Alliance Data Systems Corp. plans to offer up to $700 million of convertible bonds and use $300 million of the proceeds to buy back stock.

In certain periods and circumstances the five-year bonds would be convertible to cash, common shares, or some combination of the two, Alliance Data said Wednesday. Holders would have the right to make the Dallas company buy the bonds back if certain events occurred.

The bonds' interest and conversion rates have yet to be determined.

Alliance Data would use $105 million of the proceeds to enter hedge transactions with some bond buyers, who would get warrants to buy stock at a 75% premium on their market price.

The remaining proceeds would be used to repay two of Alliance Data's credit lines. If there are any overallotments, bondholders would have the option to buy another $105 million of convertibles.

Alliance Data issues private-label credit cards and runs marketing and loyalty programs for merchants. On Monday the San Francisco hedge fund ValuAct disclosed that it had increased its stake in Alliance Data to 5.9%, from about 2.3% on March 31.

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