Spacehab exchanges $52.944 million 8% convertibles

New York, Nov. 17 - Spacehab, Inc. said it completed its exchange for its $63.25 million of 8% convertible subordinated notes due 2007, receiving tenders of $52.944 million or 83.7% of the securities.

The company issued new 5.5% senior convertible notes due 2010 to investors who participated.

Following the transaction, Spacehab has $10.306 million of the old convertibles still outstanding.

The offer ended at 5 p.m. ET on Nov. 16.

On Oct. 20, Spacehab extended the exchange from its previous expiration date of 5 p.m. ET on Nov. 10 and amended it to make the new convertibles more attractive and reduce the level of participation required to $50.6 million from $60.0875 previously.

Under the revised terms, the new notes will convert into stock at $1.50 per share instead of a range of $2.12 to $2.50 as originally proposed. They will automatically exchange if Spacehab's stock trades above $1.95 for 20 consecutive trading days, down from a hurdle of $3.25 previously.

The old notes are convertible at $13.625. Spacehab stock closed at $0.77 Wednesday.

The company also has added a covenant to the new notes restricting the sale of or placement of liens upon Astrotech Space Operations, Inc., Astrotech Florida Holdings, Inc. and their respective assets.

At the close of business Oct. 19, Spacehab had received tenders of $43.656 million of the existing convertibles.

At its previous announcement Oct. 10, Spacehab extended the expiration to 5 p.m. ET on Nov. 10 from the original 5 p.m. ET on Oct. 7. As of the close of business Oct. 7, holders had tendered $43.696 million of the convertibles.

Spacehab announced on Sept. 6 it had begun the exchange.

The new notes it is offering rank higher in the capital structure, pay a lower coupon, mature later and have a lower conversion price than the existing notes.

Spacehab is making the exchange in order to increase its liquidity since it does not expect to be able to pay the principal due in 2007 on the existing notes, the company previously said in an S-4 filing with the Securities and Exchange Commission.

The exchange will reduce interest expense and extend the maturity of the notes. Other terms, including the conversion price, will be modified "so that they more closely resemble current market terms for convertible notes."

As announced earlier, the new notes will mature Oct. 15, 2010 and will have a conversion price starting at $2.12, rising to $2.19 on April 15, 2006, $2.25 on Oct. 15, 2006, $2.32 on April 15, 2007, $2.38 on Oct. 15, 2007, $2.44 on April 15, 2008 and $2.50 from Oct. 15, 2008 onwards. The conversion level now has been amended.

The new notes will be callable with a make-whole premium before 2008 and at par plus accrued interest after that.

The notes will be exchanged on a one-for-one basis.

Spacehab also is soliciting consents to amend the indenture of the old convertibles. Holders who tender before the consent deadline will be obliged to agree to the amendments and consents cannot be given without tendering.

SMH Capital Advisors Inc., the adviser to holders of $40.259 million of the outstanding convertibles, has said it will tender the securities, Spacehab previously said.

Jefferies & Co., Inc. and Sanders Morris Harris Inc. are dealer managers and solicitation agents.

Spacehab is a Webster, Texas, provider of space services.

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