Pivot Technology plans exchange offer for series A preferred shares

By Toni Weeks

San Luis Obispo, Calif., Nov. 21 - Pivot Technology Solutions, Inc. said it has received approval from its board to proceed with an exchange offer for the company's series A preferred shares.

According to a press release, holders will be invited to exchange their series A preferreds for subordinated redeemable notes. Up to a maximum of one-third of the outstanding notes may then be exchanged into common shares at C$0.40 per share. This cap limits the maximum number of commons shares that can be issued to 29,560,667, the release said.

The notes will be issued by subsidiary ACS Acquisition Holdings, Inc. and guaranteed by Pivot Technology, according to the release. They will have a four-year term and a coupon of 8%. The notes will be mandatorily redeemable at quarterly intervals over the four years and may be redeemed at the option of the company after two years at 110% of par and after three years at 105% of par.

The company said that $35.5 million principal amount of notes will be issued if all series A preferred shares are tendered for exchange. Preferred shares not tendered for exchange will be converted into common shares on a one-for-one basis. Upon issuance of the notes, the stated amount of the preferred shares will be largely reclassified from shareholder's equity on the company's balance sheet, the release noted.

Commenting on the benefits of the exchange offer, chief executive officer Warren Barnes stated: "It will create more visibility on our capital structure and, depending on the level of participation, could reduce potential dilution by as much as two-thirds.

"Secondly, it provides holders of the preferred shares [...] with an instrument that allows them to participate as shareholders in the future of the company, while at the same time providing a definitive path to liquidity," he added.

The terms and conditions of the exchange offer will be mailed to holders of series A preferreds, the release said.

Carlsbad, Calif.-based Pivot Technology designs, builds, implements and maintains IT services.

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