Emcore plans exchange for 5% convertibles

New York, Jan. 1 - Emcore Corp. said it plans an exchange offer in which it will offer new convertibles with a longer maturity and stock for its existing 5% convertible subordinated notes due 2006.

The Somerset, N.J., maker of compound semiconductor-based products said the transaction is intended to cut its debt by up to $72.88 million and reduce its annual interest expense by $3.64 million.

Under the proposed exchange, Emcore will offer up to $88.96 million of new 5% convertible senior subordinated notes due 2011 and $56.62 million of common stock up to 10.54 million shares.

For each $1,000 principal amount of existing convertibles tendered, holders will receive $550 principal amount of the new convertibles and $350 in Emcore stock. If the company's stock price is below $5.37 per share, holders will receive 65.18 shares. Emcore stock closed at $5.369 on Dec. 24.

The new notes will have a conversion price of $8.06 per share. The existing notes convert at $48.76.

Emcore had $161.8 million of the old convertibles outstanding as of Sept. 30, according to a filing with the Securities and Exchange Commission. In the filing, the company described the convertibles as being a "significant amount of debt" that could, among other things, make it difficult for Emcore to make payments on the notes and any other debt, make obtaining future financing difficult, reduce cash flow available for other purposes, limit Emcore's flexibility in planning for or reacting to changes in its business and make the company more vulnerable in the event of a further or continued downturn in its business.

Emcore said in has filed a registration statement for the exchange with the Securities and Exchange Commission but it has not yet become effective.

CIBC World Markets is the dealer manager for the exchange.

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