Valassis $160 million proceeds convertible talked at 1.125-1.625%, up 65%; to pre-fund put

By Ronda Fears

Nashville, May 15 - Valassis Communications Inc. launched $160 million in proceeds of 30-year discount cash-to-zero convertibles with a warrant kicker to price before Friday's open, with proceeds going to take out its existing 0% convertible before the put next summer.

The Rule 144A issue was talked to yield 1.125% to 1.625% with a 65% initial conversion premium. At the midpoint, that would put the issue price at about 70.994.

Merrill Lynch & Co. is the sole lead manager of the deal.

It will pay a cash coupon for five years, then become a 0% issue, accreting the full yield.

There will be 33.5 warrants for additional shares struck at the initial conversion price attached and that will result in an adjusted conversion ratio based on the issue price. The ratio will freeze at year five, however.

There is a contingent conversion trigger minimum of 105% and maximum of 120%. Also, there is a contingent payment trigger of 120% for an equivalent yield of 4%.

The issue will be noncallable for five years with puts in years 5, 10, 15, 20 and 25.

The company said it plans to use proceeds for general corporate purposes, including potential debt repurchases. Market sources said the company would be looking to pre-fund the put on its 0% convertible due 2021. The 0%, an estimated $155 million issue, is putable at 60.277 in July 2004.

Valassis shares closed up 5c, or 0.19%, to $26.67. The 0% convert was quoted flat at 58.25 bid, but with little to no volume in the issue.

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