Forestar scraps plan for $100 million seven-year convertibles, $150 million of straight notes

By Rebecca Melvin

New York, June 9 - Forestar Group Inc. and its subsidiary Forestar (USA) Real Estate Group Inc. have decided not to proceed as planned with a $100 million offering of seven-year convertible bonds and a concurrent offering of $150 million of straight notes to private investors due to "recent deterioration in the capital markets."

"Management determined that, because the proposed transactions were opportunistic in nature and the terms and conditions offered to Forestar did not meet their expectations or recognize the future value expected for Forestar stakeholders, it was inadvisable to proceed with the offerings at this time," the release stated.

The planned offerings were launched May 31 and were expected to price Wednesday.

Price talk on the convertibles emerged during marketing, and they had been talked to yield a coupon of 3.5% to 4% and an initial conversion premium of 22.5% to 27.5%.

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

Proceeds were to be used 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 were earmarked to repay borrowings under Forestar's senior secured term loan.

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

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