WARRENVILLE, Ill. -- Navistar International has announced plans to issue, subject to market conditions, $1 billion of senior notes due 2021 and $500 million of senior subordinated convertible notes due 2014.

The net proceeds will be used to repay in full amounts outstanding under its $1.1 billion term loan and $400 million synthetic revolver senior unsecured credit facilities, which expire in January 2012, as well as other general corporate purposes. In connection with the convertible notes offering, Navistar will grant the underwriters an over-allotment option to purchase an additional $75 million of convertible notes.

Also in connection with the convertible notes offering, Navistar may enter into convertible note hedge transactions with one or more affiliates of the underwriters (the hedge counterparties) and may also enter into warrant transactions with the hedge counterparties. The convertible note hedge transactions would be expected to reduce the potential dilution to Navistar’s common stock upon conversion of the notes. However, prior to maturity, the warrant transactions could separately have a dilutive effect on Navistar’s earnings per share to the extent that the market value per share of Navistar’s common stock exceeds the applicable strike price of the warrants.

The senior notes offering is being led by Credit Suisse, and the convertible notes offering is being led by J.P. Morgan. These notes will be offered and sold under the company's shelf registration statement filed with the Securities and Exchange Commission on Oct. 20, which was effective upon filing.