Spectrum Pharmaceuticals, Inc. (NasdaqGS: SPPI) announced today that it intends, subject to market and other conditions, to offer $100 million aggregate principal amount of convertible senior notes due 2018 (the “Convertible Notes”). The Convertible Notes will be offered and sold in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Act”). The Company expects to grant an option to the initial purchasers for up to an additional $20 million aggregate principal amount of Convertible Notes, solely to cover overallotments. The Convertible Notes will bear cash interest, payable semi-annually on June 15 and December 15, beginning on June 15, 2014. The Convertible Notes will not be redeemable prior to maturity. Initially, the Company will settle conversions of the Convertible Notes by delivering shares of the Company’s common stock (“Common Stock”) at a specified conversion rate. However, if the Company obtains stockholder approval in accordance with applicable NASDAQ rules, the Company will settle conversions of the Convertible Notes by paying or delivering, as the case may be, shares of Common Stock, cash, or a combination of cash and shares of Common Stock, at the Company's election, based on the specified conversion rate. The Convertible Notes will mature on December 15, 2018, unless repurchased or converted in accordance with their terms prior to such date. Prior to June 15, 2018, the Convertible Notes will be convertible only upon the occurrence of certain events and during certain periods, and thereafter, at any time until the second scheduled trading day immediately preceding the maturity date.
In connection with the pricing of the Convertible Notes, the Company expects to enter into convertible note hedge transactions and separate warrant transactions with one or more financial institutions, which may include the initial purchasers or their respective affiliates (the “Option Counterparties”), in order to reduce the potential dilution to the Common Stock and/or offset any cash payments the Company is required to make in excess of the principal amount upon conversion of the Convertible Notes in the event that the market price of the Common Stock is greater than the strike price of the convertible note hedge transactions (which will initially correspond to the initial conversion price of the Convertible Notes and be subject to certain adjustments under the terms of the convertible note hedge transactions). The warrant transactions will have a dilutive effect with respect to the Common Stock to the extent that the market price per share of the Common Stock, as measured under the terms of the warrant transactions, exceeds the applicable strike price of the warrants, which is anticipated to be significantly higher than the closing price of the Common Stock on the date the warrants are issued. If the initial purchasers exercise their over-allotment option, the Company expects to enter into additional convertible note hedge transactions and additional warrant transactions with the Option Counterparties on terms similar to those described above.