Veritas DGC $125 million convertible talked at Libor minus 25 bps to plus 25 bps, up 43-47%

By Ronda Fears

Nashville, Feb. 25 - Veritas DGC Inc. launched $125 million of 20-year convertible floating-rate notes talked to yield the three-month Libor minus 25 basis points to plus 25 basis points with a 43% to 47% initial conversion premium.

Deutsche Bank Securities is sole bookrunner of the Rule 144A deal, which is scheduled to price after the market close Thursday. It is being sold on swap with $20 million of proceeds earmarked to buy back stock from note purchasers.

The senior unsecured notes will be non-callable for five years and then at par. There are puts in years five, 10 and 15, at par.

There also is a 120% contingent conversion trigger.

Holders will have full dividend protection.

The issue is expected to be rated B1 by Moody's Investors Service and BB by Standard & Poor's.

There is a $30 million greenshoe available.

Excluding the stock repurchases, Veritas DGC said it plans to use proceeds to prepay a portion of amounts outstanding under its existing bank credit facility.

Veritas earnings strong

Also Wednesday after the market close, the Houston-based oil well servicing firm reported strong earnings. The company provides geophysical services and reservoir technologies to the petroleum industry worldwide.

For fiscal second quarter ended Jan. 31, Veritas DGC posted net income of $14.2 million, or 42 cents per share, compared with $4.5 million, or 14 cents per share, in the same period a year before. Revenues were up 18% to $147.8 million from $125.3.

The company's backlog increased to $172 million at Jan. 31 from $161 million at the end of the previous quarter, with contract backlog up by $15 million and multi-client backlog down by $4 million.

As well as the uptick in business, outgoing Veritas DGC chief executive Dave Robson said, "Our financial position improved as well. We ended the quarter with $70 million of cash, after paying down $13 million of bank debt. Although I am leaving, I'm confident that the management team will continue to emphasize technology, operational excellence and positive cash flow."

In late January, Veritas DGC named Thierry Pilenko chairman and chief executive officer to replace Robson, who is retiring. Pilenko, who was previously a managing director at a Paris-based Schlumberger Ltd. unit, will take the helm at Veritas DGC in March.

A conference call on the earnings is scheduled for 9 a.m. ET on Thursday.

Veritas DGC shares closed Wednesday up 29 cents, or 2.09%, to $14.19 and in after-hours trading gained another 87 cents, or 6.13%.

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