By Ronda Fears
Nashville, June 17- Scottish Power Finance Ltd. sold an upsized $700 million of perpetual deferrable convertible subordinated notes at par to yield 4% with a 25.2% initial conversion premium.
The Rule 144A/Regulation S deal, via bookrunner UBS Investment Bank, was boosted from $575 million and sold aggressively outside yield talk.
Price talk had put the coupon at 4.125% to 4.625%. It sold at the cheap end of premium guidance of 25% to 30%.
The notes are guaranteed by parent Scottish Power plc.
"The convertible bond market currently provides long-term financing on attractive terms," said Scottish Power finance director David Nish, in a company statement.
He said the company anticipates making around £900 million of capital investment across the group in each of the next two years, of which some 40% will be invested in growth opportunities identified in generation, networks and gas storage, with the balance invested in maintaining our asset base.
For credit ratings benefits, the company said that if will not call the new convertible after year eight, unless it is replaced by some other capital of equivalent or lower subordination.
Interest can be deferred if during the 12 preceding months the ratio of operating profit (pre-exceptional items, pre-goodwill) to cash interest cost falls below 1.75x or if during the 3 preceding months no dividend has been declared or paid.
If a coupon is deferred it will be paid from the sale of preference shares.
Bondholders will be protected against dividends or distributions payments in excess of 7.5% per year from £0.20 per share in year one. Dividends above that level will lead to an adjustment in the conversion ratio.
Terms of the deal are:
Issuer: Scottish Power Finance Ltd.
| Issue: | Convertible subordinated notes
|
| Bookrunner: | | UBS Investment Bank
|
| Amount | $700 million, up from $575 million
|
| Maturity: | Perpetual
|
| Coupon: | 4.0%
|
| Price: | Par
|
| Yield: | 4.0%
|
| Step-up: | If not converted by year 8, coupon steps up to 3-month Libor plus 400 bps
|
| Conversion premium: | 25.2%
|
| Conversion price: | 461.11p
|
| Conversion ratio: | 2.1687
|
| Call: | Non-callable for 6 years, then with 130% hurdle to year 8, then at par plus accrued interest, if any
|
| Ratings: | Moody's: Baa2
|
| S&P: BBB
|
| Price talk: | 4.125-4.625%, up 25-30%
|
| Pricing date: | June 17
|
| Settlement: | July 10
|
| Distribution: | Rule 144A, Regulation S
|
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