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The underwriters will be granted an over-allotment option to purchase an additional USD75m of convertible notes.
Net proceeds will repay fully its outstanding USD1.1b term loan and USD400m synthetic revolver senior unsecured credit facilities that expire in January 2012, besides other general corporate purposes.
Navistar may enter into convertible note hedge transactions with some affiliates of the underwriters (the hedge counterparties) in relation to this offering and enter into warrant transactions with the hedge counterparties as well. This hedge transaction will reduce the potential dilution to the company's common stock upon conversion of the notes.
If the underwriters exercise their over allotment option and Navistar enters into the hedge and warrant transactions, it may sell more warrants and use some of the net proceeds of the additional warrants and notes' sale to sign additional convertible note hedge transactions.
To establish their initial hedge of the convertible note hedge and warrant transactions, various derivative transactions will be signed by the hedge counterparties or their affiliates with respect to Navistar's common stock while the pricing of the notes occur or later, an activity that could increase or decrease the market price of Navistar's common stock or the notes at that time.
Credit Suisse will lead the senior notes offering and JP Morgan the convertible notes offering, being sold under the company's effective shelf registration statement filed with the US Securities and Exchange Commission.
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