Tower Group greenshoe exercised, lifting convertibles to $150 million

By Devika Patel

Knoxville, Tenn., Sept. 20 - Underwriters for Tower Group Inc.'s offering of four-year 5% convertible senior notes exercised their over-allotment option in full for $15 million more of the convertibles, increasing the size of the issue to $150 million, the company said in an 8-K filed Monday with the Securities and Exchange Commission.

As previously reported, the company sold the convertibles at par on Sept. 14 in a Rule 144A offering, via joint bookrunners Bank of America Merrill Lynch, J.P. Morgan Securities Inc. and FBR Capital Markets.

The convertibles have an initial conversion price of $27.49, which equals a conversion ratio of 36.3782.

The bonds are non-callable for life. There is takeover and dividend protection, and there is contingent conversion at 130%.

About $50 million of the proceeds will be used to repurchase common stock concurrently with the offering. Tower also plans to use about $10.4 million to pay for convertible note hedge transactions, with remaining proceeds earmarked for repaying about $56 million of outstanding borrowings under its revolving credit facility and for general corporate purposes.

In connection with the offering, the company entered into convertible note hedge and warrant transactions. The hedge transactions are aimed at reducing potential dilution of stock and will offset potential cash payments in excess of the principal amount of converted notes.

The warrant transactions have an initial strike price of $33.42 per share, which raises the effective initial conversion premium to 55% from Tower's perspective.

New York-based Tower Group is a provider of commercial, personal and specialty property and casualty insurance products and services.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.