PMI Group revises talk on planned $200 million 10-year convertibles to yield 4.5%-5%, up 27.5%

By Rebecca Melvin

New York, April 26 - PMI Group Inc.'s $200 million offering of 10-year convertible senior notes, which launched early Monday and was seen pricing after the close of markets, saw its price talk revised during the session to 4.5% to 5% with an initial conversion premium of 27.5%.

The revised price talk compared to initial talk of 5% to 5.5% for the yield and an initial conversion premium of 20% to 25%, according to a syndicate source.

The deal has a $30 million over-allotment option.

PMI also plans to price a concurrent offering of $400 million of its common stock.

Joint bookrunners of both registered offerings are Credit Suisse Securities (USA) LLC and Bank of America Merrill Lynch, with Dowling & Partners Securities as a co-manager.

The convertibles have contingent conversion at a price trigger of 130%. They are non-callable for five years and then are provisionally callable in years six through 10 at a 130% price trigger. There are no puts.

Conversion settlement can be made in cash, stock or a combination. They also have full dividend protection and change-of-control protection via a make-whole adjustment premium delivered upon conversion as incremental shares.

Closing of each of the offerings is contingent on the closing of the other.

PMI intends to use $75 million of the proceeds to pay a portion of its outstanding debt under its credit facility and to use $35 million to $40 million of proceeds for working capital and general corporate purposes.

Remaining proceeds are earmarked for principal subsidiary PMI Mortgage Insurance Co., with an amount equal to the gross proceeds from the convertible notes offering to be contributed in the form of a surplus note to be issued by PMI Mortgage Insurance Co. to PMI and the remaining amount to be contributed in the form of a contribution to capital.

PMI is a Walnut Creek, Calif.-based provider of residential mortgage insurance and credit enhancement products.

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