aaiPharma amends and extends consent solicitation for 11½% notes

New York, Oct. 28 - aaiPharma Inc. said it has amended and extended its consent solicitation for its 11½% senior subordinated notes due 2010.

The offer now expires at 1 p.m. ET on Oct. 29 instead of 10 a.m. ET on Oct. 29. Holders who have already delivered consents do not need to take any further action.

Under the changes, the consent fee is increased to $20 per $1,000 principal amount from $5 per $1,000.

In addition, the company would be able to incur up to $30 million of additional indebtedness under its credit facilities by increasing the amount of senior debt allowed under the indenture by $40 million and eliminating the general provision permitting borrowings of up to $10 million.

aaiPharma would also be able to incur additional senior debt in order to maintain $40 million in senior debt under its credit facilities in the event it is required to pay down senior debt with the proceeds of asset sales. That limit would increase to $50 million in order to allow it to make interest payments on the notes.

Debt allowed under the fixed charge coverage ratio test in the note indenture must rank the same as the notes or be subordinated.

Proceeds of asset sales will be used to reduce the senior debt under the credit facilities to $40 million.

The amendments now specify that the liens on assets that secure obligations under the notes will continue if all senior debt is repaid but will resume as junior liens if the company subsequently incurs any new senior debt.

aaiPharma will not be allowed to pay more than $5 million in cash to settle pending litigation, excluding payments funded or reimbursed under insurance policies, until it makes the interest payments due on the notes on April 1, 2005 and Oct. 1, 2005.

The amendments prohibit the payment of dividends on the company's common stock and other restricted payments as defined in the indenture until it pays the note coupons due on April 1, 2005 and Oct. 1, 2005.

The interest rate on the notes will step up by 50 basis points from Oct. 1, 2004 to March 31, 2005.

The amended terms eliminate the proposal to allow up to $20 million in sale-and-leaseback transactions without complying with the fixed charge coverage ratio test in the note indenture.

aaiPharma announced on Oct. 22 that it had begun the consent solicitation.

Under the original terms, the solicitation was for waivers and amendments to allow the Wilmington, N.C., pharmaceutical company to borrow up to $30 million in additional term loans. aaiPharma announced it had agreed on a new $30 million supplemental term loan, subject to consents being obtained.

Noteholders who consent to the amendment will receive a fee of $5 per $1,000 principal amount if the changes are approved.

aaiPharma needs holders of more than 50% of the notes to consent.

Global Bondholder Services Corp. is the information agent (banks and brokers call collect 212 430-3774; noteholders call 866 470-3700).

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