Intevac says 97% of convertibles tendered in exchange

New York, July 10 - Intevac, Inc. said 97% of its 6½% convertible subordinated notes due 2004 were tendered in its exchange offer after the company sweetened the terms twice.

The Santa Clara, Calif. electro-optical device company said in total $36.3 million of the old securities were tendered in the offer, which expired July 9.

Intevac will issue $29.6 million principal of new 6½% convertible subordinated notes and pay $6.7 million in cash to investors in exchange for their old securities. It will also pay accrued interest.

After closing of the transaction, $1.3 million of the old convertibles will remain outstanding.

Intevac twice improved the terms it was offering securities holders after failing to meet the threshold it set to complete the offer.

In the final version, the company offered $815 of new 6½% convertible subordinated notes due 2009 convertible at $7.00 per share plus $185 in cash for each $1,000 principal amount of the existing notes.

Previously Intevac had been offering $1,000 principal amount of new 6½% convertible subordinated notes due March 1, 2009 convertible at $8.00 per share and no cash for each $1,000 principal amount of the existing notes.

The new convertibles will be callable from March 1, 2005 onwards.

The exchange was conditional on at least $30 million principal amount of the existing notes being tendered. Management has agreed to tender the $2.52 million of existing notes it holds.

Under the first version of the offer, Intevac had been offering $2,000 in cash, 250 warrants to buy one share each at $7.50 until March 1, 2006, and $1,000 principal amount of new 6½% convertible subordinated notes due 2009, convertible at $10.00 per share for each $5,000 principal amount of the existing notes.

The offer also attracted tenders of $4.5 million of its convertibles.

When it originally announced the exchange, Intevac said the transaction is intended to refinance its outstanding debt, reducing the principal amount and extending the time to repay its borrowings.

Intevac has $37.5 million of the notes outstanding and they require principal and interest payments through maturity on March 1, 2004 "significantly in excess" of its $14.5 million in cash, equivalents and short-term investment as of March 30, the company said in a filing with the Securities and Exchange Commission at the time.

"We do not expect that we will be able to generate sufficient additional funds from operations to repay the existing notes at maturity," the filing added.

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