Alliance One (AOI) to Offer $600M of Senior Notes, $100M Convertible Senior Subordinated Notes

June 22, 2009 4:20 PM EDT

Alliance One International, Inc. (NYSE: AOI) today announced its intention to offer, subject to market and other conditions, $600 million in aggregate principal amount of its Senior Notes due 2016 and $100 million in aggregate principal amount of its Convertible Senior Subordinated Notes due 2014 to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, and, in the case of the Senior Notes only, to persons in offshore transactions in reliance on Regulation S under the Securities Act.

Alliance One expects to grant the initial purchasers of its Convertible Notes a 13-day option to purchase up to $15 million principal amount of additional Convertible Notes. The Convertible Notes will be convertible at the option of the holders into shares of Alliance One common stock.

Alliance One intends to use a portion of the net proceeds of these offerings to fund the purchase price of its 11% senior notes due 2012, 8-1/2% senior notes due 2012, 12-3/4% senior subordinated notes due 2012, 9-5/8% senior notes due 2011, 7-3/4% senior notes due 2013 and 8% senior notes due 2012 that are tendered and accepted by the Company for purchase in its offer to purchase for cash any and all of the outstanding Existing Notes, which Alliance One commenced on June 9, 2009, including the payment of accrued interest and any applicable early tender payments and early consent payments. The Offer is conditioned upon, among other things, the successful completion of these offerings.

In order to reduce its exposure to the potential dilution with respect to its common stock upon conversion of the Convertible Notes, Alliance One intends to use a portion of the net proceeds of the offering of the Convertible Notes to enter into one or more convertible note hedge transactions with one or more of the initial purchasers of the Convertible Notes or their respective affiliates. Alliance One also expects to enter into separate warrant transactions with the hedge counterparties, which would result in additional proceeds to Alliance One.

The Company intends to apply the remaining net proceeds of these offerings to repay outstanding borrowings under its $305 million senior secured credit facility, as well as for other general corporate purposes, which may include retiring any Existing Notes not purchased in the Offer.

In connection with the convertible note hedge and warrant transactions, the hedge counterparties or their affiliates may enter into various derivative transactions with respect to Alliance One's common stock concurrently with or shortly after the pricing of the Convertible Notes. These transactions could have the effect of increasing or preventing a decline in the price of the Company's common stock concurrently with or following the pricing of the Convertible Notes. In addition, the hedge counterparties or their affiliates may from time to time, after the pricing of the Convertible Notes, modify their respective hedge positions by entering into or unwinding various derivative transactions with respect to Alliance One's common stock or by purchasing or selling Alliance One's common stock in secondary market transactions during the term of the Convertible Notes (and are likely to do so during the six-month period prior to the maturity of the Convertible Notes). These activities could have the effect of decreasing the price of Alliance One's common stock and could adversely affect the price of the Convertible Notes.

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