Forest City plans $250 million five-year putable equity-linked notes, talked 3.125%-3.625%, up 25%-30%

By Kenneth Lim

Boston, Oct. 3 - Forest City Enterprises Inc. plans to price $250 million of five-year putable equity-linked senior notes, talked at a coupon of 3.125% to 3.625% and an initial conversion premium of 25% to 30%.

The deal is expected to price Wednesday after the market closes, and each note will be offered at par.

There is a greenshoe for a further $37.5 million.

Goldman Sachs is the bookrunner of the Rule 144A deal.

The notes are non-callable for life and may be put at a put value rate equal to a number of shares of Forest City's class A common stock.

Forest City will pay the puts in cash, but it has an option for net-share settlement.

The notes have dividend protection in the form of a rate adjustment for quarterly cash dividends above 7 cents per share, and they have takeover protection.

Forest City, a Cleveland-based real estate developer, said it will use the proceeds of the deal to fund note hedge and warrant transactions and to buy back up to $25 million of its class A common stock. It will also repay recourse debt outstanding under its $600 million revolving loan, and for general corporate purposes.

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