KBR talks $350 million five-year convertibles to yield 2%-2.5%, up 27.5%-32.5%

By Abigail W. Adams

Portland, Me., Nov. 12 – KBR Inc. plans to price $350 million of five-year convertible notes after the market close on Monday with price talk for a coupon of 2% to 2.5% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

BofA Merrill Lynch is the bookrunner for the Rule 144A deal, which carries a greenshoe of $52.5 million.

The notes are contingently convertible until May 1, 2023 subject to a 130% trigger. There is no call option. There is no put option, except upon the occurrence of certain corporate events.

The notes will be settled in cash, shares or a combination of both at the company’s option.

The company intends to settle conversion of the principal amount in cash, according to a company news release.

There will be a make-whole premium adjustment delivered as incremental shares upon a change of control.

There is dividend protection via a conversion ratio adjustment.

In connection with the pricing, KBR will enter into convertible note hedge and warrant transactions.

The strike price of the warrants is expected to be a 100% premium to the closing price of stock.

Proceeds will be used to cover the cost of the call spread, to repay debt and for working capital.

KBR is a Houston-based global engineering, construction and services company.

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