DOV Pharmaceutical launches exchange offer for 2.5% convertibles

By Caroline Salls

Pittsburgh, Jan. 29 - DOV Pharmaceutical, Inc. has begun its offer to exchange all of its 2.5% convertible subordinated debentures due 2025 for shares of convertible preferred stock and a $14.9 million cash payment, according to a company news release.

The exchange offer will expire at 5 p.m. ET on March 5.

Holders of about 88% of the debentures have committed to tender their debentures in the exchange offer, the release said.

As previously reported, if DOV is unable to restructure its obligations under the debentures, the company said it may be forced to file bankruptcy.

DOV has agreed to offer to all debenture holders the right to exchange for each $1,000 in principal amount of debentures, eight shares of a new series of convertible preferred stock, par value $1.00 per share and a liquidation preference of $100 per share, plus a cash payment of $212.50.

The new preferred stock will be convertible into shares of common stock and will automatically convert 30 days following stockholder approval and filing of an amendment to DOV's charter increasing the number of shares of authorized common stock.

Generally, DOV said the preferred stock will vote with the common stock as a single class on an as-converted basis.

DOV will also offer an alternative series of convertible preferred stock that will have different terms from the convertible preferred stock issued in the exchange offer.

This alternative series of preferred stock will have no voting rights except as required by law and will not have a fixed liquidation preference.

The exchange offer is conditioned upon the valid tender of at least 99% of the total principal amount of the outstanding debentures, and this condition may be modified by DOV with the consent of the holders of a majority in outstanding principal amount of the debentures.

DOV will also reserve the right to accept for exchange any existing debentures tendered, or the company may terminate the exchange offer, if any of the conditions of the offer are not met.

The company said it expects that holders of its outstanding common stock will receive 1.1 warrants to purchase one share of common stock for each share of common stock outstanding, for a total of roughly 30 million warrants.

The exercise price for the warrants will be $0.523 per share, and the warrants will expire on Dec. 31, 2009.

The exchange offer is being made as part of a restructuring agreement the company entered in to with members of an informal committee of debenture holders after DOV failed to buy back the debentures on Jan. 3 - the deadline for a tender offer the company was required to hold following the delisting of its common stock from Nasdaq on Oct. 27.

DOV is a biopharmaceutical company based in Somerset, N.J.

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