Connetics receives consents to amend 2.25% convertibles but not for 2% convertibles

New York, July 21 - Connetics Corp. said it received the necessary consents to amend its 2.25% convertible senior notes due May 30, 2008 but not its 2.00% convertible senior notes due March 30, 2015.

The company said that if it does not file its quarterly report for the quarter ended March 31, 2006 by the close of business on July 25, holders of at least 25% of the notes or the trustee can accelerate the notes.

If that happens, Connetics said it has enough cash and short-term investments to repay the 2% convertibles.

For the 2.25% convertibles, Connetics has entered into a supplemental indenture.

The consent solicitation expired at 5 p.m. ET on July 21 after being pushed back from 5 p.m. ET on July 19. The solicitation began on July 10.

As previously announced, the amendments to the note indentures provide the company with additional time to comply with financial reporting requirements.

For each $1,000 principal amount of the 2.25% convertibles for which consent was given, Connetics will pay $15.00 - a sum increased on July 19 from $2.50. It had been offering $10.00 for the 2% notes, a figure left unchanged on July 19.

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 for the 2.25% notes, a sum increased from the original $10.00.

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% per year in special interest on the 2.25% 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 extra interest was increased from 2.5% on July 19. Connetics had been offering 4.5%, increased from 3% for the 2% notes.

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.

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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