Hutchinson Technology begins exchange offer for 3.25% convertibles

By Angela McDaniels

Tacoma, Wash., May 6 - Hutchinson Technology Inc. began an exchange offer for its $122,206,000 of outstanding 3.25% convertible subordinated notes due 2026, according to a company news release.

For each $1,000 principal amount of 3.25% convertibles, holders will receive $985 principal amount of 8.5% convertible senior notes due 2026.

Tendering holders will not receive any net cash for accrued interest on their 3.25% convertibles. They will receive, however, interest on the 8.5% convertibles from Feb. 11 when the initial coupon payment is made on July 15.

The exchange offer will expire at 5 p.m. ET on June 21.

The offer is subject to a minimum of $40 million principal amount of 3.25% convertibles being tendered and not withdrawn and shareholder approval of the issuance of the 8.5% convertibles.

New convertibles

The 8.5% convertibles will be substantially identical to the 8.5% convertibles issued in an exchange offer for the 3.25% convertibles that settled on Feb. 11. In that offer, holders could elect to receive $1,000 principal amount of the new 8.5% convertibles, a cash payment of $850 or a combination of the first two options.

The conversion ratio of the 8.5% convertibles is 116.2790 shares of common stock for each $1,000 principal amount, compared with 27.4499 shares for the 3.25% convertibles.

The conversion price of the 8.5% convertibles is $8.60 per share, compared with the 3.25% convertibles' conversion price of $36.43 and the company's closing share price of $2.46 (Nasdaq: HTCH) on May 5.

The 8.5% convertibles will not be callable prior to Jan. 15, 2015, except that beginning Jan. 15, 2013, they are callable if the closing price of the company's common stock is 150% or more of the conversion price for at least 20 trading days. The 3.25% convertibles became callable on Jan. 21.

The 8.5% convertibles are putable on Jan. 15, 2015, Jan. 15, 2016 and Jan. 15, 2021, compared with Jan. 15, 2013, Jan. 15, 2016 and Jan. 15, 2021 for the 3.25% convertibles.

The company said that subject to the satisfaction of some limited conditions, holders are able to convert their 8.5% convertibles at any time. In comparison, the 3.25% convertibles can only be converted under certain circumstances and then only at prescribed times.

Any conversion of the 8.5% convertibles will be settled in shares. When converted, the 3.25% convertibles are settled in an amount of cash equal to the lesser of the conversion value of the converted notes and the principal amount of the converted notes plus a number of shares representing the conversion value in excess of the principal amount, if any.

The company said the purpose of the exchange offer is to improve its financial flexibility by extending the first put option date of the convertibles and to reduce its overall debt.

The dealer manager is Citadel Securities, LLC (877 660-1735). The exchange and information agent is Global Bondholder Services Corp. (212 430-3774 for banks and brokers, others call 866 807-2200).

Hutchinson Technology makes suspension assemblies for disk drives and is based in Hutchinson, Minn.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.