New Issue: Valassis $160 million proceeds cash-to-zero convertibles yield 1.625%, up 65%

By Ronda Fears

Nashville, May 16 - Valassis Communications Inc. sold $160 million in proceeds of 30-year discount cash-to-zero convertibles with a warrant kicker at 66.724 to yield 1.625% with a 65% initial conversion premium, via sole lead manager Merrill Lynch & Co.

The Rule 144A issue priced at the cheap end of yield talk. It pays a cash coupon of 1.625% on the issue price (1.0843% on par) for five years, then becomes a 0% bond accreting the full yield.

Talk for the deal put the yield at 1.125% to 1.625% with a 65% initial conversion premium.

The company said it plans to use proceeds for general corporate purposes, including potential debt repurchases. Market sources expect the company 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.

Terms of the deal are:

Issuer: Valassis Communications Inc.

Issue:	Convertible senior notes
Lead manager:		Merrill Lynch
Amount	$160 million (proceeds), $239.8 million (face)
Maturity:	May 15, 2033
Coupon:	1.625% of issue price for five years, then 0% accreting
Price:	66.724
Yield:	1.625%
Conversion premium:	65%
Conversion price:	$44.01
Conversion ratio:	15.1627, plus up to 9.8556 warrants, capped at 25.0183
Call:	May 22, 2008 onwards
Put:	In years 5, 10, 15, 20 and 25
Contingent conversion:	120%
Contingent payment:	120%
Settlement:	May 22

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