Pacific Ethanol amends terms of 8% convertibles, extending maturity

Amendment also changes conversion price to 85% or 90% of market price

By Angela McDaniels

Tacoma, Wash., Aug. 4 - Pacific Ethanol, Inc. issued $17.17 million of new 8% senior notes in exchange for an equal amount of outstanding 8% senior convertible notes, according to an 8-K filing with the Securities and Exchange Commission.

As a result of the exchange, the terms of the convertibles have been amended to:

• Extend the maturity date to May 6, 2012 from Feb. 6, 2012; and

• Change the conversion price to a percentage established individually for each investor of the closing bid price of the company's common stock on the trading date prior to the conversion date. The percentage is 85% for some investors and 90% for others. Before the change, the percentage was 88%.

The company is obligated to make amortization payments on the first trading day of each month. The amortization and coupon payments can be made in stock if certain conditions are met. Among other conditions, the volume-weighted average price of the company's common stock must be at least $0.60. This threshold was reduced from $1.40 previously.

The convertibles are callable if the company's stock price exceeds $11.90 for 15 consecutive trading days.

The company's stock closed at $0.72 (Nasdaq: PEIX) on Thursday.

The noteholders are entitled to any dividends paid on the company's common stock in an amount equal to the amount they would have received had they converted their notes.

The Sacramento-based ethanol producer sold $35 million of the convertibles and related warrants in a private placement in October 2010. In January, it exchanged new securities for the original convertibles and warrants.

The notes issued in January were identical to the original notes except they gave the company greater flexibility to take on debt subordinate to the notes and it could defer monthly payments due prior to April 6 if it couldn't make the payment in registered shares.

In early July, the company again amended the convertibles via an exchange, extending the maturity date from Jan. 6, 2012 and revising them to account for the 1-for-7 reverse split of the company's common stock that became effective on June 8.

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