'" I've seen sicker dogs than this get well".'
how will an annualized return exceeding 40 percent help heal this puppy?
regards
AgriBioTech May Pay 40% on Bonds: Financing Business (Update1)
AgriBioTech May Pay 40% on Bonds: Financing Business (Update1) (Adds list of bondholders, closing share price.)
Las Vegas, April 16 (Bloomberg) -- AgriBioTech Inc. wants to pay $4.7 million extra to redeem $23.3 million of convertible debt to avoid issuing new stock. That could give investors in the fourth-month-old bonds an annualized return exceeding 40 percent.
Each of the 5 percent debentures, sold by the unprofitable turf and forage seed company to six institutional investors, can be converted into a share of AgriBioTech stock at $13.68 a share.
Unless the stock more than doubles from its closing price of 6 1/4, the company in June will be forced to ''reset'' the bonds' terms, entitling holders to more stock. To avoid the extra stock, which could cut existing shares' value, the company wants to buy back the bonds at a premium -- if it can get the money. ''We intend to pay off the holders of these debentures with cash so as to prevent any reset of this debt,'' Richard Budd, chief executive, said in a statement last night.
Budd said AgriBioTech will be able to use ''internally generated cash'' for a ''significant'' portion of the redemption. Two weeks ago, the company warned it may not be able to fund this year's $13 million cost of servicing $135 million of debt.
The debentures raised cash to help repay $30 million in bridge loans due Dec. 31, taken while Deutchse Bank Securities and Merrill Lynch & Co. tried to find a buyer for AgriBioTech.
The company failed in its strategy of acquiring 34 rivals to bulk up and sell itself. Budd replaced Johnny Thomas as chairman and chief executive on Feb. 24, one month after Thomas abandoned the sale plan. Its loss for the quarter ended Dec. 31 widened to $10.3 million from $1.4 million in the year-earlier period.
Share Value
AgriBioTech's 42 million shares have lost 65 percent of their value since Jan. 12. If on June 30, AgriBioTech's share price is $13.68 or higher, the bonds could convert into 1.7 million new shares. At a price of 6 1/4, 3.7 million new shares would have to be issued.
Instead, the company wants to pay bondholders a 20 percent premium, or $4.7 million, to buy back the debt on June 30. That's equivalent to a 40 percent annual interest rate on the $23.3 million of debt. Bondholders will also receive the bonds' 5 percent interest rate, or 2 1/2 percent for six months. ''I'd say people would be happy to be taken out of this one,'' said Tom Haag, who co-manages $1.7 billion of high-yield bonds for the Lutheran Brotherhood. He doesn't own AgriBioTech bonds. If he did, ''I'd take the money and run,'' he said.
The investors that bought the convertible debentures are Bay Harbor Investments; HFTP Investments; LBI Investments, a unit of Lehman Brothers Holdings Inc., and three funds managed by Brown Simpson.
Budd said AgriBioTech would have funds for the redemption based on strong product demand, cash flow estimates and from the help of AgriBioTech's banks. The company didn't provide cash flow figures.
Earlier this week, it said its bankers provided a $10 million seasonal increase to its $100 million line of credit. The banks are Bankamerica Corp., Deutsche Financial Services Corp. and Branch Banking and Trust Co.
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