Tata Steel to price $650 million 1% convertible bonds due 2012, talked to yield 4.75% to 5.25%, up 25%

By Evan Weinberger

New York, Aug. 6 - Tata Steel plans to price $650 million in convertible bonds due Sept. 5, 2012. The bonds will have a 1% coupon and are talked at a yield of 4.75% to 5.25% with an initial conversion premium of 35%.

Citigroup, Standard Chartered Bank and ABN Amro are joint bookrunners of the Regulation S transaction. There is talk of a $150 million over-allotment option. The settlement date is Sept. 4.

The conversion price is set at Rs. 876.6225, and the currency exchange rate is fixed at Rs. 40.25 to $1. There is a floor price of Rs. 691.83.

The bonds will be convertible into qualifying securities or into Tata steel shares. The bonds are only convertible from Sept. 4, 2011 until 30 days prior to maturity. There are no calls or puts.

The bonds offer dividend protection for payouts exceeding a 2.2% dividend yield, according to a report from Barclays Capital, which is not the bookrunner. There are also takeover protections, a negative pledge, cross default.

Tata Steel is a Mumbai-based steel producer and part of the Tata Group of companies. The company plans to use the proceeds for capital expenditures or international acquisitions, lending to its subsidiaries and to finance expenditures for its acquisition of Corus Group plc.

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