Stone Energy to price $250 million five-year convertibles at 1.75%-2.25%, up 25%-30%

By Rebecca Melvin

New York, Feb. 28 - Stone Energy Corp. launched a $250 million offering of five-year convertible notes late Tuesday that was talked to yield 1.75% to 2.25% with an initial conversion premium of 25% to 30%, according to a market source.

The Rule 144A offering has a $25 million greenshoe.

Final terms were expected to be fixed after the market close Wednesday via bookrunners Barclays Capital Inc. and Bank of America Merrill Lynch.

The notes are non-callable with no puts, and they have dividend and change-of-control protection.

The securities also have contingent conversion at a price hurdle of 130%.

In connection with the offering, the company expects to enter into convertible note hedge and warrant transactions, which have the combined effect of boosting the bond's conversion premium from the issuer's perspective.

In addition to funding the cost of the convertible note hedge transactions, proceeds from the convertibles and the warrants will be used for general corporate purposes, which may include providing longer-term financing for the recently closed Pompano, Wideberth and Appalachian acquisitions and repayment of outstanding borrowings under the company's bank credit facility.

Stone Energy is an independent oil and natural gas exploration and development company based in Lafayette, La.

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