Human Genome sets 'increase period' for conversion of 3% notes

By Toni Weeks

San Diego, Sept. 7 - Human Genome Sciences, Inc. holders may convert their 3% convertible senior notes due 2018 during an "increase period," according to a 6-K filing with the Securities and Exchange Commission.

The increase period will begin on Sept. 24 and end at 5 p.m. ET on Oct. 23.

Any holders who convert their notes during the increase period will qualify for a conversion rate of 87.1211 shares, up from the otherwise applicable rate of 75.0469 shares, per $1,000 principal amount. The increased rate correlates to a payment of $1,241.475675 per $1,000 principal amount of notes converted, which will be paid in cash.

The notes are not currently convertible and will not be prior to the increase period.

Following the increase period, the notes will not be convertible unless the conditions to conversion detailed in the indenture governing the notes are met, at which time the temporary increase in the conversion rate will not apply, and the conversion price will be $1,069.418325 in cash per $1,000 principal amount of notes. The notes may not again be convertible before Aug. 15, 2018, the filing noted.

As previously reported, a temporary bump in the conversion rate began July 30 and ended at 5 p.m. ET on Sept. 5.

The bump was a result of GlaxoSmithKline plc's acquiring all outstanding shares of Human Genome through a tender offer and subsequent merger. GlaxoSmithKline purchased about 83% of the company's shares through a tender offer on July 30, paying $14.25 per share, or about $2.26 billion in total.

A subsequent offer for the remaining untendered shares ended at 5 p.m. ET on Aug. 2. The acquisition constituted a make-whole fundamental change requiring the conversion rate bump to 87.1211 shares per $1,000 principal amount. This is the same conversion rate as that applicable to the upcoming increase period.

Also as a result of the fundamental change, the 3% notes were putable at par plus accrued interest until 5 p.m. ET on Sept. 4 at a put price of about $1,009.25 per $1,000 principal amount, including accrued interest of about $9.25. Because the purchase price for the put option was lower than the amount of cash payable upon conversion of the notes, the company did not expect holders to participate in the offer.

Human Genome is a biopharmaceutical company based in Rockville, Md. GlaxoSmithKline is a health-care and pharmaceutical company based in Brentford, England.

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