BorgWarner Prices Convertible Senior Note Offering and Increases Offering Size to $325 Million
April 06 2009 - 9:16PM
PR Newswire (US)
AUBURN HILLS, Mich., April 6 /PRNewswire-FirstCall/ -- BorgWarner
Inc. (NYSE:BWA), a global supplier of highly engineered automotive
systems and components, primarily for powertrain applications,
today announced that it has priced a registered underwritten public
offering of $325.0 million aggregate principal amount of its 3.50%
convertible senior notes due 2012. In addition, BorgWarner has
granted the underwriters an option to purchase up to an additional
$48.75 million aggregate principal amount of notes within the
13-day period beginning on the date the notes are first issued,
solely to cover over-allotments, if any. The offering of the notes
is intended to increase BorgWarner's financial flexibility and
strengthen its liquidity. The closing of the offering is expected
to occur on April 9, 2009, subject to various customary closing
conditions. The notes will pay interest semi-annually at a rate of
3.50% per year and will mature on April 15, 2012. Holders of the
notes may convert their notes at their option at any time prior to
the close of business on the second scheduled trading day
immediately preceding the maturity date of the notes, in multiples
of $1,000 principal amount. The initial conversion rate for the
notes is 30.4706 shares of BorgWarner common stock per $1,000
principal amount of notes (representing an initial conversion price
of approximately $32.82 per share of common stock), subject to
adjustment in certain circumstances. The initial conversion price
represents a conversion premium of 27.5% over the last reported
sale price of the common stock on the New York Stock Exchange on
April 6, 2009, of $25.74 per share. Upon conversion, BorgWarner
will pay or deliver, as the case may be, cash, shares of its common
stock or a combination thereof at its election, in respect of the
conversion value above the notes' principal amount. BorgWarner may
not redeem the notes prior to their maturity. Holders of the notes
may require BorgWarner to purchase all or a portion of their notes
at a price equal to 100% of the principal amount of the notes to be
purchased, plus accrued and unpaid interest, in cash, upon the
occurrence of certain fundamental changes involving BorgWarner. The
notes will be senior unsecured obligations and will rank equally
with all of BorgWarner's other existing and future senior unsecured
debt. BorgWarner estimates that the net proceeds of this offering
will be approximately $314.9 million (or approximately $362.3
million if the underwriters' over-allotment option is exercised in
full), after deducting discounts and commissions and estimated
expenses. BorgWarner intends to use approximately $21.9 million of
the net proceeds of this offering to pay the net cost of the
convertible note hedge and warrant transactions described below
(which amount represents the cost of the convertible note hedge
transactions, partially offset by the proceeds of the warrant
transactions). BorgWarner expects to use the remaining proceeds for
general corporate purposes, including the repayment of short-term
indebtedness. In connection with the offering of the notes,
BorgWarner entered into convertible note hedge transactions with
counterparties that are affiliates of the representatives of the
underwriters of the notes. The convertible note hedge transactions
are expected to reduce the potential dilution to BorgWarner's
common stock upon conversion of the notes. BorgWarner also entered
into warrant transactions with the counterparties. However, the
warrant transactions could separately have a dilutive effect to the
extent that the volume-weighted price per share of BorgWarner's
common stock exceeds the applicable strike price of the warrants.
In connection with the convertible note hedge and warrant
transactions, the hedge counterparties have advised BorgWarner that
they or their affiliates may enter into various derivative
transactions with respect to BorgWarner's common stock concurrently
with or shortly after pricing of the notes. These transactions
could have the effect of increasing or preventing a decline in the
price of BorgWarner's common stock concurrently with or following
the pricing of the notes. In addition, the hedge counterparties or
their affiliates may from time to time, following the pricing of
the notes, modify their respective hedge positions by entering into
or unwinding various derivative transactions with respect to
BorgWarner's common stock or by purchasing or selling BorgWarner's
common stock in secondary market transactions during the term of
the notes (and are likely to do so during any cash settlement
averaging period related to the conversion of the notes). These
activities could have the effect of decreasing the price of
BorgWarner's common stock and could adversely affect the price of
the notes during any cash settlement averaging period related to
the conversion of the notes. If the underwriters exercise their
option to purchase additional notes, BorgWarner will use a portion
of the net proceeds from the sale of the additional notes to
increase ratably the number of shares underlying the convertible
note hedge transactions and expects to increase ratably the number
of shares underlying the warrant transactions as well, which would
result in additional proceeds to BorgWarner. BorgWarner expects to
use the remainder of the net proceeds from any sale of additional
notes for general corporate purposes, including to repay short-term
indebtedness. Morgan Stanley, Merrill Lynch & Co., Citi and
Deutsche Bank acted as joint book-running managers in connection
with the offering. The issuer has filed a registration statement
including a prospectus and a prospectus supplement with the SEC for
the offering to which this communication relates. Before you
invest, you should read the prospectus and prospectus supplement in
that registration statement and other documents the issuer has
filed with the SEC for more complete information about the issuer
and this offering. You may obtain these documents for free by
visiting EDGAR on the SEC Web site at http://www.sec.gov/.
Alternatively, the issuer, any underwriter or any dealer
participating in the offering will arrange to send you the
prospectus and the prospectus supplement if you request them by
contacting Morgan Stanley (address: Morgan Stanley & Co.
Incorporated, 180 Varick St, 2nd Floor, New York, NY 10014,
Attention: Prospectus Department; email: ; telephone: (866)
718-1649), Merrill Lynch & Co. (address: Merrill Lynch, Pierce,
Fenner & Smith Incorporated, 4 World Financial Center, New
York, NY 10080, Attn: Prospectus Department), Citi (address: Citi,
Brooklyn Army Terminal 140 58th Street, 8th floor, Brooklyn, New
York 11220, Attn: Prospectus Department; telephone: (800) 831-9146)
or Deutsche Bank Securities (address: Deutsche Bank Securities
Inc., Attn: Prospectus Department, 100 Plaza One, Jersey City, New
Jersey 07311, telephone: (800) 503-4611). This press release does
not constitute an offer to sell or the solicitation of an offer to
buy any notes or any other securities, nor will there be any sale
of notes or any other securities in any state or jurisdiction in
which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
state or jurisdiction. Statements contained in this news release
may contain forward-looking statements as contemplated by the 1995
Private Securities Litigation Reform Act that are based on
management's current expectations, estimates and projections. Words
such as "outlook," "expects," "anticipates," "intends," "plans,"
"believes," "estimates," variations of such words and similar
expressions are intended to identify such forward-looking
statements. Forward-looking statements are subject to risks and
uncertainties, many of which are difficult to predict and generally
beyond our control, that could cause actual results to differ
materially from those expressed, projected or implied in or by the
forward-looking statements. Such risks and uncertainties include:
fluctuations in domestic or foreign vehicle production, the
continued use of outside suppliers, fluctuations in demand for
vehicles containing our products, changes in general economic
conditions, and other risks detailed in our filings with the
Securities and Exchange Commission, including the Risk Factors,
identified in our most recently filed Annual Report on Form 10-K
and in the prospectus relating to the offering. In particular, the
closing of the notes offering is subject to various customary
closing conditions. We do not undertake any obligation to update
any forward-looking statements. DATASOURCE: BorgWarner Inc.
CONTACT: Mary Brevard, +1-248-754-0881, for BorgWarner Inc. Web
Site: http://www.borgwarner.com/
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