Rexnord’s $350 million of mandatory convertible preferred stock talked at 5.5%-6%, up 17.5%-22.5%

By Stephanie N. Rotondo

Seattle, Dec. 1 – Price talk emerged on Rexnord Corp.’s planned $350 million offering of series A mandatory convertible preferred stock on Thursday.

The deal was first announced on Wednesday. Pricing is expected later Thursday.

Initial price talk is for a yield of 5.5% to 6% with an initial conversion premium of 17.5% to 22.5%, according to a market source.

The convertible preferreds will be issued as depositary shares representing a 1/20 interest.

There is a $52.5 million over-allotment option.

Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc. are the joint bookrunners. Barclays and Citigroup Global Markets Inc. are the co-managers.

The convertibles have a liquidation preference of $1,000 per share, or $50.00 per each depositary share.

The issue will automatically convert to common stock on Nov. 15, 2019. Prior to that date, holders of 20 depositary shares can cause the company to convert their holdings upon a fundamental change.

Upon a fundamental change, the conversion rate may be adjusted. Holders may also be entitled to a make-whole premium.

The preferreds are not redeemable.

Proceeds will be used to repay $169.6 million – or $195 million, if the over-allotment option is fully exercised – of an outstanding term loan. Remaining funds will be used for general corporate purposes.

Rexnord is a West Milwaukee, Wis.-based industrial company comprising two strategic platforms: process and motion control, and water management.

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