Anacor greenshoe exercised, lifts 2% convertibles to $287.5 million

By Marisa Wong

Morgantown, W.Va., April 6 – Anacor Pharmaceuticals Inc. issued a total of $287.5 million of 2% convertible senior notes due 2023 on Wednesday. The total issue amount includes $37.5 million from a fully exercised greenshoe, according to an 8-K filing with the Securities and Exchange Commission.

Anacor priced $250 million of the seven-year convertibles after the market close on March 31 to yield 2% with a 32.5% initial conversion.

The deal came at the mid-point of talk, which had been set at a yield of 1.75% to 2.25% and an initial conversion premium of 30% to 35%.

The Rule 144A deal was sold via bookrunners Goldman Sachs & Co. and Citigroup Global Markets Inc.

The notes are non-callable for life and have no puts.

In connection with the pricing of the notes, Anacor entered into capped call transactions with Citigroup and Goldman. Following the full exercise of the over-allotment option, the company entered into additional capped call transactions. These transactions raise the effective conversion premium from Anacor’s perspective to 50%. The capped call transactions will reduce the potential dilution to Anacor’s common stock and offset cash payments that Anacor will be required to make in excess of the principal amount.

Proceeds from the offering will be used to fund the net cost of the capped call transactions and for general corporate purposes.

The notes have full dividend protection and protection for investors upon a change of control.

Anacor is a Palo Alto, Calif.-based biopharmaceutical company.

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