UBS offers record-setting $2 billion of 18-month exchangeables into Time Warner at 22% coupon

By Kenneth Lim

Boston, Feb. 3 - UBS AG is offering $2 billion of 18-month, 22% notes mandatorily exchangeable for Time Warner Inc. shares, the largest issue of its kind to be offered in the United States.

The coupon was price Friday while the conversion rate will be set on Monday.

The principal amount of the offer is $2 billion, but the notes are priced at 10% above par of $100,000 apiece. The notes mature on Aug. 15, 2007.

The investment bank has also incorporated a "wide strike" feature in the exchange ratio, the first time such a feature is being offered in a United States mandatory, syndicate sources confirmed. The exchange ratio of the notes will be calculated from a wider-than-usual range between the lower threshold of 90% and the upper threshold of 140% that could give investors payouts between 64.29% to all of the initial conversion ratio.

The syndicate source said price talk guided for a coupon between 21.25% and 22.25%, and that the deal was allocated mostly to hedge funds.

UBS may call the notes in whole or in part at any time, subject to a minimum partial call of $5,000 per note and $30,000 per note remaining after a partial call. The notes will also have dividend and takeover protection.

UBS Investment Bank is the underwriter for the Rule 144A/Regulation S sale.

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