Counsel tender ends unsuccessfully, to repay convertibles with stock

New York, Oct. 31 - Counsel Corp. said its tender offer for its 6% convertible unsecured subordinated debentures due Oct. 31, 2003 expired without meeting the minimum threshold for the transaction to be completed.

As a result, holders will receive 690 common shares of Counsel stock per US$1,000 principal amount of the convertibles at their maturity on Oct. 31.

In total, Counsel will issue 28 million shares.

Counsel had been offering to buy the convertibles for cash at the rate of US$750 per US$1,000 principal amount.

But the Toronto communications and real estate company said that the requirement that at least 45% of the convertibles be tendered was not met.

Counsel had previously announced it would use its option to repay the convertibles at maturity in stock.

Counsel had previously amended the tender offer on Sept. 9, changing the amount it is offering to all cash instead of a combination of cash, new notes and warrants.

Previously Counsel had been offering US$750 made up of US$187.50 in cash with the remainder in 8% unsecured notes due Oct. 31, 2006 plus 100 common share purchase warrants.

The new offer represents a 25% premium over the closing price of the convertibles on Sept. 8, Counsel noted.

The company has US$40.861 million of the securities outstanding.

Counsel said the offer is intended to provide holders with an alternative to receiving common shares at maturity. Under the existing terms of the securities, the company has the option to satisfy its obligation to pay principal upon redemption or at maturity by the issuance of common shares.

Counsel said it has arranged US$30 million of third-party financing at 8% for a three-year term to fund the offer. It will also issue to the lender up to 10 million common share purchase warrants with an exercise price of C$2.50 per share, expiring three years from the date of funding. The warrants are subject to the approval of shareholders and regulators.

"Even though we believe the offer was fair to debentureholders, the low response rate indicates that most debentureholders wanted to become shareholders rather than accept cash. We view this as a vote of confidence in the value of the company and its prospects," said Allan Silber, chairman and chief executive officer of Counsel , in a news release.

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