Avis Budget Group, Inc. (NYSE: CAR) recently announced the pricing of its offering of $300 million aggregate principal amount of 3.50% convertible senior notes due 2014. The notes were offered and sold solely to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The offering is expected to close on October 13, 2009. Avis Budget has also granted the initial purchasers of the notes the right to purchase up to an additional $45 million aggregate principal amount of notes solely to cover over-allotments.
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The initial conversion rate for the notes is 61.5385 shares of common stock per $1,000 principal amount of the notes, which is equal to an initial conversion price of approximately $16.25 per share, representing a 30% conversion premium above today's closing price of Avis Budget's common stock of $12.50 per share. The notes mature October 1, 2014. Avis Budget will settle any conversion of the notes through the delivery of shares of its common stock. Avis Budget intends to simultaneously enter into a warrant transaction and to purchase a convertible note hedge. The Company intends to use approximately 10% of the net proceeds from the offering to pay the cost of the convertible note hedge (after such cost is partially offset by the proceeds from the warrant transaction) and to use the balance for general corporate purposes, including the repayment of debt. The effect of the convertible note hedge and warrant transaction, or "call spread," will be to increase the effective conversion premium of the notes from the Company's perspective to 80% above today's closing price of Avis Budget's common stock. Avis Budget has been advised by the counterparties to the call spread that they intend to hedge their exposure under the call spread by entering into various derivative transactions concurrently with pricing of the offering, which may have an effect on the market price of Avis Budget's common stock.
This announcement is neither an offer to sell nor a solicitation of an offer to buy any of these securities and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale is unlawful. Source Avis Budget Group.
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