June 1, 2009 / 11:50 AM / in 8 years

UPDATE 2-Goldcorp plans $750 mln note offering, shares drop

* Plan private offering of convertible senior notes

* Offering will be worth about $750 mln

* Stock drops 5 percent (Adds comment, details. Figures in U.S. dollars, unless noted)

TORONTO, June 1 (Reuters) - Goldcorp Inc (G.TO) (GG.N) said on Monday it will offer about $750 million of convertible senior notes due 2014, sparking a 5 percent drop in its shares as investors worried about potential equity dilution if the notes are eventually converted into stock.

Goldcorp, the world's No. 2 gold miner by market capitalization, said it plans to use the proceeds from the offering to repay outstanding debt under its revolving term credit facility, as well as for general corporate purposes, including capital expenditures.

Goldcorp Chief Executive Chuck Jeannes has said in recent presentations and interviews that the company would not follow the lead of other gold miners who have taken advantage of strong gold prices in recent months to issue equity.

Convertible notes are debt that can eventually be converted to shares, although Goldcorp said in a statement it would also reserve the right to pay cash for the notes.

Upon conversion, "Goldcorp may, in lieu of delivery of its common shares, elect to pay or deliver, as the case may be, cash or a combination of cash and common shares, in respect of the converted notes," it said.

It also said the holder's right to convert the debt to equity will be contingent on certain events, including the company's stock trading at a premium to the conversion price, which has not been set.

Goldcorp's stock plunged C$2.20 to C$40.95 on the Toronto Stock Exchange, underperforming a 2.6 percent drop in the TSX global gold index.

"The CEO's of gold companies have unfortunately all become serial diluters," said John Ing, president of Toronto investment dealer Maison Placements.

"They issue a lot of stock and it puts a cap on the stock, which is what's happened in this case."

$1=$1.09 Canadian Reporting by Cameron French and Euan Rocha; Editing by Frank McGurty

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