PMI $250 million convertible talked at 6.0-6.5%, up 20-24%

By Ronda Fears

Nashville, Oct. 22 - PMI Group Inc. came off the shadow calendar Wednesday after reporting better-than-expected earnings, launching $250 million of convertible units talked to yield 6.0% to 6.5% coupon with a 20% to 24% initial conversion premium.

Banc of America Securities is sole bookrunner.

Citigroup, JPMorgan and Lehman Brothers are co-managers.

Concurrently, PMI is selling 4.2 million shares of common stock aimed at fetching another $150 million or so.

The three-year convertibles will be non-callable. Par is $25.

Pricing is scheduled after the close Oct. 28, next Tuesday.

There is a $37.5 million greenshoe available on the convertible offering.

PMI has been planning the convertible and stock offerings for a couple of months, with proceeds earmarked as part of its investment in the purchase of Financial Guaranty Insurance Co. from General Electric Co. The FGIC venture was announced Aug. 4.

Any net proceeds not applied to that purpose will be used for working capital and general corporate purposes, PMI said.

On Wednesday, PMI also announced earnings.

The company posted third quarter net income of $60.1 million, or 67c per share, versus $89.3 million, or 98c per share, a year before. For the nine months ending Sept. 30, net income was $219.2 million, or $2.43 a share, compared to $261.9 million, or $2.85 a share, in the prior-year period.

Third quarter net income was impacted by 20c a share, the company said, because of a charge related to two strategic investments held by the company. In a press release, PMI Group said Fairbanks Capital Holdings Corp. and Fairbanks Capital Corp. have reached a proposed settlement of potential civil charges by the Federal Trade Commission and the Department of Housing and Urban Development.

Claims and delinquency developments are slightly more favorable now, the company said. As a result, the company said it now expects loss and loss-adjustment expenses for its U.S. Mortgage Insurance operations to be $215 million to $225 million for 2003, compared with its estimate in June of $210 million to $230 million.

PMI shares closed Wednesday up 75c, or by 2.1%, to $36.44.

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