Forest City plans $250 million of seven-year convertibles to yield 3.375%-3.875%, up 32.5%-37.5%

By Rebecca Melvin

New York, July 15 - Forest City Enterprises Inc. launched Monday an offering of $250 million of seven-year convertibles that was seen pricing after the market close and was talked to yield 3.375% to 3.875% with an initial conversion premium of 32.5% to 37.5%, according to a syndicate source.

The Rule 144A deal has a $50 million overallotment option and was being priced via bookrunners BofA Merrill Lynch, Barclays, Citigroup Capital Markets Inc., Goldman Sachs & Co. and Morgan Stanley & Co. Inc.

The notes are freely convertible. They are provisionally callable for five years until Aug. 15, 2018 at par subject to the stock trading at 130% of the conversion price or higher, and then feely callable after that.

Proceeds are earmarked to repay the balance of Forest City's 6.5% senior notes due 2017 and other outstanding debt.

Proceeds will be held in an escrow account and invested in short-term, investment-grade, interest-bearing securities, pending their application.

Forest City is a Cleveland-based real estate developer with $10.6 billion in assets.

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