By Reshmi Basu
New York, Dec. 13 - Great Atlantic & Pacific Tea Co., Inc. priced a $380 million two-part convertibles offering made up of $150 million in 5.125% senior notes due 2011 and $230 million 6.75% senior notes due 2012, according to a prospectus filed with the U.S. Securities and Exchange Commission.
The 2011 notes will carry a 30% initial conversion premium and an initial conversion price of $36.40. The notes are not redeemable.
Meanwhile the 2012 notes will bear a 35% initial conversion premium and an initial conversion price of $37.80. The company has the right to redeem the notes for cash on Dec. 15, 2010 at 102.70 and from Dec. 15, 2011 to maturity at a redemption price of 101.35.
Banc of America Securities LLC and Lehman Brothers Inc. were joint bookrunners for the deal, which priced after the close Wednesday.
Friedman, Billings, Ramsey & Co. Inc. was a co-manager.
The convertibles have net share settlement and takeover protection through a conversion rate adjustment grid.
Proceeds will be used to pay down the remaining debt on a bridge loan established to help finance the acquisition of Pathmark, which closed on Dec. 3.
Alongside the new convertibles, A&P plans to enter into note hedge and warrant transactions to reduce any potential dilution when the notes are converted. A&P said that the transactions could increase or prevent or offset a decline in A&P's common stock price upon or shortly after pricing of the notes.
At the same time, A&P will enter into share lending agreements with affiliates of Banc of America Securities and Lehman Brothers. The share borrowers will offer and sell the common stock in a registered public offering and will use the proceeds to establish hedged positions in the offered notes for investors.
The affiliates will receive all proceeds from the sale of the borrowed common stock, but A&P will receive a nominal lending fee.
Legally, the borrowed shares are considered outstanding. But in accordance with generally accepted accounting principals, the borrowed shares will not be considered outstanding for the purposes of computing and reporting earnings per share because the shares lent as part of the share lending agreement will be returned to A&P.
A&P is a Montvale, N.J.-based supermarket chain, and manages A&P, Pathmark, Waldbaum's, the Food Emporium and other supermarkets.
Issuer: Great Atlantic & Pacific Tea Co., Inc.
Issue: Two-part offering of convertibles
Total amount: $380 million
Bookrunners: Banc of America Securities LLC, Lehman Brothers Inc.
Co-manager: Friedman, Billings, Ramsey & Co.
| Net share settlement: | Yes
|
| Pricing date: | Dec. 12, after close
|
| Settlement date: | Dec. 18
|
|
|
| 2011 notes
|
| Amount: | $150 million
|
| Maturity: | June 15, 2011
|
| Coupon: | 5.125%
|
| Price: | Par
|
| Yield: | 5.125%
|
| Initial conversion premium: | 30%
|
| Conversion price: | $36.40
|
| Conversion ratio: | 27.4725
|
| Call: | Non-callable
|
|
|
| 2012 notes |
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| Amount: | $230 million
|
| Maturity: | Dec. 15, 2012
|
| Coupon: | 6.75%
|
| Price: | Par
|
| Yield: | 6.75%
|
| Initial conversion premium: | 35%
|
| Conversion price: | $37.80
|
| Conversion ratio: | 26.4550
|
| Call: | Dec. 15, 2010 at 102.7
|
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