By Rebecca Melvin
Princeton, N.J., March 29 - Germany's Bayer Capital Corp. BV priced €2 billion of three-year mandatory convertible bonds to yield 6.625% with an initial conversion premium of 17%, according to a company news release.
The subordinated bonds, which are guaranteed by Bayer AG, priced near the cheap end of talk for the coupon, which was 6.25% to 6.75%, and the initial conversion premium, which was 16% to 20%.
Credit Suisse and Citigroup were bookrunners.
The mandatories have a minimum conversion price of €33.03 and a maximum conversion price of €38.64. The minimum conversion price equals the volume weighted average price of Bayer shares between the time of launch and pricing on Wednesday.
The bonds are callable from June 2006 at the minimum conversion price, subject to a make-whole payment equal to all remaining coupon payments including deferred interest payments. They are also dividend protected.
The coupons are deferrable if the company hasn't declared or paid a dividend in three months prior to the coupon payment.
Net proceeds will be used for financing the planned acquisition of its German rival Schering AG, among other things. The offering is part of a previously announced equity capital raising effort for up to €4 billion.
According to U.K.-based Barclays Capital analysts Haidje Rustau, Heather Beattie and Luke Olsen, the bonds model out at a theoretical value of 99.5, with a delta of 91% with respect to the minimum ratio or an implied skew of 0.6%.
"We consider the bond marginally unattractive for hedged investors. However, we also note that due to the high coupon and its equity-like characteristics, the mandatory might be attractive to outright equity investors," the analysts said.
The bond will be sold via private placement to institutional investors outside of the United States, Canada, Japan, Australia and Italy only.
Bayer is a Leverkusen, Germany-based health care company.
| Issuer: | Bayer Capital Corp. BV
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| Guarantor: | Bayer AG
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| Issue: | Mandatory subordinated convertibles
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| Bookrunners: | Credit Suisse and Citigroup
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| Amount: | €2 billion
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| Maturity: | June 1, 2009
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| Coupon: | 6.625%
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| Price: | Par
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| Yield: | 6.625%
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| Conversion premium: | 17%
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| Conversion price: | Minimum €33.03 to maximum €38.64
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| Price talk: | 6.25%-6.75%, up 16%-20%
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| Pricing date: | March 29
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