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Vale plans $1 billion three-year mandatory convertibles in two parts
By Rebecca Melvin
New York, July 6 - Vale SA planned to price about $1 billion of three-year mandatory convertibles in two tranches after the close of markets Tuesday, which were talked at a coupon of 6.25% to 6.75% with an initial exchange premium of 17.5% to 22.5% for both tranches, according to a syndicate source.
Citigroup Global Markets Inc. and J.P. Morgan Securities are acting as bookrunners of the registered offering, which will be issued through wholly owned subsidiary Vale Capital II.
The first series, the VALE-2012 notes, will be converted to American Depositary Shares representing one common share of Vale, and the second series, the VALE.P-2012 notes, will be convertible into preferred class A shares. Together, the ADSs will represent up to 18.4 million common shares and 47.28 million preferred class A shares.
Under an agreement between Vale and Vale Capital II, Vale will sell to Vale Capital II the number of ADSs that Vale Capital II will require to satisfy its obligations under the terms of the notes. The Brazilian Securities Commission authorized Vale's use of treasury stock to constitute the ADSs it will sell to Vale Capital II.
Vale will use proceeds for general corporate purposes.
The notes will be unsecured and unsubordinated obligations of Vale Capital II and will be fully and unconditionally guaranteed by Vale.
Rio de Janeiro-based Vale is a diversified metals and mining company.
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