American Financial $150 million proceeds cash-to-zero convert talked at 3.5-4.0% yield, up 47.5-52.5%

By Ronda Fears

Nashville, May 21 - Price talk on American Financial Group Inc.'s $150 million proceeds of 30-year cash-to-zero convertibles put the yield at 3.5% to 4.0% and initial conversion premium at 47.5% to 52.5%.

Merrill Lynch & Co. is lead manager of the Rule 144A deal, which was set to price after the close Wednesday.

The discount notes will pay a cash coupon for five years, then becoming a 0% accreting bond.

The notes will be non-callable for five years with puts in years 5, 10, 15, 20 and 25.

There is a contingent conversion trigger of 120% for life and a contingent payment trigger of 120%.

The issue is expected to be rated Baa3 by Moody's Investors Service and BBB by Standard & Poor's Corp.

Cincinnati-based American Financial said proceeds would be used to repay outstanding debt under its existing bank line of credit and to provide capital to support operations.

American Financial shares closed at $22.20 Thursday, down $0.77.

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