Kyphon Closes $400 Million Offering of Convertible Senior Notes and Provides Update on Its First Quarter and Full Year 2007 Non-
February 06 2007 - 6:57PM
PR Newswire (US)
SUNNYVALE, Calif., Feb. 6 /PRNewswire-FirstCall/ -- Kyphon Inc.
(NASDAQ:KYPH) today announced the closing of its offering of $200
million aggregate principal amount of Convertible Senior Notes due
2012 and $200 million aggregate principal amount of Convertible
Senior Notes due 2014 that were privately offered to qualified
institutional buyers pursuant to Rule 144A under the Securities Act
of 1933, as amended (the "Securities Act"). The notes of each
series include $25 million aggregate principal amount of notes sold
to the initial purchasers pursuant to an over-allotment which was
exercised in full. Interest on the notes due 2012 will be paid
semiannually at a rate of 1.00% per year and interest on the notes
due 2014 will be paid semiannually at a rate of 1.25% per year.
Upon the occurrence of certain events, the notes will be
convertible into cash up to the principal amount, and if
applicable, shares of common stock in respect of any conversion
value above the principal amount, based on an initial conversion
rate of 17.1951 shares of common stock per $1,000 principal amount
of notes, which is equivalent to an initial conversion price of
approximately $58.16 per share. This initial conversion price
represents a premium of 24% relative to the last reported sale
price on January 31, 2007 of Kyphon's common stock of $46.90 per
share. In connection with the offering, Kyphon entered into
convertible note hedge transactions with affiliates of the initial
purchasers. These transactions are intended to reduce the potential
dilution to Kyphon's stockholders upon any future conversion of the
notes. Kyphon also entered into warrant transactions concurrently
with the offering, pursuant to which it sold warrants to purchase
Kyphon's common stock to the same counterparties that entered into
the convertible note hedge transactions. The convertible note hedge
and warrant transactions effectively will increase the conversion
price of the convertible notes to approximately $75.04 per share of
Kyphon's common stock, representing a 60% premium relative to the
last reported sale price on January 31, 2007 of $46.90 per share of
the common stock. Kyphon estimates that the net proceeds from the
offering, including proceeds resulting from the exercise of the
initial purchasers' over-allotment option, will be approximately
$390 million, after deducting discounts, commissions and estimated
expenses. In addition, the warrant transactions resulted in gross
proceeds to Kyphon of approximately $77 million. Kyphon used
approximately $112 million of the combined net proceeds of the
offering and proceeds from the sale of warrants to fund the cost of
the convertible note hedge transactions. Kyphon intends to use the
remaining proceeds of approximately $355 million, together with
revolver borrowings under its $250 million senior secured credit
facility, to retire the $425 million senior secured term loan
incurred to complete the acquisition of St. Francis Medical
Technologies. Kyphon currently projects non-operating expense for
full year 2007, including expenses related to debt issuance costs,
will be approximately $20 million as a result of this refinancing.
Non-operating expense for the first quarter of 2007 is expected to
be approximately $12 million including the impact of the write-off
of debt issuance costs related to retirement of the term loan.
Kyphon has been advised that, in connection with the convertible
note hedge and warrant transactions, the counterparties to those
transactions or their affiliates entered into various derivative
transactions with respect to Kyphon's common stock concurrently
with or shortly after pricing of the notes. In addition, these
counterparties or their affiliates may enter into or unwind various
derivative transactions with respect to Kyphon's common stock and
purchase or sell Kyphon's common stock in secondary market
transactions following the pricing of the notes (and are likely to
do so during any observation period relating to the conversion of a
note). This press release is neither an offer to sell or a
solicitation of an offer to buy the notes nor shall there be any
sale of the notes in any state or jurisdiction in which such an
offer, solicitation or sale would be unlawful prior to the
registration or qualification thereof under the securities laws of
any such state or jurisdiction. Any offers of the notes will be
made only by means of a private offering memorandum. The notes and
Kyphon's common stock issuable upon the conversion of the notes
have not been registered under the Securities Act or the securities
laws of any other jurisdiction and may not be offered or sold in
the United States absent registration or an applicable exemption
from registration requirements. This press release contains
forward-looking statements within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. Forward-looking
statements are based on management's current preliminary
expectations and are subject to risks, uncertainties and
assumptions. Other information on potential risk factors that could
affect Kyphon, its business and its financial results are detailed
in the company's periodic filings with the Securities and Exchange
Commission (SEC), including, but not limited to, those risks and
uncertainties listed in the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Factors Affecting Future Operating Results," which can
be found in Kyphon's annual report on Form 10-K for the year ended
December 31, 2005 filed with the SEC on March 3, 2006 and in
Kyphon's quarterly report on Form 10-Q for the quarter ended
September 30, 2006 filed with the SEC on November 9, 2006. KYPHG
DATASOURCE: Kyphon Inc. CONTACT: Julie D. Tracy, Vice President,
Investor Relations and Corporate Marketing of Kyphon Inc.,
+1-408-548-6687, or Web site: http://www.kyphon.com/
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