Maverick Tube $220 million 20-year convertibles talked to yield 1.75%-2.25%, up 20%-25%

By Rebecca Melvin

Princeton, N.J., Nov. 8 - Maverick Tube Corp. plans to offer $220 million 20-year convertibles, which are talked to yield 1.75% to 2.25% with an initial conversion premium of 20% to 25%, according to a syndicate source.

The Rule 144A convertible senior subordinated notes are expected to price Wednesday after the close, the syndicate source said.

Morgan Stanley & Co. is bookrunner.

A $30 million greenshoe is available.

The notes will be non-callable for eight years and will have puts in years eight, 10 and 15, according to a market source.

Maverick will settle conversions in cash up to a maximum of $1,000 per note and in stock for any excess amount. The notes have takeover and dividend protection.

There is contingent conversion, under which the notes are convertible before August 2013 if they trade below 103% of the product of the last reported sale price of stock and the conversion rate for five consecutive trading days. There is no stock price trigger.

The company intends to use proceeds to purchase its stock in the open market and in private transactions. Also the company plans to use part of net proceeds to pay the costs associated with the convertible note hedge and warrant transactions.

In connection with the offering, Maverick plans to enter into convertible note hedge and warrant transactions with Morgan Stanley & Co. International.

Maverick is a steel tube manufacturer based in Chesterfield, Mo.

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