Airborne $100 million convertibles talked at 6.0-6.5% yield, up 18-22%

By Ronda Fears

Nashville, Tenn., March 15 - Airborne Inc. launched a $100 million offering of five-year convertible senior notes with guidance of a 6.0% to 6.5% yield and an 18% to 22% initial conversion premium. Goldman Sachs & Co. is lead manager of the Rule 144A deal, which is set to price Tuesday.

There is a $25 million greenshoe available. The senior notes will be non-callable for three years.

Seattle-based Airborne said it would use proceeds to repay the Airborne Express Inc. $100 million of 8.875% notes due Dec. 15, 2002.

Moody's Investors Service rated the new issue at Ba3 on Friday when it also lowered its ratings on Airborne's senior notes to Ba1 from Baa3. The outlook is stable.

The convertible rating reflects support provided by guarantees of the company's operating subsidiaries, Moody's said, but also subordination as a result of the security provided to Airborne's currently undrawn $275 million bank line of credit, $200 million accounts receivable securitization and $200 million of existing notes.

Moody's said the downgrade on Airborne's other senior notes reflects an increase in Airborne's financial risk profile created by higher levels of debt and reduced cash flow.

The stable outlook anticipates a slow but steady positive revenue impact on Airborne from an economic recovery, the benefits of its pricing and product initiatives and the ability of the company to manage its costs, Moody's said.

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