By Sarah Lizee
Olympia, Wash., Nov. 12 – Verastem, Inc. entered into privately negotiated agreements with holders of its existing 5% convertible senior notes due 2048 to exchange about $114.3 million of the existing notes for about $62.9 million of newly issued 5% convertible senior second-lien notes due Nov. 1, 2048 and about $11.6 million in cash, according to a press release.
For each $1,000 principal amount of existing notes being exchanged, the company will deliver to the exchanging investor $550 principal amount of exchange notes and a cash payment of $100, together with accrued interest on the existing notes, plus, if applicable, an adjustment in lieu of issuing fractional exchange notes.
The exchange is expected to close on Nov. 14, subject to customary closing conditions.
After giving effect to the issuance and exchange of the existing notes, about $62.9 million of the exchange notes will be issued and outstanding and about $35.7 million of the existing notes will remain issued and outstanding.
The exchange notes will be convertible at the option of the holder into shares of common stock of the company at any time prior to the close of business on the scheduled trading day immediately preceding the maturity date.
The conversion rate for the exchange notes is 606.0606 shares of the company’s common stock per $1,000 principal amount of the exchange notes, which is equivalent to an initial conversion price of about $1.65 per share, representing an about 52.8% premium to the last reported sale price of $1.08 per share of common stock on Nov. 11 on the Nasdaq Global Market.
Upon conversion of the exchange notes, holders will receive a cash payment equal to the accrued interest on the converted exchange notes.
In addition, prior to Nov. 1, 2020, holders who convert their exchange notes, other than in connection with the exercise of the company’s issuer conversion option, will also be entitled to an interest make-whole equal to the sum of all regularly scheduled stated interest payments, if any, due on the exchange notes on each interest payment date occurring after the conversion date for that conversion and on or before Nov. 1, 2020.
The company will have the right to cause all exchange notes then outstanding to be converted automatically if the volume-weighted average price per share of the company’s common stock equals or exceeds 121% of the conversion price for a specified period of time and some other conditions are satisfied.
Prior to Nov. 1, 2022, the company will not have the right to redeem the exchange notes. On or after Nov. 1, 2022, the company may elect to redeem the notes, in whole or in part, at par plus accrued interest, if any.
Holders will have the right to require the company to purchase their exchange notes on Nov. 1, 2023, Nov. 1, 2028, Nov. 1, 2033, Nov. 1, 2038 and Nov. 1, 2043, or if a fundamental change occurs, in each case, at a repurchase price equal to par plus accrued interest, if any, to but excluding the applicable repurchase date.
In connection with the exchange, the company intends to enter into an amendment to its senior secured credit agreement.
Based in Boston, Verastem discovers and develops drugs to treat cancer.
Exchange notes
| Issuer: | Verastem, Inc.
|
| Issue: | Convertible senior second-lien notes
|
| Amount: | $62.9 million
|
| Maturity: | Nov. 1, 2048
|
| Coupon: | 5%
|
| Conversion premium: | 52.8%
|
| Conversion rate: | 606.0606 shares of stock per $1,000 of notes
|
| Conversion price: | $1.65 per share
|
| Call: | After three years at par plus accrued interest
|
| Put option: | At par plus accrued interest every five years, beginning Nov. 1, 2023
|
| Announcement date: | Nov. 11
|
| Settlement date: | Nov. 14
|
| Stock symbol: | Nasdaq: VSTM
|
| Stock price: | $1.08 at close on Nov. 11
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