Vornado estimates that the aggregate net proceeds from the offering, after subtracting the underwriters' discounts and expenses, will be in the $490-million range. According to a statement issued by the REIT, the net proceeds from the offering will be used "for working capital and other corporate purposes."
Citigroup Global Markets is underwriting the offering. Citigroup Global also has a 30-day option to buy up to an additional $75 million of debentures to cover over-allotments.According to the terms of the offering, the debentures are exchangeable, under certain circumstances, for common shares of Vornado Realty Trust stock at an initial exchange rate of 10.9589 common shares per $1,000 of principal amount of debentures. The initial exchange price of $91.25 amounts to a premium of 30% of yesterday's closing price of $70.25 for Vornado's common shares.
Vornado Realty LP may also elect to settle any exchange right in cash. The debentures permit Vornado to increase its common dividend up to 5% per year without an increase in the exchange rate.
Also, the debentures are redeemable at Vornado Realty LP's option beginning in 2012 for the principal amount plus any accrued and unpaid interest. Holders of the debentures have the right to require Vornado to repurchase their debentures in 2012, 2015 and 2020, as well as in the event of a change in control of the company.
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