2007

Rag Top

Like its automobile namesake, convertible bond offerings are becoming more popular these days. It is no surprise given the attractive interest rates and the fact that the convertible feature can be hedged to minimize dilution to existing shareholders.

In the latest instance, Seadrill last Friday announced the offering of a $900 million convertible bond with a five-year tenor and on Monday they announced the successful completion of the transaction. With its strong pedigree and market fundamentals, it is not surprising that this was the largest-ever Nordic equity-linked transaction. In fact, the stock price rose throughout the marketing period despite potential hedging activity associated with a convert offering.

With ABG Sundal Collier and Deutsche Bank acting as joint bookrunners, joint lead managers and sole syndicate members, the transaction was clearly well received as evidenced by the terms and the fact that it was upsized to $1 billion. These senior unsecured convertible bonds will have an annual coupon of 3.625%, the low end of the range, and a conversion price of $34.474 per bond representing a premium of 45% (at the high end of the range) of the volume weighted average share price of the company’s shares on the OSE up to the pricing on October 26th which was calculated to be $23.7752.

This is only an excerpt of The Week in Review – 11/01/2007

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