Oscient holders tender $213 million 3.5% convertibles in exchange offer

By Susanna Moon

Chicago, Nov. 24 - Oscient Pharmaceuticals Corp. said holders tendered $213 million principal amount, or 94.4%, of 3.5% convertible senior notes due April 15, 2011 in the exchange offer for new 12.5% convertible senior notes due April 15, 2011 and common shares.

The offer expired at 11:59 p.m. ET on Nov. 21.

As a result of the exchange offer, the company said it will issue $85 million principal amount of 12.5% convertible guaranteed senior notes due 2011 and 21 million common shares.

The exchange offer is expected to close on Nov. 25.

Oscient previously said it would issue $400 principal amount of new 12.5% convertibles, up from $300, and common shares worth $100, down from $200.

The exchange offer is scheduled to expire at 11:59 p.m. ET on Nov. 21, pushed back from Nov. 18. It began on Oct. 21.

Oscient also said that the new notes will be guaranteed by its subsidiary, Guardian II Acquisition Corp., and that it will make upward revisions to the conversion rate adjustments payable in certain circumstances upon conversions of the new notes in connection with changes in control.

Oscient had said on Sept. 11 that the 12.5% convertibles will have a conversion price equal to 110% of the average of the stock's daily volume-weighted average price for the five trading days prior to the second business day before the exchange offer's expiration date, provided that the conversion price be at least $1.10 per share.

The company previously noted that the conversion price of the 3.5% convertibles is $13.50 per share. Oscient stock (Nasdaq: OSCI) closed at $1.17 on Sept. 9, at $0.80 on Oct. 20 and at $0.43 on Nov. 19.

Interest on the 12.5% convertibles will be payable in cash or in kind. Interest on the 3.5% convertibles is payable only in cash.

The 12.5% convertibles will become callable at par on Oct. 15, 2010. The 3.5% convertibles become callable at par on May 10, 2010.

Like the 3.5% convertibles, the 12.5% notes are automatically convertible by the company if the share price exceeds 130% of the conversion price for 20 or more trading days during any 30-trading-day period.

The company already said it believes the exchange offer is an important component of its plan to reduce its overall debt level and recalibrate its capital structure to better execute its business strategy.

Lazard Capital Markets LLC and MTS Securities, LLC are the dealer managers for the exchange offer, and Altman Group, Inc. (866 751-6316) is the information agent.

Oscient is a Waltham, Mass.-based pharmaceutical company.

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