Connetics extends, ups payment in consent solicitation for 2%, 2.25% convertibles

By Jennifer Chiou

New York, July 19 - Connetics Corp. announced the extension of its consent solicitation for its 2.25% convertible senior notes due May 30, 2008 and its 2.00% convertible senior notes due March 30, 2015 and higher payments to investors.

The deadline is now 5 p.m. ET on July 21, pushed back from 5 p.m. ET on July 19. The solicitation began on July 10.

The proposed amendments to the note indentures provide the company with additional time to comply with financial reporting requirements.

For each $1,000 principal amount, Connetics said it will now pay $15.00, up from $2.50, for the 2.25% notes and an unchanged $10.00 for 2.00% notes.

If the company has not filed an amendment to its 2005 10-K and 10-Q for the quarter ended March 31 by the close of business on July 29, Connetics said it will pay an additional $35.00, instead of $10.00, for the 2.25% notes.

If the company has not filed an amendment to its 2005 10-K and 10-Q for the quarter ended March 31 by the close of business on July 25, Connetics said it will pay an additional $30.00 for the 2.00% notes.

In addition, Connetics will pay an additional 4.75%, instead of 2.50%, per year in special interest on the 2.25% notes and an additional 4.5%, augmented from 3.00%, per year in special interest on the 2.00% notes from execution of the supplemental indenture to the date on which it files an amendment to its 10-K for 2005 and required quarterly reports.

The company is seeking amendments from a majority of noteholders.

On May 3, the company announced that its rebate reserves as of the end of 2005 were understated, adding that it would restate certain historical financial statements.

On May 30, Connetics received a notice of default from holders of more than 25% of the 2.25% notes and for the 2.00% notes on May 26 due to its failure to file its 10-Q for the quarter ended March 31 by the filing deadline.

If the proposed amendments are approved, Connetics will not be obligated to provide financial reports under the indentures as long as notes are accruing the special additional interest and the company will not be required to file any additional reports or information for any period ended on or prior to Dec. 31, 2005.

Goldman, Sachs & Co. is the solicitation agent (800 828-3182 or call collect 212 357-7867) and Global Bondholder Service Corp. is the information agent and depositary (866 873-6300 or call collect 212 430-3774).

The specialty pharmaceutical company, based in Palo Alto, Calif., is focused on dermatology products.

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