Blackhawk Network to sell $425 million 5.5-year convertibles to yield 1.5%-2%, up 35%-40%

By Rebecca Melvin

New York, July 20 – Blackhawk Network Holdings Inc. plans to price $425 million of 5.5-year convertible senior notes after the market close on Thursday that were talked to yield 1.5% to 2% with an initial conversion premium of 35% to 40%, according to market sources.

The Rule 144A deal has an over-allotment option for up to an additional $35 million of notes and was being marketed by joint bookrunners BofA Merrill Lynch, Wells Fargo Securities LLC, SunTrust Robinson Humphrey Inc. and MUFG.

Senior co-managers are BMO Capital Markets and PNC Capital Markets LLC, and co-managers are Barclays, Raymond James, Fifth Third Securities and BNP Paribas Securities Corp.

The notes are non-callable with no puts and have full dividend protection via conversion ratio adjustment and change-of-control protection.

There is contingent conversion if shares exceed 130% of the conversion price, and there is net share settlement.

In connection with the pricing of the notes, Blackhawk plans to enter into convertible note hedge and warrant transactions with one or more of the initial purchasers of the notes or their affiliates or a call spread.

Proceeds are earmarked to repay borrowings under its credit facility, to repurchase shares of the company’s common stock from certain purchasers of the notes, to pay the net cost of the convertible note hedge transactions, to pay related transaction fees and expenses, and for general corporate purposes, including future acquisitions.

Up to $35 million of the net proceeds will be used to repurchase common shares in privately negotiated transactions concurrently with the offering of notes.

Pleasanton, Calif.-based Blackhawk is a prepaid, gift card and payments services company.

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