Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP) has announced the pricing of A $260.0 million aggregate principal amount of 3.25% convertible senior notes, due 2021. But pursuant to Rule 144A under the Securities Act of 1933, as amended, they are only for qualified institutional buyers. In addition to this, the global biopharmaceutical company also gave a 13-day alternative to the first purchaser of the notes to purchase up to an additional $40.0 million aggregate principal amount of the notes. Subject to habitual closing conditions, the sale of the notes is anticipated to close on December 27, 2016.
But the market seems to be overreacting
Sucampo’s initial intention was to sell $225 million in debt notes. There is an option of selling an additional $33.75 million in debt, which would total the gross proceeds to $259 million. However, the company’s shares dropped over 20%. Nonetheless, the net proceeds from the $225 million will pay off existing debt, which was to the tune of $219 million at the end of September while the rest will be added to the company’s cash position.
The company’s move should entice the investors given that the company is also estimating $251.6 million as net proceeds from this offering. If the first buyer exercises its option to purchase additional notes the proceeds will get to $290.4 million. Sucampo hopes to use the net proceeds of the offering in repayment all accrued but unpaid interest. The remainder will be used for general corporate purposes.
The notes will be senior unsecured obligations of Sucampo and are convertible
This will attract an interest of 3.25% per year and be paid semiannually in amount outstanding on June 15 and December 15 of each year. At the same time and at the option of holders the notes are convertible into shares of Sucampo’s Class A common stock at a rate of 60.2637 shares per $1,000 primary total of notes. This is approximate $16.59 per share.
However, upon conversion of the notes, none of them nor the shares of Sucampo Class A common stock issuable will gain any form of registration under the Securities Act or the securities laws of any other jurisdiction. They may not also be offered or sold in the United States.
Sucampo’s stock closed at $12.85 for a decline of $0.42 or 3.20%