Strategic Hotels prices $150 million five-year exchangeables at 3.5%, up 20%

New York, March 29 - Strategic Hotels & Resorts Inc. priced $150 million of five-year exchangeable senior notes on Thursday after the market closed to yield 3.5% with a 20% initial exchange premium.

The deal came at the cheap end of talk for a coupon of 3% to 3.5% and an exchange premium of 20%.

The exchange price is $27.70 and the exchange ratio 36.1063.

The notes are issued by Strategic Hotel Funding LLC and are exchangeable into common stock of the Strategic Hotels & Resorts.

There is an over-allotment option for a further $30 million.

Deutsche Bank, Citigroup and JP Morgan are the bookrunners of the Rule 144A offering.

The notes will be non-callable.

There will be a contingent exchange trigger at 130% of the exchange price.

The notes will have dividend and takeover protection.

Strategic Hotels & Resorts, a Chicago-based real estate investment trust that focuses on upscale hotels, will use the proceeds to enter into capped call transactions, to buy back up to $25 million of its common stock, to repay outstanding bank debt and to fund general purposes.

The capped call raises the exchange price from the company's point of view to $32.31, a 40% premium.

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