Nashville, Nov. 18 - American Express Co. sold $1.8 billion of 30-year cash-to-zero convertible notes at par for a yield to maturity of 1.85% with a 58% initial conversion premium via joint bookrunners Merrill Lynch & Co., JPMorgan Securities and Lehman Brothers.
The Rule 144A deal priced at the cheap end of guidance for a yield to maturity of 1.35% to 1.85% and 58% to 62% initial conversion premium.
The issue will pay a cash coupon for three years, then become an accreting zero-coupon bond.
Buyers of the convertible notes also will receive incremental shares based on net share settlement of a number of call options equal to three times the base conversion ratio, struck at the conversion price. There will be a cap, however, on the number of shares delivered, equal to the issue price divided by the stock price at closing.
The notes will be re-marketed at year three, if the stock is below the conversion price, into a straight debt instrument with no conversion feature.
In addition to the contingent conversion price trigger, the convertible will be convertible if, among other things, the credit ratings drop to BBB+ by Standard & Poor's and Baa1 by Moody's.
The New York-based credit card company said proceeds would be used for general corporate purposes.
Terms of the deal are:
| Issuer: | American Express Co.
|
| Issue: | Convertible senior notes
|
| Lead managers: | Merrill Lynch & Co., JPMorgan Securities and Lehman Brothers
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| Amount: | $1.8 billion
|
| Greenshoe: | $200 million
|
| Maturity: | Nov. 15, 2033
|
| Coupon: | 1.85%
|
| Price: | Par
|
| Yield: | 1.85%
|
| Conversion premium: | 58%
|
| Conversion price: | $69.41
|
| Conversion ratio: | 14.41 capped at 22.76
|
| Contingent conversion: | 120%
|
| Contingent payment: | 120%
|
| Call: | Non-callable for 3 years
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| Put: | In years 3, 5, 10, 15, 20 and 25 if no remarketing has occurred and the issue is not convertible at the put date
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| Ratings (expected): | Moody's: A1
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| S&P: A+
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| Price talk: | 1.35-1.85%, up 58-62%
|
| Pricing date: | Nov. 17, after the close
|
| Settlement date: | Nov. 24
|
| Distribution: | Rule 144A
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