American Greetings receives 91% of 7% convertibles during exchange offer

By Angela McDaniels

Seattle, May 26 - American Greetings Corp. said holders of $159.1 million, or 91%, of the $175 million outstanding of its 7% convertible subordinated notes due July 15, 2006 tendered their notes for exchange during an exchange offer that expired on Thursday.

Noteholders who exchanged will receive a $5.00 fee for each $1,000 principal amount of notes exchanged and new 7% convertible subordinated notes due July 15, 2006 with identical terms, except that the new notes include a net share settlement feature that will require the company to pay par in cash upon conversion and, if there is additional value, class A common shares.

The old notes are convertible into class A common shares only.

The net share settlement modification is one component of the Cleveland-based greeting card company's plan to change its capital structure, the collective result of which will be $1 billion of new or amended financial facilities.

American Greetings said the net share settlement will improve its capital structure by limiting the additional amount of common shares that will be issued upon conversion of the convertibles. Had all of the convertibles been exchanged, the dilution associated with the conversion would have decreased by roughly 8 million shares.

Global Bondholder Services Corp. (212 430-3774 for banks and brokers, otherwise 866 795-2200) was information agent for the exchange offer.

American Greetings announced the offer on April 6, which was extended from May 12 after holders tendered only 47% of the convertibles. The company also raised the fee to $5.00 from $3.75.

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