Orckit Communications Ltd. (Nasdaq: ORCT; TASE: ORCT) today reached a written agreement with its Series A and B bondholders. Orckit will repay its Series A bond in full. Orckit's share price fell 24.2% in morning trading on the TASE, following the announcement, to NIS 2.15, after falling 2.7% Nasdaq yesterday to $0.73, giving a market cap of $16.6 million.
The outstanding debt on the Series A bond is $25.5 million, and the outstanding debt on the Series B bond is $8.2 million. Both bonds are convertible into shares under certain conditions.
Under the debt settlement, the early repayment of the Series A bond, originally due in March, will be rescheduled over a period of 26 months: $9.8 million in May 2012; $2.6 million in September 2012; $1.4 million in March 2013; and $11.7 million, plus all accrued and unpaid interest, in July 2014. Series B bondholders will have the right to request early redemption of part of the bonds at the same payment dates as for the Series A bond.
In order to encourage note holders to convert their notes, the conversion price of the two bond series will be lower to a price below the current share price on the market for a specified period, and to approximately $2.00 per share thereafter. To the extent Series A bonds are converted, the required payments to the bondholders will be reduced in the reverse order of maturity, beginning with the last payment to be made according to the schedule of payments.
The agreement sets the prevailing market price of Orckit's shares at which the company would be entitled to force the conversion of the two bond series at $3 per share, and set the share price at which the company is entitled to force conversion of the Series A bond at $30.
Orckit president Izhak Tamir said, "I am very pleased that the company has reached an agreement with the representatives of the company's bondholders. The agreement aims to strengthen the company's balance sheet by reducing short-term debt and long-term debt and increasing shareholders' equity while also recognizing the rights of our bondholders. It is also meant to enable the company to focus on continuing the momentum of its business and maximizing its potential as a leader in its field."
Published by Globes [online], Israel business news - www.globes-online.com - on February 16, 2012
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