Cubist's planned convertible notes upsized to $700 million; talk tightened on both tranches

By Rebecca Melvin

New York, Sept. 4 - Cubist Pharmaceuticals Inc.'s planned offering of convertible senior unsecured notes in five- and seven-year tranches was upsized to $700 million from $600 million, and price talk was tightened, market sources said.

Pricing of the Rule 144A deal was expected to be fixed late Wednesday.

The size of the first tranche, which matures in 2018, was unchanged at $300 million, but talk was tightened to 1.125% to 1.625% coupon talk, from 1.625% to 2.125% coupon talk.

The size of the second tranche, maturing in 2020, was upsized to $400 million from $300 million and talked on the yield was revised to 1.875% to 2.125% from 2.125% to 2.625%.

The initial conversion premium of both tranches was tightened to 32.5% from initial talk of 27.5% to 32.5%.

As previously reported, each tranche has a $50 million greenshoe. The notes will be non-callable.

Joint bookrunners are Morgan Stanley & Co. LLC, Barclays and RBC Capital Markets LLC.

In connection with the deal, the company plans to enter into convertible note hedge and warrant transactions with initial purchasers of the bonds.

Proceeds will be used primarily to fund the company's previously announced acquisition of Optimer Pharmaceuticals Inc. and to pay the cost of the convertible note hedge and warrant transactions. Remaining proceeds will be for general corporate purposes.

Cubist is a Lexington, Mass.-based biopharmaceutical company.

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