Ciena® Corporation (NASDAQ: CIEN) has entered into separate, privately negotiated exchange agreements under which it will retire $187.5 million in aggregate principal amount of its outstanding 4.0% Convertible Senior Notes due 2015 (the “2015 Notes”) in exchange for its issuance of a new series of 4.0% Convertible Senior Notes due 2020 (the “2020 Notes”) in an aggregate original principal amount of $187.5 million. The 2020 Notes will mature on December 15, 2020. Following these transactions, $187.5 million in aggregate principal amount of the 2015 Notes will remain outstanding with terms unchanged.
“By extending the maturity of half of our outstanding 2015 convertible notes to 2020 we have strengthened our balance sheet and enhanced our financial flexibility,” said Jim Moylan, Ciena’s Chief Financial Officer. “Further, we have accomplished this without increasing our annual cash interest expense or adding incremental share dilution relative to the 2015 Notes being retired.”
Certain terms of the 2020 Notes will remain the same as the 2015 Notes they replace, including the 4% annual cash interest rate and the conversion rate of 49.0557 shares of Ciena common stock per $1,000 in original principal amount, which is equal to an initial conversion price of $20.385 per share.
Unlike the 2015 Notes, the principal amount of the 2020 Notes will accrete at a rate of 1.85% per year commencing December 27, 2012, compounding on a semi-annual basis. The accreted portion of the principal is payable in cash upon maturity but does not bear cash interest and is not convertible into Ciena common stock. Accretion of principal will be reflected as a non-cash component of interest expense on Ciena’s statement of income during the term of the 2020 Notes.The 2020 Notes also provide Ciena with the option, at its election, to convert the new notes in whole or in part, prior to maturity, into the underlying common stock, provided the trading price of Ciena’s common stock exceeds $26.50 (or 130% of the then applicable conversion price) for the required measurement period. If the Company elects to convert the 2020 Notes on or before maturity, holders receive a make-whole premium payable in Ciena common stock, or its cash equivalent, at the election of the Company.