Morgans prices upsized $150 million convertibles at 2.375%, up 22.5%

New York, Oct. 11 - Morgans Hotel Group Co. priced an upsized $150 million offering of senior subordinated convertible notes due 2014 with a 2.375% coupon and a 22.5% initial conversion premium.

The deal was increased from a planned size of $100 million and came towards the rich end of talk, which had put the coupon at 2.25% to 2.75% and the conversion premium at 17.5% to 22.5%.

Morgans also increased the greenshoe to $22.5 million from $15 million.

The conversion price is $26.89 and the conversion ratio is 37.1903.

Merrill Lynch is the bookrunner for the offering, priced Thursday after the market close.

The notes have contingent conversion subject to a 130% hurdle. They are non-callable and non-putable.

Morgans, a New York-based boutique hotel chain, plans to use the proceeds to pay down in full its revolving credit facility, to enter into hedge transactions and for general corporate purposes.

The convertible note hedge and warrant transactions will raise the effective conversion premium from the company's perspective to 82.23%, a price of $40.00 per share.

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