01—Abstract
Summary
Summary of the 8-K filed March 19, 2010. Cited figures are marked; the original filing is the authoritative source.
Ciena Corporation (CIEN) filed this Form 8-K on March 19, 2010, to report the issuance of $375 milliona in aggregate principal amount of 4% Convertible Senior Notes due 2015.
These notes were offered privately to qualified institutional buyers and are senior unsecured obligations of Ciena, ranking equally with existing and future senior unsecured debt. The notes are convertible into Ciena common stock at an initial conversion price of approximately $20.38b per share, potentially diluting existing shareholders if converted. The primary purpose of this debt issuance is to fund a significant portion of Ciena's pending acquisition of Nortel's Metro Ethernet Networks (MEN) business.
Specifically, proceeds will be used to replace a contractual obligation to issue $239 millionc in 6% senior convertible notes due 2017 with cash, and the remaining proceeds will reduce the cash needed for the acquisition. This transaction signals Ciena's strategic move to acquire key assets from Nortel, aiming to enhance its market position in optical networking and carrier Ethernet.
02—Key points
Key Highlights
- Ciena issued $375 million of 4% Convertible Senior Notes due March 15, 2015, in a private offering.
- The notes are unsecured and rank equally with other senior unsecured debt.
- Conversion price is initially set at approximately $20.38 per share, potentially leading to the issuance of ~18.4 million shares.
- Proceeds are earmarked to finance the acquisition of Nortel's Metro Ethernet Networks (MEN) business, specifically replacing a debt obligation with cash.
- Ciena can redeem the notes starting March 15, 2013, under certain conditions including a 'make-whole premium'.
- Holders can put the notes back to Ciena at par plus accrued interest upon certain fundamental changes.
- Additional interest may be incurred if Ciena fails to file reports on time or remove restrictive legends from converted shares.
03—Questions
Frequently Asked Questions
What is the primary use of the proceeds from the convertible note issuance?
The net proceeds of approximately $364.3 million are primarily intended to fund Ciena's pending acquisition of Nortel's Metro Ethernet Networks (MEN) business. Specifically, about $243.8 million will be used to replace a contractual obligation to issue 6% senior convertible notes due 2017 with cash, and the remainder will reduce the cash needed for the acquisition's purchase price.
What is the potential dilution to existing shareholders from these convertible notes?
The notes are convertible into Ciena common stock at an initial conversion price of approximately $20.38 per share. If all $375 million in principal are converted, it could result in the issuance of approximately 18,395,888 new shares of common stock, which would dilute existing shareholders' ownership.
Under what conditions can Ciena redeem these notes before maturity?
Ciena can redeem the notes on or after March 15, 2013, if the common stock price has been at least 150% of the conversion price for at least 20 trading days within a 30-day period. The redemption price includes the principal amount, accrued interest, and a 'make-whole premium' based on the present value of remaining interest payments.
What happens if Ciena fails to meet certain filing or legend removal requirements?
If Ciena fails to file its annual or quarterly reports with the SEC on time (considering grace periods) or fails to remove restrictive legends from converted shares that are freely tradable, it will be required to pay additional interest on the notes at a rate of 0.50% per annum for each day such failure continues.
04—Continue