MGI Pharma $200 million proceeds discount cash-to-zero convert talked at 2.0-2.5% yield, up 30-35%

By Ronda Fears

Nashville, Feb. 24 - MGI Pharma Inc. launched $200 million in proceeds of 20-year discount cash-to-zero convertible notes with guidance for a yield to maturity of 2.0% to 2.5% and a 30% to 35% initial conversion premium.

Merrill Lynch & Co. is sole bookrunner of the Rule 144A deal, which is scheduled to price after Wednesday's close. Banc of America Securities, UBS Investment Bank and U.S. Bancorp Piper Jaffray are co-managers.

A management call is scheduled for 10:30 a.m. ET.

At an issue price of 75.762, which would put the yield at 2.25% or the midpoint of the guidance range, the notes would pay a cash coupon of 1.6821% on the face amount.

A cash coupon will be paid for seven years, with the first six interest payments collateralized with U.S. Treasury strips.

The senior subordinated notes will be non-callable for three years with puts in years seven, 10 and 15.

There also is a contingent conversion trigger of 120%.

Holders will have full dividend protection via a conversion ratio adjustment.

The Minneapolis-based biopharmaceutical firm, which focuses on cancer treatments, said that after the Treasury securities are bought, remaining proceeds would be used to continue its business development, including potential acquisitions, and general corporate purposes.

Pending such uses, the company intends to invest proceeds in interest bearing, marketable securities.

MGI Pharma shares closed Tuesday up 27 cents, or 0.55%, to $49.92. In after hours trading, the stock was down $1.16, or 2.35%.

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