Guitar Center $90 million convertibles talked to yield 3.5-4.0%, up 40-45%

By Ronda Fears

Nashville, June 9 - Guitar Center Inc. plans to sell $90 million of 10-year convertible notes with talk putting the yield at 3.5%to 4.0% with a 40% to 45% initial conversion premium.

Goldman Sachs & Co. is bookrunner for the deal. U.S. Bancorp Piper Jaffray and William Blair & Co. are co-managers.

The senior unsecured notes will be non-callable for three years, with puts in years five and seven.

There is a 120% contingent conversion feature.

The issue is expected to be rated B1 by Moody's Investors Service and B+ by Standard & Poor's Corp.

The Westlake Village, Calif.-based guitar retailer plans to use proceeds to redeem all of its outstanding 11% senior notes due 2006 and to reduce the amount outstanding under its credit agreement.

There is a $10 million greenshoe available.

Also Monday, the company reiterated its second quarter 2003 sales and earnings guidance.

Based on current business and economic conditions, the company expects second quarter net sales will be in the range of $286.5 million to $292.2 million and earnings per share in a range of 18c to 20c.

Guitar Center shares closed Monday off 57c, or 2.29%, to $24.33.

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