AOL greenshoe brings 0.75% convertibles issue to $379.5 million

By Jennifer Chiou

New York, Aug. 19 – AOL Inc. announced the full exercise of its $49.5 million over-allotment option, lifting its 0.75% five-year convertible senior notes issue to $379.5 million.

According to an 8-K filing with the Securities and Exchange Commission, the company priced $330 million of the notes after the market close on Aug. 13 at par with an initial conversion premium of 35%.

As reported, the Rule 144A deal was initially talked at $300 million in size. Pricing came toward the rich end of 0.625% to 1.125% coupon talk and at the midpoint of 32.5% to 37.5% premium talk.

There greenshoe had been upsized from $45 million. Joint bookrunners were Goldman Sachs & Co. and J.P. Morgan Securities LLC.

The notes are non-callable with no puts. They have takeover and dividend protection and net share settlement.

In connection with the offering of notes, AOL entered into privately negotiated convertible note hedge and warrant transactions, or a call spread. The strike on the warrants is $84.92, which boosts the initial conversion premium from the issuer’s perspective to 100%.

Net proceeds from the issue were about $368.1 million, and roughly $36.5 million of the proceeds from the offering was used to fund the net cost of the call spread, while about $40 million of the proceeds was used to fund common stock repurchases. Remaining proceeds will be used for general corporate purposes, which may include share repurchases, acquisitions, and other strategic transactions and working capital.

The stock repurchases are part of AOL’s previously announced $150 million share repurchase program.

New York-based AOL is a digital brands, products and services company.

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