Cell Therapeutics ( CTIC) removed a sizeable chunk of its debt burden, but much still remains hanging over the company's head.

Holders of 46% of Cell Therapeutics' nearly $119 million in convertible debt agreed to tender their notes in exchange for cash and common stock, the Seattle-based drug developer said Wednesday.

The preliminary results of the debt tender offer, which expired Tuesday night, cuts the company's debt burden by $54.8 million and will reduce future annual interest expenses by $3.4 million.

But holders of more than half of Cell Therapeutics' debt chose not to accept the company's below-par bid for their notes, which means the company remains in shaky financial straits.

To put the 46% acceptance figure in perspective, Cell Therapeutics was aiming to convince 70% of note holders to agree to the debt tender offer in May, before the company raised its exchange offer earlier this month.

The $64 million in debt still on Cell Therapeutics' books includes $43 million in notes due in 2010. Only 30% of the 2010 holders agreed to tender their notes.

Cell Therapeutics will pay out $7.4 million in cash and 25.1 million shares of company stock to satisfy those note holders who accepted the debt tender offer.

Previously, Cell Therapeutics warned that its remaining cash was only sufficient to fund the company through August. Recent cost-cutting measures and the partial easing of interest payments may extend that cash further, but it's not clear by how long because the company didn't update its financial guidance Wednesday.

Cell Therapeutics offered $134.50 in cash and 458 shares of common stock for each $1,000 in convertible debt -- a sweetened exchange offer but one that asked bondholders to accept much more common stock than cash.

The 46% acceptance rate suggests bondholders preferred more cash, which Cell Therapeutics doesn't have at the moment. This likely means the company will be forced to sell a significant amount of stock into the market, if possible, in order to raise enough cash to satisfy their debt obligations starting next year.

And even if Cell Therapeutics' can pay off its debt, the company will be forced to find ways to raise even more money if it hopes to build a commercial operation necessary to sell its cancer drug pixantrone, if the drug is approved by regulators late in 2009 or early 2010. Cell Therapeutics is expected to file pixantrone with the U.S. Food and Drug Administration by the end of the second quarter.

Cell Therapeutics already has 452 million shares outstanding as of the end of April. The company's shares closed Tuesday at $1.55.

Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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