By Kenneth Lim
Boston, Feb. 7 - UBS AG priced its record $2 billion issue of 18-month, 22% notes mandatorily exchangeable for Time Warner Inc. shares.
Pricing was set using a reference stock price of about $18.27, making each $100,000 par note initially exchangeable into up to 5,473.0044 Time Warner shares, a syndicate source confirmed.
Holders will receive between 64.2857% and 100% of the exchange ratio.
If Time Warner stock is below 90% of the reference value, or $16.4444, the payout on exchange is the full 5,473.0044 shares.
If the stock is between 90% and 140% of the reference value, or from $16.4444 to $25.5801, holders receive Time Warner stock worth 90% of the par value of the notes. At the 140% level, the payout decreases to a lower limit of 3,518.36 shares per note.
Above 140%, the ratio rises back towards 100% as the price of Time Warner stock rises using a ratio of 100% minus the difference between the upper and lower thresholds divided by the current value of the stock.
Price talk had guided for a coupon of between 21.25% and 22.25%, the source said. Most of the notes were distributed to hedge funds. The coupon was fixed on Friday.
The notes mature on Aug. 15, 2007.
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 have dividend protection, and UBS may reject takeover offers only if it determines that doing so will provide holders with the highest value.
The notes will be listed on the Luxembourg Stock Exchange.
UBS Investment Bank is the underwriter of the Rule 144A/Regulation S sale.
| Issuer: | UBS AG
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| Issue: | Mandatory exchangeable notes
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| Underlying stock: | Time Warner Inc. (NYSE: TWX)
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| Bookrunner: | UBS Investment Bank
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| Amount: | $2 billion
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| Maturity: | Aug. 15, 2007
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| Coupon: | 22%
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| Price: | 110% of par of $100,000
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| Initial stock price: | $18.27
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| Exchange ratio: | 5,473.0044 shares per note
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| Payout at call or maturity: | Between 64.2857% and 100% of the exchange ratio; if Time Warner stock is below 90% of the reference value, or $16.4444, the payout on exchange is the full 5,473.0044 shares; if the stock is between 90% and 140% of the reference value, or from $16.4444 to $25.5801, Time Warner stock worth 90% of the par value of the notes; above 140%, ratio of 100% minus the difference between the upper and lower thresholds divided by the current value of the stock
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| Cash settlement option: | Yes, at issuer's discretion
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| Dividend protection: | Conversion ratio adjustment if dividend exceeds 5 cents per quarter.
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| Takeover protection: | Issuer may reject offers only if it determines that doing so will provide holders with the highest value.
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| Call: | Issuer may call at any time in whole or part. Minimum partial call of $5,000 per note and $30,000 per note remaining after partial call
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| Settlement date: | Feb. 15
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| Distribution: | Rule 144A, Regulation S
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| Price talk: | 21.25-22.25%
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