Matria extends tender for 11% notes

New York, April 23 - Matria Healthcare Inc. (B2/B+) said it had extended its previously announced tender offer for its 11% series B senior notes due 2008 and the related consent solicitation.

The company said the tender offer was extended to noon ET on May 28, subject to possible further extension, from the originally announced deadline of noon ET on April 27. The price determination date has been extended to May 26, subject to possible further extension, from the originally scheduled April 23.

Matria said that as of midnight on April 22, it had received valid tenders from the holders of $120 million of the notes, representing 98.36% of the outstanding principal amount. That amount is unchanged from the amount which had been tendered by the previously announced April 13 expiration of the consent deadline.

All other terms and conditions of the tender offer and consent solicitation remain unchanged.

As previously announced, Matria, a Marietta, Ga.-based provider of comprehensive disease management programs to health plans and employers, said on March 30 that it had begun a tender offer for all $122 million of it 11% series B notes and had started soliciting consents to proposed changes in the notes' indenture aimed at eliminating all of the restrictive covenants and certain events of default and other related provisions.

The company set a now-expired consent deadline of 9 a.m. ET April 13 and initially said the tender offer would expire at noon ET on April 27 (this was later extended).

Matria did not initially set the price it will offer to noteholders, saying that it would determine the price no later than the start of business on the second business day before the tender offer expires (originally a tentative pricing date of April 23, later extended to May 26).

The company said that holders validly tendering their notes and delivering consents before the consent deadline would receive the total consideration, which will be determined based upon a fixed spread of 0.50% over the yield to maturity on the reference security, the 1.625% U.S. Treasury note due April 30, 2005. The amount includes a $20 per $1,000 principal amount consent fee. Holders tendering their notes and delivering their consents after the consent deadline but before the expiration will not receive the consent fee.

Holders who tender their notes will be required to consent to the proposed amendments.

The consent of holders of a majority of the outstanding principal amount of notes is required for the proposed amendments to become effective, but the proposed amendments will not become operative unless a financing condition to which the offer is subject is satisfied (the company is seeking to replace its existing credit facility with a new credit facility and/or obtain other financing through the sale of publicly or privately held securities on acceptable terms and in an overall sufficient amount to let Matria purchase all of the outstanding notes).

Matria said that should the amount of notes tendered exceed the amount of proceeds raised by the company in a financing permitted by the waiver, it will be required to use those proceeds to purchase the tendered notes on a pro rata basis.

The completion of the tender offer and the consent solicitation is subject to several conditions, including the financing condition; should the waiver Matria is seeking, allowing it to incur new debt to fund the tender offer, become effective and should Matria complete such a funding, it will still be obligated to use the proceeds from that financing to purchase any notes tendered, whether or not the other conditions applicable to the tender offer are satisfied.

By purchasing the notes through the tender offer, Matria anticipates saving the annual interest expense related to the senior notes of $12.8 million.

On April 12, Matria said that it had obtained waivers to the debt incurrance covenant from holders of $69.755 million principal amount of the 11% notes, a majority of the outstanding amount, meaning that it can now incur up to $150 million of additional debt to buy notes in the tender offer.

On April 14, Matria said that it had it obtained the requisite consents from holders of the 11% notes; it said that the consent deadline expired as scheduled at 9 a.m. ET on April 13, without extension and as of that deadline, holders of some $120 million principal amount of the notes, representing 98.36% of the outstanding principal amount, had tendered their notes and consented to the proposed amendments to the related indenture.

Matria said it would enter into a supplemental indenture that incorporates the proposed amendments.

UBS Investment Bank is acting as the exclusive dealer manager for the offer and the solicitation agent for the consent solicitation (contact Kevin Reynolds at 888 722-9555 or 203 719-4210). UBS is also advising Matria on various financing alternatives to complete the tender offer. MacKenzie Partners Inc. is the information agent (call 800 322-2885).

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