Liberty drive-by $1.5 billion exchangeables into AOL talked at 0.25-0.75%, up 52-57%

By Ronda Fears

Nashville, March 20 - Liberty Media Corp. launched a $1.5 billion exchangeable after the close Thursday talked to yield 0.25% to 0.75% with a 52% to 57% initial conversion premium.

Liberty will settle the issue in either AOL Time Warner Inc. shares, Liberty Class A common stock, cash or a combination.

Joint lead managers are Banc of America Securities and JPMorgan.

Terms will be set before Friday's open.

Analysts put the deal 0.55% rich to 4.2% cheap, based on the midpoint of price talk.

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

There is a $250 million greenshoe available.

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

AOL shares closed unchanged at $11.46 but were down 5.5% to $10.83 in after-hours trading.

Deutsche Bank Securities Inc. convertible analysts put the deal, at the midpoint of guidance, 0.1% cheap, using a credit spread of 225 basis points over Libor and a 47.5% stock volatility.

Wachovia Securities, Inc. convertible analyst Kimberlee Brody put it, at the midpoint of guidance, 0.55% rich, using a spread of 275 bps over Treasuries and 47.5% stock volatility. She used the after-hours stock price of $10.83.

Bear Stearns convertible analyst Matt Hempel put the deal, at the midpoint of guidance, 4.2% cheap, using a spread of 260 bps over Treasuries and 50% stock volatility.

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