PMC-Sierra talks $215 million of 20-year convertibles to yield 2.0% to 2.5%, up 25% to 30%

By Rebecca Melvin

Princeton, N.J., Oct. 20 - PMC-Sierra Inc. was expected to price $215 million of 20-year of convertibles late Thursday to yield 2.0% to 2.5%, with an initial conversion premium of between 25% and 30%, a syndicate source said.

The Rule 144A offering of senior convertible notes, via bookrunner Merrill Lynch & Co., was launched before the bell Thursday.

The notes have seven-year hard call, and puts in years seven, 10 and 15. There is an overallotment option for $35 million.

The notes have full dividend protection via a conversion ratio adjustment and change of control protection. The change of control protection is in the form of a make-whole premium delivered upon conversion as incremental shares.

PMC-Sierra intends to use proceeds for general corporate purposes, including capital expenditures, research and development and potential investments in and acquisitions of complementary businesses, partnerships, minority investments, products or technologies, to fund further enhancements of PMC-Sierra's operating infrastructure and for working capital.

If PMC-Sierra reaches an agreement to purchase a semiconductor business that it has identified and that is consistent with its business strategy, PMC-Sierra expects the proceeds from the proposed convertibles offering will help fund a portion of the purchase price.

Santa Clara, Calif.-based PMC-Sierra is a maker of semiconductors for the communications industry.

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