Hartford overnight $300 million mandatory talked at 6.0-6.5% yield, 18-22% premium

By Ronda Fears

Nashville, Tenn., Sept. 9 - The Hartford Financial Services Group launched a quick-sale convertible for pricing after the close Monday via joint lead managers Banc of America Securities, Morgan Stanley and Salomon Smith Barney.

The $300 million 4.2-year mandatory is talked to price with a par of 50 to yield 6.0% to 6.5% and an initial conversion premium of 18% to 22%.

Deutsche Bank Securities Inc. puts the deal, at the midpoint of guidance, 3.65% cheap using a credit spread of 175 basis points over Libor and 33% volatility in the stock, plus a 2.24% common dividend.

Salomon Smith Barney puts the deal 5.1% cheap, using a credit spread of 140 basis points over Treasuries and 30% volatility, plus a 3.6% common dividend growth rate for the life of the convert.

Hartford also is selling 6.5 million shares of common stock for targeted proceeds of $300 million.

The mandatory is non-callable. There is a $30 million greenshoe.

Proceeds will be used for general corporate purposes, including capital contributions to subsidiaries.

Moody's assigned an A2 rating to the new issue, citing diversified earnings and cash flows, a high-quality investment portfolio and conservative underwriting standards, offset by intense competition, significant financial leverage and the potential for adverse reserve development.

Standard & Poor's is expected to assign an A rating to the issue.

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