IGT gets $100 million more than it sought

Your life should work this way: Reno's International Game Technology went to the financial markets last month with the thought of borrowing $400 million on very attractive terms.

Investors like IGT so much that the company came away with an additional $100 million, and probably could have raised somewhere close to $1 billion if it wanted.

It was all a matter of being in the right place at the right time with the right kind of offering, said Bob McIver, who handles investor relations for IGT.

On Jan.

23, a press release from the maker of gaming machines announced that it planned to raise $400 million from the sale of zero-coupon debentures to an institutional investor.

The debentures would be convertible into shares of the company's common stock, which last week crossed the $80 mark compared with its 52-week low of $47.75.

The next day, IGT said the offering was so well-liked that it was able to raise $500 million, and the unnamed institutional buyer a few days later exercised right to purchase $75 million more.

McIver said IGT became interested in a debenture convertible to common stock because the company's executives believe the stock is undervalued, even with its strong run-up during the past year.

Investment bankers, too, had watched the situation and were knocking on IGT's door for months in hopes of underwriting an issue of bonds that could be converted into stock.

Just as IGT and its underwriter, Goldman Sachs, were putting finishing touches on the offering, Moody's Investor Service raised its rating on the company's debt.

The combination of a strong stock and better credit rating was explosive.

"When Goldman went to test the water, they discovered there was demand for a billion dollars worth," McIver said.

The terms were so attractive the company would pay 1.75 percent interest on a bond held to maturity that the company decided to raise more money that it had planned.

So what do you do with an additional $100 million? That's not the right question, said McIver.

"You borrow money when it's most attractive, not when you need it," he said.

"When you need it, it's usually not attractive." The company said it will repurchase $137 million worth of its common shares with part of the money it borrowed.

That dampens the effect on the company's stock that occurs when holders of convertible debentures decide to swap their bonds for common stock.

One possible use of another chunk of the money, McIver said, is retirement of debt paying 8.375 percent interest.

The effects of replacing that debt with the new offering pegged at 1.75 percent would be immediate.

"That's going to drop our interest expense like a stone," McIver said.