American Business Financial offers convertible preferreds, notes for investment notes

New York, May 14 - American Business Financial Services, Inc. said it is offering senior collateralized subordinated notes and 10.0% series A convertible preferred stock in exchange for up to $120 million of its outstanding investment notes.

For each $1,000 principal amount of the investment notes, American Business Financial is offering either $500 principal amount of the senior collateralized subordinated notes and 500 shares of the series A convertible preferreds or 1,000 shares of the series A convertible preferreds.

For the new senior collateralized subordinated notes, the maturity will be same as the investment notes for which they are exchanged. If more than three years remains, holders can choose to cut the remaining term to three years. Interest on the new notes will be 10 basis points higher than the old notes. The new notes will be callable after one year at par.

The new convertible preferreds will have a $1.00 per share liquidation preference and be callable at par after two years. They will convert into $1.20 plus accrued dividends of stock in year two and $1.30 plus accrued dividends of stock in year three onwards subject to a minimum stock price of $5.00.

The offer runs through 5 p.m. ET on June 30.

The company is acting as exchange agent for the offer.

The Philadelphia sub-prime home equity lender and business loan servicer said it is carrying out the exchange to increase its stockholders' equity and reduce its debt. These actions will in turn assist in achieving compliance with financial covenants in its credit facilities and some servicing agreements, complying with Nasdaq's continued listing standards which require at least $100 million of stockholders' equity, and enhance the company's ability to implement its adjusted business strategy and obtain additional financing.

American Business Financial previously exchanged $117.2 million of its outstanding subordinated debentures for 61.8 million shares of the convertible preferreds and $55.4 million of senior collateralized subordinated notes in an offer begun in December 2003.

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