Salix closes $690 million senior notes offering

Salix PharmaceuticalsMar 17 2012

Salix Pharmaceuticals, Ltd. (NASDAQ:SLXP) today announced the closing of its offering of $690 million aggregate principal amount of 1.5% convertible senior notes due 2019, which includes the exercise in full of the initial purchasers' overallotment option.

• The coupon on the notes is 1.5% per year on the principal amount. Interest accrues from March 16, 2012, and is payable semi-annually in arrears on March 15 and September 15 of each year, beginning September 15, 2012.
• The notes will mature on March 15, 2019, unless previously converted or repurchased in accordance with their terms.
• The notes will be convertible, under certain circumstances, into cash, shares of Salix's common stock or any combination thereof at Salix's election. The initial conversion rate for the notes is 15.1947 shares of Salix's common stock per $1,000 principal amount of notes, which is equivalent to an initial conversion price of approximately $65.81 per share of common stock and represents a 35% conversion premium over the last reported sale price of Salix's common stock on March 12, 2012, which was $48.75 per share. The conversion rate and the conversion price are subject to adjustment in certain events, such as distributions of dividends or stock splits.

In connection with the offering of the notes, Salix has entered into privately negotiated convertible note hedge transactions with counterparties that include some of the initial purchasers (and/or their respective affiliates) (the "hedge counterparties"). The convertible note hedge transactions cover, subject to customary anti-dilution adjustments, the number of shares of Salix's common stock that initially underlie the notes, and are intended to reduce the dilutive impact of the conversion feature of the notes on Salix's outstanding shares of common stock. Salix has also entered into privately negotiated warrant transactions with the hedge counterparties initially relating to the same number of shares of Salix's common stock. The warrant transactions could have a dilutive effect to the extent that the market price per share of Salix's common stock exceeds the applicable strike price of the warrants on any expiration date of the warrants.

Salix intends to use the net proceeds from the offering, together with the proceeds from its entrance into the warrant transactions, to repurchase at closing from a holder a portion of their outstanding 5.5% Convertible Senior Notes due 2028 and, at the holder's option within a certain period after closing, to repurchase at the same price an additional portion of their outstanding 5.5% Convertible Senior Notes due 2028, both in privately negotiated transactions, to pay the cost of the convertible note hedge transactions, to repurchase up to $75 million of its outstanding common stock in privately negotiated, off-market transactions, which may be effected through one or more of the initial purchasers of the notes or their respective affiliates, concurrently with the offering, and for business development activities and other general corporate purposes, including potential additional repurchases of its outstanding debt, commercialization of product candidates, clinical trials, research and development expenses and general and administrative expenses.