Forest City prices $175 million seven-year convertibles to yield 5%, up 27.5%

New York, Oct. 20 - Forest City Enterprises, Inc. priced $175 million of convertible senior notes due 2016 after the close Tuesday to yield 5% with a 27.5% initial conversion premium.

The deal came at the rich end of talk for a yield of 5% to 5.5% and a conversion premium of 22.5% to 27.5%.

The conversion price is $13.91 per share and the conversion ratio 71.8894.

Bank of America Merrill Lynch and Barclays Capital Inc. were bookrunners for the Rule 144A deal.

There is a greenshoe for $13 million.

The convertible senior notes are non-callable for life.

Forest City entered into a convertible note hedge transaction that raises the initial conversion premium from the company/s perspective to 50%.

Proceeds will be used to reduce outstanding borrowings under a $750 million revolving credit facility, to repay debt, to fund existing development projects and for general corporate purposes. A portion of the proceeds from the sale will be used to cover the cost of the convertible note hedge transactions.

Cleveland-based Forest City owns, develops, manages and acquires commercial and residential real estate properties.

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