International Power spells out conversion, redemption terms for notes

By Susanna Moon

Chicago, May 17 - International Power plc holders may put or convert three series of notes in connection with a cash offer for the company by Electrabel SA, a wholly owned subsidiary of GDF Suez SA.

The following series of notes are affected by the merger proposal:

• 3.75% $228,262,000 guaranteed convertible bonds due 2023 issued by International Power (Jersey) Ltd.;

• 3.25% €230 million guaranteed convertible bonds due 2013 issued by International Power Finance (Jersey) II Ltd.; and

• 4.75% €700 million guaranteed convertible bonds due 2015 issued by International Power Finance (Jersey) III Ltd.

The company announced the possible conversion or put option on April 16.

As previously noted, Electrabel agreed to acquire the company for 418p per share, which reflects a 20.8% premium to the company's closing price of 345.9p (London: IPR) on Feb. 29, the last business day "before press and market speculation intensified that GDF Suez would make an offer," according to a previous press release by GDF Suez.

Conversion terms

For the 3.75% notes

• If holders choose to convert by the record date of the final dividend on May 25, the exchange price is expected to be 109p per International Power share, which reflects no adjustment. Holders will thus receive 577 shares based on the exchange price of 109p per share, or £2,411.86 cash per $1,000 principal amount.

• If they choose conversion after the record date but before payment of the final dividend, the exchange price is expected to be 107p per share, which reflects the retroactive adjustment for the final dividend but not for the relevant event. Holders will then receive 588 shares, which amounts to £2,457.84 cash, per $1,000 principal amount.

• If they opt to convert after the final dividend on June 29, the exchange price will be 107p per share.

For the 4.75% notes

• If holders choose to convert before the merger, the exchange price is expected to be 415p per International Power share, regardless of whether the conversion occurs before or after the record date of the final dividend. Holders will thus receive 9,501 shares, or £39,714.18 cash per €50,000 principal amount.

• If they choose conversion after the merger, the exchange price is expected to be 369p per share, which reflects an adjustment for the final dividend and for the relevant event. Holders will then receive 10,686 shares, which amounts to £44,667.48 cash, per €50,000 principal amount.

• If they opt to convert after the special conversion period, the exchange price will be 415p per share.

For the 3.25% notes

• If holders choose to convert by the record date of the final dividend on May 25, the exchange price is expected to be 254p per International Power share, which reflects no adjustment. Holders will thus receive 13,635 shares, or £56,994.30 cash per €50,000 principal amount.

• If they choose conversion after the record date but before the merger, the exchange price is expected to be 250p per share, which reflects the retroactive adjustment for the final dividend but not for the relevant event. Holders will then receive 13,853 shares, which amounts to £57,905.54 cash, per €50,000 principal amount.

• If they choose conversion after the merger and during the special conversion period, the exchange price is expected to be 236p per share, which reflects the retroactive adjustment for the final dividend and the relevant event. Holders will then receive 14,675 shares, which amounts to £61,341.50 cash, per €50,000 principal amount.

• If they opt to convert after the conversion period, the exchange price will be 250p per share.

More on calls and conversion

Under the bond terms, the issuer may call the bonds at par plus accrued interest with 30 to 90 days' notice if the company's closing price is at least 130% of the exchange price for 20 out of 30 trading days ending not earlier than the fifth dealing day prior to service of a redemption notice.

If the merger is approved, Electrabel plans to call the bonds after the special conversion period, according to a press release.

If holders convert or put at least 85% of the bonds issued, Electrabel plans to redeem the remaining bonds at par plus accrued interest.

International Power's independent directors have unanimously recommended that bondholders convert their bonds during the special conversion period.

Background

The merger offer values the share capital of International Power at about £22.8 billion, assuming full conversion of its convertible bonds and exercise of share options, according to a previous press release.

International Power plans to treat the effective date of the acquisition as a relevant event under the note terms, allowing holders to

• Convert their bonds at the prevailing conversion price prior to the effective date of the merger, and they will receive the offer price for each share then held;

• Convert their bonds during the 60 days following the merger at the relevant event-enhanced conversion price. Holders who exercise this right will receive the offer payment of 418p for each International Power share they would otherwise have been entitled to on conversion, rather than the resulting International Power shares, shortly following the end of the 60-day relevant event period;

• Convert their bonds at the prevailing conversion price following the end of the 60-day relevant event period. Holders who exercise this right will not be entitled to the enhanced conversion price and will receive the offer price for each company share they would otherwise have been entitled to on conversion rather than the resulting International Power shares; or

• Redeem their convertibles at par plus accrued interest.

The company's shares closed at 416.8p on April 16.

International Power a London-based independent power generation company.

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