Forestar plans to price $100 million seven-year convertibles to yield 3.5%-4%, up 22.5%-27.5%

By Rebecca Melvin

New York, June 7 - Price talk emerged on $100 million of convertibles to be priced by Forestar (USA) Real Estate Group Inc., a subsidiary of Forestar Group Inc. The bonds are talked to yield a coupon of 3.5% to 4% with an initial conversion premium of 22.5% to 27.5%, according to a syndicate source.

Pricing is expected Wednesday after the market close.

As previously reported, Forestar plans to price the convertible bonds, which have a $15 million greenshoe, concurrently with $150 million of eight-year straight notes.

Goldman Sachs & Co. is the bookrunner of the Rule 144A offering.

The bonds are non-callable.

In connection with the convertibles, Forestar intends to enter into privately negotiated capped call transactions with one or more financial institutions, which may include the initial purchasers.

Proceeds from the convertible offering are earmarked for general corporate purposes, including investments in strategic growth opportunities, and to pay the cost of the capped call transactions.

Proceeds of the secured straight notes are earmarked to repay borrowings under Forestar's senior secured term loan, with any remaining amount being used for general corporate purposes, which may also include repayment of borrowings under its revolving loans.

Forestar is an Austin, Texas-based company engaged in real estate and natural resources businesses.

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