NRG Energy $400 million convertible talked to yield 4.0%-4.5%, up 22%-25%

By Ronda Fears and Sara Rosenberg

Nashville, Dec. 13 - NRG Energy Corp. launched $400 million of convertible perpetual preferreds talked with a 4.0% to 4.5% dividend and 22% to 25% initial conversion premium after the close Monday.

Deutsche Bank Securities and Citigroup Global Markets Inc. will be equal placement agents for the Section 4(2) offering, which is being made with registration rights and is expected to trade similar to a Rule 144A issue within a couple of days of closing the books.

After a full day of book-building, including a "due diligence" conference call at 11 a.m. ET on Tuesday, the convertible is set to price after the market closes Tuesday.

The issue will be non-callable for five years.

The Minneapolis-based power generation firm said proceeds would be used to redeem a portion of its 8% senior secured second-lien notes due 2013 and to enable NRG to use existing cash balances to repurchase 13 million shares held by investment partnerships managed by MatlinPatterson Global Advisors LLC.

NRG issued the $1.25 billion of 8% senior secured second-lien notes due 2013 (B2/B+) in December 2003 as it exited bankruptcy. Then, in January 2004, it sold a $503.5 million proceeds add-on to that issue.

NRG also was in-market with a $950 million credit facility (Ba3/BB) via joint lead arrangers Credit Suisse First Boston and Goldman Sachs, structured as a $450 million seven-year term B talked at Libor plus 250 basis points, a $350 million seven-year synthetic letter-of-credit facility talked at Libor plus 250 basis points, and a $150 million three-year revolver talked at Libor plus 275 basis points with a 50 basis point commitment fee.

The new credit facility proceeds are earmarked to refinance bank debt. It was already oversubscribed by Dec. 3, almost a week before the actual commitment deadline, with more than $1.6 billion of commitments in the book. More than 80 people attended the Nov. 30 bank meeting that launched the deal into syndication in person and more than 80 people attended via telephone, market sources said, so it was expected to be a blow out.

Pricing on the new credit facility, however, has not been firmly established as it is still in the syndication process.

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