Company to Use Net Proceeds to Repurchase Common Stock
DALLAS, July 24 /PRNewswire-FirstCall/ -- Alliance Data Systems
Corporation (NYSE: ADS) announced today the pricing of $700 million aggregate
principal amount of convertible senior notes due 2013 (the 'Notes') through
offerings to qualified institutional buyers pursuant to Rule 144A under the
Securities Act of 1933, as amended (the 'Securities Act'). Alliance Data has
granted 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. 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.
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The Notes will be general unsecured senior obligations of Alliance Data,
will pay interest semi-annually at a rate of 1.75% per annum, will be
convertible during certain periods and under certain circumstances and,
subject to earlier repurchase by Alliance Data or conversion, will mature on
August 1, 2013. 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, based on the
applicable conversion rate at such time. The Notes have an initial conversion
rate of 12.7392 shares of common stock per $1,000 principal amount of the
Notes (which is equal to an initial conversion price of approximately $78.50
per share), representing an initial conversion premium of approximately 22.5%
above the closing price of $64.08 per share of Alliance Data's common stock on
July 23, 2008.
In connection with the offering of the Notes, Alliance Data entered 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 entered into separate
warrant transactions with the hedge counterparties, which will result in
additional proceeds to Alliance Data. The warrants have an exercise price
that is approximately 75% higher than the closing price of Alliance Data's
common stock on July 23, 2008.
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 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 $94 million, the cost of
the convertible note hedge transactions, taking into account the proceeds to
Alliance Data from 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
