Renewable Energy to price $125 million 20-year convertibles to yield 3.5%-4%, up 25%-30%

By Rebecca Melvin

New York, May 29 – Renewable Energy Group Inc. plans to price $125 million of 20-year convertible senior notes after the market close Thursday. The offering was talked to yield 3.5% to 4%, with an initial conversion premium of 25% to 30%, according to market sources.

The Rule 144A deal has a greenshoe for $18.75 million and was being marketed by Piper Jaffray & Co. as bookrunner.

The notes are convertible if shares exceed 130% of the conversion price for at least 20 trading days during a 30-day period.

They are non-callable for five years and then freely callable. There are investor puts in years five, 10 and 15.

There is standard takeover and dividend protection, and the company is also entering into capped call transactions with the underwriters or their affiliates.

About $50 million of proceeds will be used to repurchase a portion of Renewable Energy’s outstanding 2.75% convertible senior notes due 2019, about $30 million will be used to repurchase shares of common stock concurrently with the pricing of the notes, which will establish the capped call. Remaining proceeds will be used for working capital and general corporate purposes, which may include additional repurchases of the 2019 notes and shares of common stock and to finance potential strategic transactions.

Ames, Iowa-based Renewable Energy is a biodiesel producer.

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