ANI Pharmaceuticals (ANIP)

[LordDarley]

ANIP was far-thinking in December, 2014, when it issued the convertible debt for $125,000,000. Even then, it was thinking the stock would be worth more than $69.48/share at some point before the December 1, 2019 final maturity date. It then entered into two transactions with $13M of the $125M it just raised.

The actual mechanics are two complicated to explain here, but the bottom line for ANIP is that other parties are on the hook to protect ANIP from dilution. At the conversion date the Company can receive, at its option, a number of shares, cash or combination to cover any difference between the $69.48 and actual value at the time. So, if the stock is worth $90 at December 1, the company raises the $115M from the credit it has lined up with the bank and covers the difference from the other parties who have to cover the "convertible hedge."

One other wrinkle. If the stock is worth more than $96.21/share on December 1 (actually, two trading days before) ANIP will need to come up with the extra cash (or shares) for any increase over the $96.21. It did this by selling warrants (options) to buy the shares

The overall cost for this protection was $13,000,000 of the $125,000,000, less the proceeds from selling the warrants and was well worth it.

Next (and final) post for the punchline and big picture.