American Axle $130 million cash-to-zero convert talked at 2.125-2.625%, up 37.5-42.5%

By Ronda Fears

Nashville, Feb. 5 - American Axle & Manufacturing Holdings Inc. launched the quick sale of $130 million of 20-year cash-to-zero convertible notes alongside a $250 million straight senior note offering. The convertible was talked to yield 2.125% to 2.625% with a 37.5% to 42.5% initial conversion premium.

The issue, which is being sold on swap, will pay a cash coupon for five years and then become an accreting 0% bond. American Axle said it would use $40 million of proceeds to repurchase stock.

The 144A senior convertibles were set to price after Thursday's close via joint lead managers Banc of America Securities, Merrill Lynch & Co. and Wachovia Securities.

The issue will be non-callable for seven years with puts in years seven, 10 and 15. There is a 125% contingent conversion trigger and 120% contingent payment trigger.

Standard & Poor's assigned a BBB rating to the convertible as well as the straight debt. S&P noted that before the transactions, at Dec. 31, American Axle had $450 million of debt outstanding.

Moody's is expected to rate the convertibles at Baa3.

There is a $20 million greenshoe available on the convertible offering.

Detroit-based American Axle said it plans to use $314.6 million of proceeds from the offerings to redeem its 9.75% senior subordinated notes due March 2009. Some $40 million of proceeds will be used to repurchase common stock, and the balance for general corporate purposes.

The company, a spinoff from General Motors Corp. in 1994, is one of the largest domestic suppliers of driveline products for the automotive industry. S&P noted that the company's dependence on GM business has decreased to 82% of total sales from 93% six years ago.

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