Avid Bioservices, Inc. (NASDAQ: CDMO), a renowned biologics contract development and manufacturing organization (CDMO), has unveiled plans for a significant financial move with the pricing of $160 million aggregate principal amount of 7.00% Convertible Senior Notes due 2029 (the “2029 Notes”).
This announcement came on March 12, 2024, through private placement purchase agreements with several purchasers, each classified as a “qualified institutional buyer” under the Securities Act of 1933, as amended (the “Securities Act”).
The closing of this offering is subject to customary closing conditions and is expected to finalize soon.
Key Features of the 2029 Notes
Senior Unsecured Obligations: The 2029 Notes will represent senior unsecured obligations of Avid Bioservices, Inc.
Interest Payment Schedule: These notes will accrue interest payable semiannually on March 1 and September 1 of each year, starting from September 1, 2024.
Maturity Date: The maturity date for the 2029 Notes is March 1, 2029, unless earlier converted or repurchased.
Conversion Rights: Holders will have the right to convert their 2029 Notes before September 1, 2028, upon the satisfaction of specified conditions and during certain periods. From September 1, 2028, until the second scheduled trading day before the maturity date, holders may convert all or any portion of their notes at any time.
Upon conversion, Avid Bioservices, Inc. will pay or deliver cash, shares of its common stock, or a combination of both at its discretion.
Conversion Rate: The initial conversion rate for the 2029 Notes will be 101.1250 shares of the company’s common stock per $1,000 principal amount of notes, equivalent to an initial conversion price of approximately $9.89 per share of common stock.
This represents a premium of approximately 12.5% over the last reported sale price of the company’s common stock on March 6, 2024. The conversion rate may be subject to adjustment in certain events but will not be adjusted for any accrued or unpaid interest.
Redemption and Sinking Fund: The 2029 Notes are not redeemable, and no sinking fund is provided. However, in the event of a “fundamental change,” holders may require the company to repurchase their notes at a fundamental change repurchase price.
Use of Proceeds: Avid Bioservices, Inc. intends to utilize the net proceeds from the offering to repurchase a portion of its 1.250% Exchangeable Senior Notes due 2026 and to repay any remaining outstanding 2026 Notes.
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Regulatory Compliance and Offer Restrictions
It’s important to note that the 2029 Notes and any shares of the company’s common stock issuable upon conversion have not been and will not be registered under the Securities Act or any state securities laws.
As a result, these securities may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
This offering announcement does not constitute an offer to sell or a solicitation of an offer to buy these securities, nor does it authorize any sale of these securities in jurisdictions where such actions would be unlawful.
Additionally, it’s clarified that this press release is not an offer to repurchase the 2026 Notes, as detailed in the company’s recent filings. All outstanding 2026 Notes have been accelerated and became due and payable pursuant to an acceleration notice received by the company on February 29, 2024.
Strategic Financial Move
The pricing of $160 million convertible senior notes offering represents a strategic financial move for Avid Bioservices, Inc.
It provides the company with additional capital to address its financial obligations, pursue growth opportunities, and strengthen its position in the biologics contract development and manufacturing sector.
However, investors should carefully consider the terms and conditions of the offering and its potential impact on the company’s financial position and future prospects.
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