Company to Use Net Proceeds to Repurchase Common Stock
DALLAS, July 23 /PRNewswire-FirstCall/ -- Alliance Data Systems
Corporation (NYSE: ADS) announced today that it proposes to offer, subject to
market conditions and other factors, up to $700 million aggregate principal
amount of convertible senior notes due 2013 (the 'Notes') to qualified
institutional buyers pursuant to Rule 144A under the Securities Act of 1933,
as amended (the 'Securities Act'). Alliance Data also intends to grant to the
initial purchasers of the Notes an option to purchase up to an additional $105
million aggregate principal amount of the Notes solely to cover
over-allotments, if any.
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The Notes will be general unsecured senior obligations of Alliance Data,
will pay interest semi-annually, and will be convertible during certain
periods and under certain circumstances. Upon conversion, holders of the Notes
will receive, at the election of Alliance Data, cash, shares of Alliance
Data's common stock or a combination of cash and shares of Alliance Data's
common stock. Holders of the Notes will have the right to require Alliance
Data to repurchase for cash all or some of their Notes upon the occurrence of
certain events. The interest rate, conversion rate and other terms are to be
determined by negotiations between Alliance Data and the initial purchasers.
In connection with the offering of the Notes, Alliance Data expects to
enter into convertible note hedge transactions with one or more of the initial
purchasers of the Notes or their respective affiliates (the 'hedge
counterparties') and intends to use a portion of the net proceeds from the
offering to pay for the convertible note hedge transactions. Alliance Data
also expects to enter into separate warrant transactions with the hedge
counterparties, which would result in additional proceeds to Alliance Data,
and anticipates that the warrants will have an exercise price that is
approximately 75% higher than the closing price of Alliance Data's common
stock on the date the warrants are issued.
In connection with the convertible note hedge and warrant transactions,
the hedge counterparties have advised Alliance Data that they or their
affiliates may enter into various derivative transactions with respect to
Alliance Data'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 Alliance Data'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 Alliance Data's common stock or by
purchasing or selling Alliance Data'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 Alliance
Data'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.
Alliance Data expects to use the net proceeds of the offering and the
proceeds of the warrant transactions to (i) fund the repurchase of
approximately $300 million worth of shares of Alliance Data common stock
pursuant to a new repurchase program (under which up to $1.3 billion of stock
may be purchased in addition to the Company's previously announced $500
million repurchase program, of which approximately $50 million remains),
including concurrently with the issuance of the Notes through private block
trades with one or more of the initial purchasers of the Notes, their
affiliates, or both, and, from time to time, in open market purchases and in
private transactions, (ii) pay approximately $105 million, the estimated cost
of the convertible note hedge transactions, taking into account the proceeds
to Alliance Data of the warrant transaction, each described above and (iii)
free up borrowing capacity under its revolving credit facility by repaying two
outstanding credit agreements in full.
If the initial purchasers exercise their option to purchase additional
Notes, Alliance Data expects to 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. The Company also expects
the hedge counterparties to increase ratably the number of shares underlying
the warrant transactions, which would result in additional proceeds to
Alliance Data. Alliance Data expects to use the remainder of the net proceeds
from the sale of additional Notes for the repurchase of shares of Alliance
Data common stock from time to time under its new repurchase program in open
market purchases and in private transactions.
The Notes have not been registered under the Securities Act or any state
securities laws and may not be offered or sold in the United States absent
registration or an applicable exemption from such registration requirements.
This announcement is neither an offer to sell nor a solicitation of an
offer to buy any of these securities (including the shares of Alliance Data
common stock into which the Notes are convertible) and shall not constitute an
offer, solicitation or sale in any jurisdiction in which such offer,
solicitation or sale is unlawful.
SOURCE Alliance Data Systems Corporation
