Safeguard Scientifics $100 million convertible talked at 2.375-2.875% yield, up 34-42%

Nashville, Feb. 11 - Safeguard Scientifics Inc. launched $100 million of 20-year convertible notes talked to yield 2.375% to 2.875% with a 34% to 42% initial conversion premium via sole bookrunner Wachovia Securities.

The Rule 144A deal is slated to priced after Thursday's close.

The senior unsecured debentures will be non-callable for five years and then with a 140% hurdle for two years. There are cash puts in years seven, 10 and 15.

Holders will have dividend protection.

There is a $25 million greenshoe available.

Wayne, Pa.-based Safeguard, an information technology firm focused in the healthcare and life sciences industries, said proceeds would be used to partially repay its 5% convertible subordinated notes due June 15, 2006.

On Tuesday, the company reported a fourth quarter net loss of $32.9 million, or 28 cents per diluted share, versus a net loss of $31.2 million, or 27 cents per diluted share, in fourth quarter 2002. Revenues rose to $459 million from $439 million.

For 2003, Safeguard posted a net loss of $33.3 million, or 30 cents per diluted share, versus a net loss of $129.2 million, or $1.12 per diluted share, in 2002. Revenues dipped to $1.6 billion from $1.7 billion.

Safeguard attributed the narrowed net loss to gains on the sale of companies, reduced impairment charges and the elimination of the mark-to-market loss as a result of the sale of Verticalnet in 2003. During the year, the company said it increased cash balances and balance sheet strength from monetizing holdings in Internet Capital Group Inc., Kanbay International, Pac-West Telecomm Inc., DocuCorp International Inc. and Verticalnet Inc.

Also, the company said it provided growth capital to Mantas and ChromaVision Medical Systems Inc., resulting in increased ownership.

At Dec. 31, Safeguard said the parent company cash balance was $131 million and the market value of its ownership of public company marketable securities was $262 million. At Feb. 9, the parent company cash balance was reported at $130 million with $273 million of market value of public company marketable securities.

"During 2003, we generated $77.9 million in cash from the sale of companies and fund distributions and funded an additional $26.7 million to support our existing strategic operating companies," said Safeguard Chief Financial Officer Chris Davis in the company's earnings release.

"We are very pleased with our progress in monetizing non-strategic assets to enable us to support the growth of our strategic companies."

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