Lennar's distribution of class B shares will boost conversion ratios slightly

By Ronda Fears

Nashville, April 15 - Lennar Corp.'s distribute of class B Shares to class A shareholders will boost the conversion ratio for the two convertibles slightly, said Wachovia Securities, Inc. convertible analyst Kimberlee Brody.

Both the 0% convertible due 2018 and 0% due 2021 will remain convertible into class A shares but the existing conversion ratios will be increased, Brody said in a report Tuesday.

Ratios will be boosted by the value of 1 share of class A stock divided by the value of that one share of class A stock minus 10% of the value of 1 share of class B stock, with the values established from the weighted average closing prices of both stocks from April 22 to May 5.

The 2018 issue's original conversion ratio was 12.3768. The 2021 issue's original conversion ration was 6.3842, and that issue carries a 120% contingent conversion feature that declines to 110% after year six.

Lennar will distribute on April 21 one class B share for each class A share held. The record date is April 9 and regular trading in class A common includes due bills for class B for trades settled April 10 through April 21.

The due bill entitles the holder to 1/10 of a class B share for each share of class A held, with settlement on April 24.

When-issued trading in class A common, without due bills, and class B common began on April 9 with NYSE tickers LEN WI and LEN.B WI, respectively. Trading ends on April 21 for both.

The class B shares then begin trading on April 22.

Conversion ratios will be adjusted for Lennar's 0% convertible due July 29, 2018, and Lennar's 0% convertible due April 4, 2021.

When Lennar announced the stock distribution on April 8 the company also announced that stockholders approved an increase its authorized issuance to 300 million shares of class A stock and 90 million shares of class B stock.

Lennar also lowered its earnings-per-share forecast for 2003 to reflect the additional class B common shares that will be issued. The company said it now expects earnings per share of $7.73 instead of $8.50 for the year.

The company said the EPS goal of $8.50 was based on about 76 million diluted shares and assumed dilution for both of the convertibles. Because the distribution of class B stock will increase the total outstanding stock by 10%, Lennar now expects to have around 83.6 million diluted shares.

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