Kyphon greenshoes fully exercised, lifting convertibles offers to $400 million

By Jennifer Chiou

New York, Feb. 6 - Kyphon Inc. said that underwriters exercised both $25 million over-allotment options on the company's issues of 1% convertible senior notes due 2012 and 1.25% convertible senior notes due 2014, augmenting the offerings to a combined $400 million.

After the close on Jan. 31, the company priced $350 million total of the five- and seven-year convertible senior notes within talk.

The $175 million of each issue of notes had an initial conversion premium of 24% for both tranches.

As already reported, the five-year notes were talked at a coupon of 0.75% to 1.25%, while the seven-year series was talked at a coupon of 1% to 1.5%. The initial conversion premium was talked at 20% to 25%.

Goldman Sachs, JP Morgan and Banc of America were the bookrunners of the Rule 144A offering.

The notes are non-callable and may not be put. There is dividend and takeover protection.

Kyphon, a Sunnyvale, Calif.-based maker of spinal medical devices, said it will use the proceeds of the offering to retire $310 million of a $425 million senior syndicated bank term loan that it used to buy St. Francis Medical Technologies. It will also use the proceeds to fund convertible hedge and warrant transactions.

The company added that the convertible note hedge and warrant transactions effectively will increase the conversion price of the convertible notes to $75.04 per share of Kyphon's stock, representing a 60% premium relative to the last reported sale price on Jan. 31 of $46.90 per share.

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