Gilat says holders of 45% of notes will participate in exchange

New York, Oct. 21 - Gilat Satellite Networks Ltd. said holders of 45% of its $88.754 million of outstanding 4% convertible subordinated notes due 2012 have agreed to participate in its exchange offer.

As announced on Oct. 12, Gilat is offering 125 of its ordinary shares for each $1,000 principal amount of the convertibles and accrued interest.

There is no minimum for the exchange to be completed.

The offer ends at midnight ET on Nov. 10 unless extended.

Gilat said it expects the exchange will result in a "significant improvement" in its balance sheet, increased shareholders' equity, reduced debt and improved financial ratios.

The Petah Tikva, Israel satellite telecommunications company said in a filing with the Securities and Exchange Commission that it expects that its results of operations will tend to increase its shareholders' deficiency in the next few quarters. In addition, it may need to write down certain assets, which would further increase its shareholders' deficiency.

Some important customers might claim that this deficiency constitutes a breach of financial covenants in the contracts with them and may seek to cancel those contracts and collect penalties.

Gilat said it believes that in the short term the exchange offer is "our most viable means to substantially increase our equity."

Gilat issued the 4% convertibles earlier this year as part of a debt restructuring. Holders may convert them at a price of $0.87 per share starting one year from the date of issuance, according to documents filed with the SEC.

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