Province Healthcare $150 mln convertible notes talked 4.25-4.75% yield, up 20-25%

By Ronda Fears

Nashville, Tenn., Oct. 2 - Province Healthcare Co. is returning to the convertible market, tapping investors for $150 million and lunging ahead of two deals next week to be the first convert sold since the Sept. 11 terrorist attacks on the U.S. Price talk on the Province Healthcare deal emerged Tuesday, putting the seven-year convertible subordinated notes pricing to yield 4.25% to 4.75% with a 20% to 25% initial conversion premium. The Rule 144A deal is set to price after the market close Thursday.

Market sources said joint lead managers are Merrill Lynch, First Union Securities and UBS Warburg, and Banc of America Securities is a co-manager.

Brentwood, Tenn.-based Province Healthcare, a hospital operator, said it intends to use proceeds from the deal to pay down debt and fund future hospital acquisitions, for working capital and general corporate purposes.

A buy-side source said the price talk for the new Province Healthcare convert looks a bit cheaper than fair value, but not as cheap as the other two deals pending from Performance Food Group and Community Health Systems on next week's calendar.

Deutsche Banc Alex. Brown convertible analysts put the new Province Healthcare convert at about 4% to 8% cheap to fair value, assuming a credit spread of 550 basis points over LIBOR and 40% volatility in the underlying stock. However, analysts note that the stock borrow may be difficult in this name.

The Province Healthcare 4.5% convertible notes due 2005 were sold last November at par with a 23% initial conversion premium. The converts were quoted at 113.5 on Tuesday, with the common shares down $1.40 to $34.95. End

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