Kilroy prices $400 million five-year exchangeables at 3.25%, up 20%

By Kenneth Lim

Boston, March 27 - Kilroy Realty Corp. priced $400 million of five-year exchangeable senior unsecured notes on Tuesday after the market closed at a coupon of 3.25% and an initial exchange premium of 20%.

The deal came at the cheap end of talk for a coupon of 2.75% to 3.25% and an initial exchange premium of 20% to 25%.

The deal was expected to be reoffered at 99. The actual reoffered price was not available late Tuesday.

The exchange price is $88.04 and the exchange ratio 11.358.

The notes are issued by Kilroy operating partnership Kilroy Realty LP and are exchangeable into the listed company's common stock. Kilroy Realty Corp. is also guaranteeing the notes.

There is an over-allotment option for an additional $60 million.

JP Morgan, Banc of America Securities and Lehman Brothers are the bookrunners of the Rule 144A offering.

The exchangeables are non-callable and may not be put.

There is a contingent exchange hurdle at 130% of the exchange price.

The notes have standard dividend and takeover protection.

Kilroy, a Los Angeles-based real estate investment trust that focuses on office and industrial real estate in southern California suburban markets, said the proceeds of the deal will be used to fund capped call transactions, to reduce a $550 million unsecured revolving debt, to repay outstanding mortgage debt, to partly finance its development pipeline and to fund general purposes.

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