Magma exchanges additional $2.5 million convertibles

By Jennifer Chiou

New York, March 16 - Magma Design Automation Inc. agreed to exchange another $2.5 million of its zero-coupon convertible subordinated notes due May 15, 2008 for an equal amount of new 2% convertible senior notes due May 15, 2010, according to an 8-K filing with the Securities and Exchange Commission.

On March 5, the company exchanged $47.4 million of the old convertibles for an equal amount of new convertibles.

As a condition to the closing of the additional exchange, Magma entered into an amendment to the registration rights agreement to add the new noteholder who exchanged to the registration rights agreement.

Magma added that it agreed to file a shelf registration statement linked to the resale of the new notes and the common stock issuable upon conversion within 30 days of closing the first transaction.

The registration statement must become effective within 90 days of closing the transaction, unless the SEC reviews it and requires modifications, in which case the company will have 150 days.

If the company does not meet the requirements, it will have to make additional payments to holders of the new notes.

Following the exchange, the Santa Clara, Calif., maker of semiconductor design software has $15.2 million of the notes due 2008 outstanding.

The new notes, of which $49.9 million is outstanding, will be convertible at $15.00 per share and have net share settlement. Magma will be able to call them from May 20, 2009 at par.

Upon certain change-of-control events, Magma may be required to pay a premium make-whole amount whereby the conversion rate on the new notes may be increased by up to 22 shares.

After May 20, 2009, Magma will have the option to redeem the new notes for cash at par.

The new notes will be convertible at the option of the holders when:

• The closing price of Magma common stock exceeds 150% of the conversion price of the new notes, initially $15.00, for 20 out of 30 consecutive trading days

• The trading price per $1,000 principal amount of new notes is less than 98% of the product of the average price of common stock for each day during any five consecutive trading day period and the conversion rate per $1,000 principal amount of notes;

• Magma distributes to all holders of common stock rights or warrants entitling them to purchase additional shares of common stock at less than the closing price of common stock on March 2;

• Magma distributes to all holders of common stock any form of dividend which has a per share value exceeding 7.5% of the price of the common stock on the day prior to the distribution date;

• The period beginning 60 days prior to May 15, 2010; or

• There has been a designated change of control of Magma.

The new notes are unsecured senior securities and rank senior in right of payment to the old notes and junior in right of payment to Magma's $5 million revolving line of credit facility with Wells Fargo Bank, NA.

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