PDL BioPharma Inc (NASDAQ:PDLI) has embarked on a process to raise $150 million in convertible notes, though the amount could be higher if the underwriters exercise their option to purchase additional notes in case of overallotment. But what is PDLI raising the money for?
The company itemized several reasons for the fundraiser with chief among them being acquisition of income-generating assets. The company further said it would look into acquiring promising pharmaceutical products without elaborating.
PDL BioPharma further said a portion of the net proceeds from the convertible notes would be used to retire certain existing notes. Specifically, the company is focusing on repurchasing a portion of the convertible notes due 2018 that have a coupon of 4.00%.
$22.5 million in additional notes
Though the primary target is to offer $150 million in principal amount of convertible notes, PDL BioPharma said it would allow the underwriters to purchase additional notes worth $22.5 million in the event of strong public demand for the debt. That suggests that the notes offering could end up generating gross proceeds of $172.5 million for the company. PDL BioPharma didn’t say how much it expects in net proceeds from the new notes.
The new notes have a maturity date of December 1, 2021.
Semi-annual interest
Holders of the new notes will have the opportunity to redeem them for cash or common stock of PDL BioPharma or a combination of the two. Interest on the notes will be paid semi-annually. However, PDL BioPharma is yet to disclose the pricing, interest rate and conversion rate of the notes.
PDL BioPharma is working with RBC Capital Markets (RBC) as the book-running manager for the offering.
Capped call transaction
PDL BioPharma has said it will enter into a capped call transaction in connection with the notes offering with the Royal Bank of Canada. The capped transaction is a form of hedging measure and PDL BioPharma said it would use a portion of the net proceeds from the notes offering to pay the hedging cost.
PDL BioPharma stock dipped 18% to $3.05 in the last session. The stock is down 14% YTD.