By Ronda Fears
Nashville, Jan. 23 - International Game Technology sold $400 million in proceeds of 30-year 0% convertible senior notes at 63.87 to yield 1.5% with a 47.5% initial conversion premium, according to market sources.
The Rule 144A overnight deal came to market via lead manager Goldman Sachs & Co.
It priced at the middle of guidance which had put the yield at 1.25% to 1.75% and the premium at 45% to 50%. Analysts said it priced right about theoretical fair value.
"It's a little too rich for my blood," said a convertible trader at a hedge fund in New Jersey.
But, he noted the market is starved for new paper and IGT is an appealing stock. Also, it is an investment-grade credit with this week's upgrade from Moody's.
"The redeeming feature [of the new deal] is the three-year put," said a convertible analyst at hedge fund in New York.
"But this is a story that people will be knocking each other over to get."
The issue has three years of hard call protection with puts in years three, five, 10, 15, 20 and 25 years.
It also has a contingent conversion trigger of 120% and a contingent interest payment trigger of 60%.
Wachovia Securities, Inc. convertible analyst Kimberlee Brody said the deal modeled out exactly at theoretical fair value, using a credit spread of 225 basis points over the comparable Treasuries and 30% volatility in the stock.
There is a greenshoe of $60 million in proceeds.
Reno, Nev.-based IGT said it plans to use $125 million to $155 million of proceeds to buy back stock under its share repurchase program, simultaneously with the new issue. Remaining proceeds would be used for general corporate purposes, including acquisitions, repurchases of outstanding senior notes or more stock repurchases.
IGT shares closed Thursday up 86c to $77.26.
Standard & Poor's assigned a BBB- rating to the new deal, noting the slot machine and gaming systems distributor has a strong industry position with solid and improving credit measures.
Pro forma for the new converts, total long-term debt outstanding will be about $1.38 billion, S&P said, with pro forma debt leverage below 2x.
On Wednesday, Moody's upgraded IGT's senior ratings to Baa3 from Ba1.
Moody's also noted IGT's leading market position in casino gaming products with market share growing from 50% to nearly 70% over the last decade.
IGT's credit statistics also have improved, Moody's said, with cash flow from operations to total adjusted debt up from about 13% in fiscal 2000 to 48% in fiscal 2002 while total coverage improved from 3.1x to 4.9x in that time period.
Both Moody's and S&P have IGT's outlook at stable.
Also Wednesday, IGT posted earnings and raised its EPS growth outlook for fiscal 2003 to a range of 15% to 20% from a previous forecast of about 15%.
For fiscal first quarter ended Dec. 28, net income rose to $91.5 million, or $1.04 per share, from $51.08 million, or 70c per share. Revenue gained to $531.66 million from $301.5 million. Operating income increased to $154.8 million from $97.8 million.
Final terms of the new deal are:
| Issuer: | International Game Technology
|
| Amount: | $400 million (proceeds)
|
| Greenshoe: | $60 million (proceeds)
|
| Lead manager: | Goldman Sachs
|
| Maturity date: | Feb. 2, 2033
|
| Coupon: | 0%
|
| Issue price: | 63.87
|
| Yield: | 1.5%
|
| Conversion premium: | 47.5%
|
| Conversion price: | $113.96
|
| Conversion ratio: | 5.605
|
| Call: | Non-callable for three years, then at 66.8
|
| Put: | In years three, five, 10, 15, 20 and 25
|
| Contingent conversion: | 120%
|
| Contingent payment: | 60%
|
| Ratings: | Moody's: Baa3 (expected)
|
| S&P: BBB-
|
| Pricing date: | Jan. 23
|
| Settlement date: | Jan. 29
|
|
|
© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere.
For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.
