Vector issues new convertibles in exchange for $99.94 million of 5% variable-interest convertibles

By Angela McDaniels

Tacoma, Wash., June 30 - Vector Group Ltd. has issued $106.94 million principal amount of 6.75% variable-interest senior convertible exchange notes due Nov. 15, 2014 in exchange for $99.94 million principal amount of its 5% variable-interest senior convertible notes due Nov. 15, 2011, according to a company news release.

The old notes were putable on Nov. 15.

The principal amount of new notes issued is equal to 107% of the principal amount of the old notes exchanged.

The new notes have a conversion price of $17.06 per share, which is equal to a conversion rate of 58.6063 shares per $1,000 principal amount of notes. The old notes had a conversion price of $15.96 per share.

Vector stock closed at $14.29 (NYSE: VGR) on Tuesday.

Interest on the new notes is payable quarterly beginning Aug. 15.

The new notes accrue interest at 3.75% per year. They will pay an additional amount of interest each quarter equal to the amount of cash dividends paid on the company's common stock during the prior quarter multiplied by the number of shares into which the new notes are convertible, subject to a minimum interest rate of 6.75% per year.

The company said that beginning June 15, 2014, it will redeem at the end of each interest period an additional amount, if any, of the new notes necessary to prevent them from being treated as an "applicable high yield discount obligation" under the Internal Revenue Code.

Miami-based Vector Group is a holding company that indirectly owns Liggett Group LLC, Vector Tobacco Inc. and New Valley LLC.

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