Komag $200 million seven-year convertibles talked at 2.375%-2.875%, up 73%-77%, for Thursday

By Ronda Fears

Memphis, March 21 - Komag Inc. launched $200 million of seven-year convertible senior subordinated notes after Wednesday's close. The issue is talked to price at par with a coupon of 2.375% to 2.875% with an initial conversion premium of 73% to 77%.

The issue includes embedded warrants equal to 0.75 times the number of underlying shares.

There are no puts.

There is dividend and change-of-control protection, including compensation for warrants as well.

The San Jose, Calif., data storage device maker intends to use proceeds to repurchase common stock in connection with this offering.

Credit Suisse is bookrunner of the Rule 144A offering. Bear Stearns, Citigroup and Piper Jaffray are co-managers.

There is an over-allotment option for a further $30 million.

The issue is scheduled to price on Thursday after the market close.

Komag said it also plans to use proceeds to pay the redemption price of its 2% convertible subordinated notes due 2024 to the extent not converted, and any remaining proceeds for general corporate purposes, which may include additional stock repurchases.

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