Scottish Annuity $100 million converts talked to yield 4.5% to 5.0%, up 25% to 30%

By Ronda Fears

Nashville, Nov. 18 - Scottish Annuity & Life Holdings Ltd. launched $100 million of 20-year convertible senior notes with guidance for a yield of 4.5% to 5.0% and a 25% to 30% initial conversion premium.

Bear Stearns & Co. is lead manager of the Rule 144A deal.

The deal was seen bid 0.5 to 2 points over par in the gray market.

Scottish Annuity shares closed down $1.40 to $16.70.

Deutsche Bank Securities Inc. analysts put the deal, at the midpoint of price talk, 8.35% cheap, using a credit spread of 500 basis points over Libor and 35% volatility in the stock. Also, a 1.91% common dividend was a factor.

The issue is rated BBB- by Standard & Poor's, BBB by Fitch Ratings and is expected to be rated Baa2 by Moody's.

S&P said the issue will raise Scottish Annuity's financial leverage to 20% with fixed-charge coverage of more than 6x. However, because of its rapid growth, both ratios are expected to improve over time.

Scottish is expected to grow revenue by more than 50% in 2002 and by at least 20% in 2003, S&P said.

The company said proceeds will be used to support growth, pursue business opportunities in reinsurance and general corporate purposes.

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