Omnicare $250 million convertible Piers talked to yield 4.0-4.5%, up 30-35%

By Ronda Fears

Nashville, June 4 - Omnicare Inc. launched $250 million of convertible trust preferreds in the Piers, or preferred income equity redeemable securities, structure for pricing Monday after the close.

Price talk puts the yield at 4.0% to 4.5% with a 30% to 35% initial conversion premium.

Joint bookrunners for the registered deal are Lehman Brothers Inc. and Wachovia Securities.

Joint lead managers are JPMorgan, SunTrust Robinson Humphrey and UBS Warburg. Co-managers are CIBC World Markets, Bear Stearns & Co. Inc. and Thomas Weisel Partners LLC.

The senior unsecured debt will be noncallable for 6 years and there is a 120% contingent interest payment trigger.

There is a $37.5 million greeshoe available.

Proceeds, along with funds from a stock offering, will be used in part to redeem Omnicare's 5% convertible subordinated debentures due 2007.

In addition to the stock offering of 5.625 million shares, Omnicare is selling $250 million of 10-year senior subordinated notes.

Concurrent with the offerings, Omnicare said it has executed a commitment letter for a new, four-year credit facility consisting of a $250 million term loan and a $500 million revolving credit facility that will replace its existing credit facility.

The company said proceeds from the senior subordinated notes offering and borrowings of $250 million under the term loan portion of the new credit facility to repay the balance of the its existing $474 million credit facility.

The Covington, Ky.-based provider of pharmaceutical care for the elderly said any remaining proceeds will be used for general corporate purposes.

Moody's Investors Service assigned a Ba3 rating to the convertible and confirmed Omnicare's existing ratings, but noted that the Ba3 rating on the $345 million of 5% convertible subordinated debtentures due 2007 would be withdrawn following its redemption.

The rating outlook remains stable, Moody's said, anticipating moderate top line growth in the high single digit range and ongoing improvements in EBITDA margins.

"Since we feel that the company is well positioned within its current rating category, absent any unforeseen events, the ratings/outlook are unlikely to decline over the near-to-intermediate term," Moody's said.

"If the company's margins, free cash flow generation and deleveraging all improve more than we anticipate, possibly as a result of a smooth and successful integration of [NCS Healthcare Inc.], then Moody's may consider an upward outlook change/rating adjustment within the next 12 to 18 months."

Standard & Poor's assigned a BB rating to the convertible.

Omnicare shares closed Wednesday up 25c, or 0.94%, to $26.94.

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