to increase the effective conversion premium of the notes and to reduce the potential dilution upon conversion of the notes.

In connection with establishing its initial hedge of the capped call transaction, the counterparty or affiliates expects to enter into over-the-counter cash settled derivative transactions related to Evergreen Solar's common stock.

In addition, Evergreen Solar has been advised by the counterparty that it expects to modify or unwind its hedge positions by purchasing or selling Evergreen Solar's common stock in secondary market transactions and/or entering into or unwinding various derivative transactions prior to the maturity of the notes.

Evergreen Solar said it expects to enter into a common stock lending agreement with an affiliate of Lehman Brothers, under which Evergreen Solar will agree to lend to the affiliates a number of shares of common stock that will be determined along with pricing of the notes.

Concurrently, the affiliate will offer and sell a portion of the borrowed shares in a registered public offering.

Marlboro, Mass.-based Evergreen Solar makes solar power panels.

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