Navistar International Corp. has priced $190 million of new senior convertible bonds to be sold in a private placement.

Of the net proceeds, $100 million will be used to repay the aggregate principal amount of existing 7.0% senior notes due Feb. 1, 2003. The remaining funds will be used to repay other existing debt. The bonds will be sold in a private placement and priced to yield 2.5% with a conversion premium of 30.0% on a closing price of $26.70.
The securities offered will not be or have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
Simultaneous with the issuance of the convertible bonds, Navistar will enter into two derivative contracts, the consequences of which will allow the company to eliminate share dilution associated with the convertible debt from the conversion price of the bond up to a 100% premium over the share price at issuance. The maturity and terms of the derivatives match the maturity of the convertible bonds. These contracts are not expected to affect earnings per share.
In connection with this arrangement, the seller of the derivative has informed Navistar that it intends to purchase Navistar common shares in open-market transactions upon completion of the distribution of the convertible bonds.