Scientific Games $225 million convertible talked at 0.5%-1.0% step-down coupon, up 22.5%-27.5%

Nashville, Dec. 1 - Scientific Games launched Wednesday $225 million of 20-year convertible notes talked to yield 0.5% to 1.0%, which would step down by 25 basis points at December 2010, with a 27.5% to 32.5% initial conversion premium, according to buyside sources.

Bear Stearns & Co. Inc. and JPMorgan Securities Inc. are joint bookrunners of the quick-sale Rule 144A deal, which was slated to price after the market close Wednesday.

The senior subordinated notes will be non-callable for 5.5 years, with puts in years 5.5, 10 and 15.

There is a 120% contingent conversion trigger.

There is full dividend and takeover protection for holders.

A $25 million greenshoe is available.

A New York City-based online betting and video poker company, Scientific Games also provides ticket machines for lotteries and pari-mutual betting. The company said it would use proceeds to repay a portion of the term loan outstanding under its existing senior credit agreement and to finance a tender offer for its 12.5% senior subordinated notes due 2010.

The company also was expected to launch a new $300 million credit facility consisting of a $200 million senior revolver and $100 million senior term loan on Thursday, according to sources in the bank loan market.

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