Hutchinson Technology extends exchange, tender offer for convertibles

By Jennifer Chiou

New York, March 6 - Hutchinson Technology Inc. announced the extension of the exchange offer and tender offer for its 3.25% convertible subordinated notes due 2026, the tender offer for its 8.5% convertible senior notes due 2026 and the concurrent rights offering.

As reported, the company is offering $900 principal amount of new 8.5% senior secured second-lien notes due Jan. 15, 2017 in exchange for each $1,000 principal amount of 3.25% convertibles.

In the rights offering, the company will distribute one right for every $1,906.075 principal amount of 3.25% convertibles held.

The exchange offer will now expire at 9 a.m. ET on March 16 instead of on March 6, and the tender offers will end at 9 a.m. ET on March 23. The rights will also expire on March 23.

As of 9 a.m. ET on March 6, holders had tendered $43,256,750 of the 3.25% notes in the exchange offer, $20,831,000 of the same notes in the tender offer and $52,857,000 of the 8.5% notes in the tender for that series.

Each right is exercisable at $985 for one unit. Each unit consists of $1,000 principal amount of new 8.5% notes and a 10-year warrant to purchase on a cashless basis 96.725 shares of common stock at an exercise price of $0.01 per share.

The rights may be exercised only by holders who participate in the exchange offer and who exercise all of their rights. Holders may subscribe for their pro rata share of any units not purchased.

The maximum proceeds of the rights offering will be $39.4 million. Hutchinson Technology will apply the proceeds to the tender offer for the 3.25% convertibles. It will purchase up to $49.25 million principal amount of the 3.25% convertibles at 80% of par.

If there are any leftover proceeds, the company will apply an amount of cash equal to the lesser of the excess proceeds and $20 million to purchasing up to $26,666,000 principal amount of its 8.5% convertibles at 75% of par.

New notes

As noted, the company will issue up to $108,618,000 principal amount of the new 8.5% notes, including up to $68,618,000 through the exchange offer and up to $40 million through the rights offering, according to an S-1 filing with the Securities and Exchange Commission.

The new notes will be callable at any time at par plus a make-whole amount. There is a change-of-control put option at 101% of par. The company is required to use the proceeds of certain asset sales to pay down the notes at par.

A registration statement for the new 8.5% notes, rights, units, warrants and common stock underlying the warrants has been filed with the SEC but has not yet become effective. The new 8.5% notes may not be issued prior to the time the registration statement becomes effective.

The company previously said the purpose of the transactions is to improve its financial flexibility by allowing it to retire outstanding debt at a discount to par and reduce outstanding debt that is subject to repurchase at the option of the holder.

The dealer manager is Houlihan Lokey (212 497-7864). The exchange agent, information agent and subscription agent is D.F. King & Co. (banks and brokers call 212 269-5550; others call 800 758-5880).

Hutchinson Technology is a Hutchinson, Minn.-based designer and manufacturer of precision technologies. The company launched the offers on Feb. 6.

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