BorgWarner Prices $374M Convertible Notes

BorgWarner Inc. (NYSE: BWA - News), a global supplier of highly engineered automotive systems and components, primarily for powertrain applications, today announced that it has completed its previously announced public offering of 3.50% convertible senior notes due 2012 (the "notes"). The Company also announced that the underwriters fully exercised their option to purchase additional notes to cover over-allotments, resulting in a total sale of $373.75 million in aggregate principal amount of notes.

BorgWarner estimates that the net proceeds of this offering will be approximately $362.2 million (including the exercise in full of the underwriters' over-allotment option), after deducting discounts and commissions and estimated expenses.

BorgWarner intends to use approximately $25.2 million of the net proceeds of this offering to pay the net cost of the convertible note hedge and warrant transactions described below (which amount represents the cost of the convertible note hedge transactions, partially offset by the proceeds of the warrant transactions). BorgWarner expects to use the remaining proceeds for general corporate purposes, including the repayment of short-term indebtedness.

In connection with the offering of the notes (including the exercise in full of the underwriters' over-allotment option), BorgWarner entered into convertible note hedge transactions with counterparties that are affiliates of the representatives of the underwriters of the notes. The convertible note hedge transactions are expected to reduce the potential dilution to

BorgWarner's common stock upon conversion of the notes. BorgWarner also entered into warrant transactions with the counterparties. However, the warrant transactions could separately have a dilutive effect to the extent that the volume-weighted price per share of BorgWarner's common stock exceeds the applicable strike price of the warrants.

Morgan Stanley, Merrill Lynch & Co., Citi and Deutsche Bank acted as joint book-running managers in connection with the offering.