Network Equipment holders tender $8.12 million 3.75% convertibles

By Susanna Moon

Chicago, Oct. 12 - Network Equipment Technologies, Inc. said investors tendered $8.12 million of its 3.75% convertible senior notes due 2014 by the end of the offer at 11:59 p.m. ET on Oct. 9 and that it will purchase the notes on Friday.

As noted, the company offered to purchase the convertibles after its merger with Sonus Networks, Inc. on Aug. 27.

Under the offer, the company paid par plus accrued interest to but excluding the settlement date, which worked out to about $1,012.08 per $1,000 principal amount of notes tendered in the offer, including accrued interest to the purchase date. The offer began on Aug. 27.

U.S. Bank, NA (800 934-6802) is the paying agent.

Because the fundamental change clause under the notes was triggered by the merger, the notes also were convertible at $99.05 in cash per $1,000 principal amount. The conversion price was based on the conversion rate of 73.3689 shares of Network Equipment common stock per $1,000 principal amount of notes.

On the merger date of Aug. 24, the company entered into a supplemental indenture to amend the notes to fix the conversion value.

As a result, the conversion value for notes that were converted after the merger was fixed at the right to receive the merger price for each share into which the holder may convert the notes, and upon conversion of notes, the company was to pay the cash amount the holder would have received as the merger price had the holder converted its notes into shares just before the merger at the conversion rate then in effect, according to a previous press release.

The company announced the planned merger on Aug. 3 to holders of its 7.25% convertible subordinated debentures due 2014 and its 3.75% convertibles after it had agreed to be acquired by Sonus on June 18.

The conversion ratio for the 7.25% convertibles was 31.746 shares per $1,000 principal amount, which amounted to a conversion price of $31.50 per share. As a result, each $1,000 principal amount was convertible into $42.86 in cash after the merger.

Network Equipment's common stock closed at $1.34 (Nasdaq: NKW) on Aug. 3. The company develops and sells networking equipment optimized for real-time communications and is based in Fremont, Calif.

Sonus Networks provides infrastructure and subscriber solutions and is based in Westford, Mass.

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