King Pharma $300 mln convertibles talked at 2.75-3.25% yield, up 28-32%

By Ronda Fears

Nashville, Tenn., Oct. 24 - King Pharmaceuticals Inc. launched $300 million of 20-year convertible senior notes in the Rule 144A market with pricing guidance that puts the yield in a range of 2.75% to 3.25% with a 28% to 32% initial conversion premium. The company also is selling 16 million shares of common stock and certain company officers are selling 4.5 million shares. Credit Suisse First Boston, J.P. Morgan, Banc of America Securities and UBS Warburg are joint bookrunners of the deal, which is scheduled to price after market close next Wednesday.

There is a $45 million greenshoe available on the convertible offering. The 20-year convert will be non-callable for five years with puts in years five, 10 and 15. There is a contingent conversion threshold of 110% and contingent payment threshold of 120%. Joint lead managers are Goldman Sachs & Co., Merrill Lynch, Morgan Stanley and Salomon Smith Barney. Co-managers are CIBC World Markets, Prudential Securities, SG Cowen, SunTrust Robertson Humphrey and Wachovia Securities

Deutsche Banc Alex. Brown convertible analysts said the mid-range of the price talk would put the issue pricing around 3% to 6.5% cheap to fair value, assuming a credit spread of 475 basis points over Libor, 40% volatility in the stock and a borrow cost of 50 basis points. That would put the implied volatility in a range of 34.3% to 27.7%.

Bristol, Tenn.-based King Pharma, a manufacturer and marketer of branded pharmaceutical products, did not specify a use for the proceeds. King Pharm stock closed down $3.80 to $38.20.

End

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.