Owens-Illinois unit to sell $500 million five-year exchangeables at 2.75%-3.25%, up 35%-40%

By Rebecca Melvin

New York, May 3 - Owens-Brockway Glass Container Inc., a subsidiary of Owens-Illinois Inc., plans to price $500 million of five-year exchangeable senior notes after the close of markets on Monday that were talked to yield 2.75% to 3.25% with a 35% to 40% initial conversion premium, according to a market source.

The Rule 144A offering has a $75 million greenshoe and is being sold via joint bookrunners Bank of America Merrill Lynch, Deutsche Bank Securities Inc., Citigroup Global Markets Inc. and Goldman Sachs & Co.

The notes will be non-callable for life with no puts. Upon exchange, the exchange obligation will be settled in a combination of cash to be paid by Owens-Brockway Glass Container Inc. and shares of Owens-Illinois.

Up to $55 million of the proceeds are expected to be used for the repurchase of Owens-Illinois shares concurrently with the closing of the notes, with remaining proceeds for general corporate purposes, including debt repayment and funding of strategic priorities.

There is dividend protection via an exchange rate adjustment and cash takeover protection via a make-whole table.

Perrysburg, Ohio-based Owens-Illinois is a glass container maker.

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