Molina Healthcare to sell $325 million seven-year convertibles at 1.125%-1.625%, up 27.5%-32.5%

By Rebecca Melvin

New York, Feb. 11 - Molina Healthcare Inc. planned to price $325 million of seven-year convertibles after the market close Monday that were talked to yield 1.125% to 1.625% with an initial conversion premium of 27.5% to 32.5%, according to a market source.

The Rule 144A offering has a $50 million greenshoe and was being sold via joint bookrunners J.P. Morgan Securities LLC and BofA Merrill Lynch.

The notes have continent conversion if shares rise to 130% of the conversion price. They are non-callable for life with no puts. They also have takeover and dividend protection and will be cash settled.

In connection with the offering, the company plans to enter into a call spread, or privately negotiated convertible note hedge and warrant transactions with one or more of the initial purchasers of the notes.

Proceeds of the note offering will be used to pay the cost of the call spread and to repurchase up to $50 million of the company's common stock in privately negotiated transactions concurrently with the offering, and to pay off a $40 million credit facility. Remaining proceeds will be used for working capital and general corporate purposes, including possible repurchases of the company's 3.75% convertible notes due 2014.

Long Beach, Calif.-based Molina Healthcare is a health management organization that works with Medicaid patients and other government assistance programs.

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