Bell Microproducts cancels tender offer for 3.75% convertibles

By Angela McDaniels

Seattle, Jan. 19 - Bell Microproducts Inc. terminated its tender offer to purchase its $109.85 million outstanding 3.75% convertible subordinated notes due 2024, series B, at par plus accrued interest, according to a company news release.

The company said that after evaluating available options, it determined the termination was the "most prudent course of action." All notes tendered during the offer, which began on Dec. 13 and ended on Thursday, will be returned.

Bell Microproducts began a consent solicitation on Dec. 7 to waive any default or event of default relating to reporting requirements in the note indenture and received consents from holders of $109.475 million of the notes by Dec. 14, the consent deadline.

Under the terms of the offer, if Bell Microproducts received the required consents - as it did - but failed to complete an eligible tender offer, it is required to make a one-time special interest payment equal to 8.5% of the outstanding principal amount of notes.

Bell Microproducts believes it has access to sufficient resources to fund the special interest payment and its working capital requirements, according to the release.

In exchange for the special interest payment and an initial consent fee equal to 0.50% of the principal amount of the notes, the company said it received a permanent waiver of the Securities and Exchange periodic reporting covenants and obligation to deliver such periodic reports to the trustee under the indenture.

The company began the consent solicitation due to its delay in filing its 10-Q quarterly report for the period ended Sept. 30 with the SEC. Bell Microproducts plans to file an amended 10-K report for the year ended Dec. 31, 2005 and amended 10-Q reports for the quarters ended March 31, 2006 and June 30, 2006. Results are being restated due to accounting errors.

Credit Suisse Securities (USA) LLC was the dealer manager (800 820-1653 or 212 325 7596) and solicitation agent (212 538-3953), and Global Bondholder Services Corp. was information agent for the consent solicitation (866 736-2200 or 212 430-3774).

San Jose, Calif.-based Bell Microproducts is a distributor of high-tech products.

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