Alliance Data Systems in $345 Million Convertible Note Offering and Related Hedge, Warrant and Prepaid Forward Transactions

Cleary Gottlieb represented the initial purchasers, led by Merrill, Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities Inc. and Barclays Capital Inc., in a $345 million Rule 144A offering by Alliance Data Systems Corporation (ADS) of 4.75% convertible senior notes due 2014, including exercise in full of the related over-allotment option. Cleary Gottlieb also represented affiliates of certain initial purchasers as counterparties to ADS in convertible note hedge transactions, warrant transactions and prepaid forward transactions. The note offering and the related transactions closed on June 2 and the related over-allotment option closed on June 9.

The hedge and warrant transactions that ADS entered into will have the effect of increasing the notes’ effective conversion price to ADS and reducing the potential dilution from conversion.

Under the prepaid forward transactions, ADS repurchased shares of its common stock for expected delivery over a specified settlement period in 2014. For accounting purposes, ADS will treat the shares to be purchased under the prepaid forward transactions as retired as of the prepaid forward transactions’ effective date. Those shares will, however, remain outstanding for corporate law purposes, including for purposes of any future stockholder votes, until they are delivered to ADS.

ADS is a leading provider of marketing, loyalty and transaction services, primarily within the credit card industry.