Network Equipment offers to buy 3.75% convertibles after Sonus deal; notes also convertible

By Susanna Moon

Chicago, Aug. 27 - Network Equipment Technologies, Inc. said it is offering to purchase its 3.75% convertible senior notes due 2014 after the merger with Sonus Networks, Inc. on Friday.

Because the fundamental change clause under the notes was triggered by the merger, the notes also are convertible at $99.05 in cash per $1,000 principal amount. The conversion price is based on the conversion rate of 73.3689 shares of NET common stock per $1,000 principal amount of notes.

Under the offer, the company will pay par plus accrued interest to but excluding the settlement date of Oct. 12, which works out to about $1,012.08 per $1,000 principal amount of notes tendered in the offer, including accrued interest to the purchase date.

Holders must deliver their notes by the end of the offer at 11:59 p.m. ET on Oct. 9.

U.S. Bank, NA (800 934-6802) is the paying agent.

On the merger date of Aug. 24, the company entered into a supplemental indenture to amend the notes to fix the conversion value.

As a result, the conversion value for notes that are converted after the merger is fixed at the right to receive the merger price for each share into which the holder may convert the notes, and upon conversion of notes, the company will pay the cash amount the holder would have received as the merger price had the holder converted its notes into shares just before the merger at the conversion rate then in effect, according to the company's press release.

The company announced the planned merger on Aug. 3 to holders of its 7.25% convertible subordinated debentures due 2014 and its 3.75% convertibles, saying that it agreed to be acquired by Sonus on June 18.

The conversion ratio for the 7.25% convertibles is 31.746 shares per $1,000 principal amount, which is equivalent to a conversion price of $31.50 per share. As a result, each $1,000 principal amount will be convertible into $42.86 in cash after the merger is completed.

Network Equipment's common stock closed at $1.34 (Nasdaq: NKW) on Aug. 3. The company develops and sells networking equipment optimized for real-time communications and is based in Fremont, Calif.

Sonus Networks provides infrastructure and subscriber solutions and is based in Westford, Mass.

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