Advocat to restructure series B redeemable convertible preferreds

By Jennifer Chiou

New York, Oct. 24 - Advocat said it agreed to restructure its series B redeemable convertible preferred stock held by Omega Healthcare Investors, eliminating Omega's right to convert the stock into Advocat shares.

Omega's series B preferreds will be exchanged for a new series C preferred stock that is not convertible.

Similar to the terms of the series B preferreds, the new preferred have a stated value of $4.9 million and a 7% annual dividend rate.

The series C preferreds are redeemable at stated value at Omega's option after Sept. 30, 2010 and may be redeemed at Advocat's option in some cases.

Advocat said that the series B preferreds were convertible, under certain circumstances, into 800,000 common shares.

Advocat and Omega noted that they agreed to value this conversion feature at a discount of 22.3% to the underlying market value of the stock and as consideration for eliminating the feature, Advocat will increase its rental payments to Omega by about $687,000 per year, beginning in January.

"The elimination of the conversion feature removes a significant dilution to our current shareholders, and provides a greater degree of stability in our capital structure," Advocat chief executive officer William R. Council said in a news release.

"We are pleased that Omega agreed to discount the value of the underlying shares, capturing that value for Advocat's current shareholders."

Based in Brentwood, Tenn., Advocat provides long-term care services to nursing home patients.

Omega is a publicly owned real estate investment trust.

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