Finisar issued a press release Wednesday that described the $100 million subordinated debt offering, which is convertible to 18.1 million shares at $5.52 a share (see Finisar Selling Securities). Debt holders are receiving 5.25 percent annual interest and will be able to convert their holdings in 90 days after the stock is registered with the Securities and Exchange Commission. The notes expire in seven years, but Finisar has the right to call them after three.
Prior to the Sept. 11 terrorist attacks, Finisar had intended to raise $200 million in debt. After that date, analysts doubted the company could raise anywhere near that, if anything at all. Even news reports Tuesday said the offering was to be only $75 million.
After brokerage commissions, Finisar netted $97 million from the offering. The company could also net another $24 million if note buyers exercise a 30-day option to purchase over-allotment shares.
The money could come in handy on a couple fronts. Workman hints that Finisar, which has a history of making acquisitions, may use some of the debt proceeds to buy companies or technologies at distressed prices.
It still may be better to sit on that cash. Nearly all the components Finisar sells go into data communications and storage area network (SAN) products. But even the hot optical and SAN markets have cooled, and Finisar burned $26 million in cash in its July quarter. At that rate, the company could exhaust its money supply over the next four or five quarters.
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