UPDATE 1-Student Transportation to raise C$45 mln in bought deal

* Says to sell 7.5 pct convertible debentures due 2014

* Syndicate of underwriters led by BMO Capital Markets

* Debentures will bear interset of 7.5 pct/annum

Oct 5 (Reuters) - Student Transportation of America (STB.TO) said it would raise C$45 million ($41.98 million) by selling debentures on a bought deal basis, and would use the proceeds to redeem its 14 percent subordinated notes.

The school bus transportation services provider said it has agreed to sell 7.5 percent convertible unsecured subordinated debentures due Oct. 31, 2014 to a syndicate of underwriters led by BMO Capital Markets.

The debentures will bear interest of 7.5 percent per annum payable semi-annually, and will be convertible at the option of the holder into common shares of the company at a conversion price of C$5.15 a share, the company said in a statement.

The underwriters will have an over-allotment option to purchase up to an additional C$6.75 million of debentures at the same offer price.

Shares of the Toronto-based company closed at C$4.14 Monday on the Toronto Stock Exchange.

($1=1.072 Canadian Dollar) (Reporting by Koustav Samanta in Bangalore; Editing by Pradeep Kurup)