Oneok $275 million mandatory talked to yield 8.25%-8.75%, up 18%-22%

By Ronda Fears

Nashville, Jan. 14 - Guidance emerged Tuesday on Oneok Inc.'s $275 million of three-year mandatory convertibles, putting the yield at 8.25% to 8.75% and initial conversion premium between 18% and 22%.

The deal is scheduled to price next week, either on Tuesday or Wednesday.

Joint bookrunning lead managers for the deal are Banc of America Securities, JPMorgan and UBS Warburg.

Wachovia Securities, Inc. analysts put the deal at 6.1% cheap, using the midpoint of guidance and with the stock at $18.41. That assumes a credit spread of 170 basis points over Treasuries, 36% volatility in the stock and a 3.37% current yield on the stock.

The issue is expected to be rated Baa1 by Moody's Investors Service and A by Standard & Poor's.

Oneok, a Tulsa, Okla.-based diversified natural gas utility, is also selling 12 million shares of common stock.

Proceeds are earmarked to repurchase up to $250 million of Oneok's series A convertible preferred stock from Westar Energy Inc., which was issued in 1997 when Oneok bought Westar's natural gas assets, and to repay short-term debt.

There is a $41.5 million greenshoe available.

Oneok shares ended down 21c to $18.20.

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