The company announced that the bonds were priced at 90.495 cents on the dollar, and carry a yield to maturity of 0.5 percent. The bonds may be converted into common shares of
The company intends to use the proceeds of the sale to pay down existing debt. The company currently is carrying $147 million in debt, at a floating rate of six to seven percent, Crate said.
'The coupon on this [bond] is 50 basis points,' he said. 'So you can see that it will certainly lower the cost of capital.' After paying off the debt, and accounting for expenses, the company should be left with approximately $21 million in excess to invest, Crate said.
This sale is at least the second instance of a company in the mutual fund industry in recent weeks using convertible bonds as a means of low-cost financing. On April 24, Stillwell Financial of Kansas City, Mo., the parent company of Janus Capital Corp. of Denver, announced the sale of $600 million of convertible bonds with a yield to maturity of one percent.