Mercury may face acceleration of 0%, 4.75% convertibles

By Angela McDaniels

Seattle, March 17 - Mercury Interactive Corp. said it will be unable to file its 10-Q reports for the second and third quarters of 2005 by March 31, which will constitute an event of default under its $300 million of 4.75% convertible subordinated notes due 2007 and $500 million of zero-coupon senior convertible notes due 2008.

The company received a limited waiver through March 31 from its bondholders when it did not file the reports on time, and because it will not file the reports prior to the expiration of the waiver, the trustee or the holders of 25% of each series of bonds will have the right to declare the bonds immediately due and payable.

Mercury said it expects to meet the debt obligations in the event of acceleration, however, as it had cash and investments in excess of $1.2 billion at Feb. 28, according to a company news release.

The company is restating its financial statements in connection with work done by the special committee of the board of directors regarding stock option matters and loans to some of the company's officers, according to the release.

Mercury said it expects to complete its restated financial statements and file its amended 10-K report for 2004 and 10-Q report for the first quarter of 2005 with the Securities and Exchange Commission in the second quarter of 2006 and to file all other required SEC filings, including its 10-K report for the period ended Dec. 31, in a timely fashion thereafter.

"Mercury has completed a substantial amount of the required restatement and recertification work and is working closely with its independent advisors in completing this process," chief financial officer David Murphy said in the release.

Mercury will hold a conference call at 8:30 a.m. ET on Monday. Interested parties may call (877) 502-9272 (conference call code 3175146) or visit www.mercury.com/ir.

Mercury Interactive is an enterprise software company based in Mountain View, Calif.

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