Ciena extends half of 4% convertibles in exchange deal for new notes

By Susanna Moon

Chicago, Dec. 19 - Ciena Corp. said it plans to retire $187.5 million principal amount of its outstanding 4% convertible senior notes due 2015 in exchange for an equal amount of new 4% convertible senior notes due Dec. 15, 2020.

The company entered into separate, privately negotiated agreements with holders to issue the new notes in exchange for the notes due 2015, according to a press release.

After settlement, $187.5 million principal amount of the notes due 2015 will remain outstanding with terms unchanged.

"By extending the maturity of half of our outstanding 2015 convertible notes to 2020 we have strengthened our balance sheet and enhanced our financial flexibility," Jim Moylan, Ciena's chief financial officer, said in the release.

"Further, we have accomplished this without increasing our annual cash interest expense or adding incremental share dilution relative to the 2015 notes being retired."

The new notes have some of the same terms as the ones they replace, such as the cash coupon and the conversion rate of 49.0557 Ciena shares per $1,000 original principal amount, which is equal to an initial conversion price of $20.385 per share.

Unlike the 2015 notes, however, the principal amount of the 2020 notes will accrete at a rate of 1.85% per year beginning Dec. 27, compounding on a semiannual basis. The accreted portion of the principal is payable in cash upon maturity but does not bear cash interest and is not convertible into Ciena common stock. Accretion of principal will be reflected as a non-cash component of interest expense on Ciena's statement of income during the term of the 2020 notes.

The new notes also provide Ciena with the option to convert the new notes in whole or in part if the company's trading price exceeds $26.50, or 130% of the conversion price, for the required measurement period.

If the company elects to convert the 2020 notes on or before maturity, holders will receive a make-whole premium payable in Ciena stock, or its cash equivalent, at the election of the company.

Ciena is a Linthicum, Md.-based supplier of communications networking equipment and software.

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