Human Genome Sciences Inc. (NASDAQ: HGSI) is raising capital. The company announced the sale of $400 million in Convertible Senior Notes which will mature in 2018. These notes are convertible into common stock and the company is going to grant the underwriter an option to purchase up to $60 million in additional notes to cover overallotments.
It was just on Tuesday that Human Genome Sciences was downgraded to Underperform by Zacks, but it was also given the dubious honor of being named The Bear of the Day.
The company earmarked the funds for general corporate purposes, but it included that it may repurchase its outstanding 2.25% Convertible Subordinated Notes due 2012 before their scheduled maturity date on August 15, 2012. Also noted was capped call transactions to reduce the potential dilution and/or to offset any potential cash payments in excess of the principal amount of the converted notes.
This offering is being underwritten by Citigroup. Our take is that this company is simply raising refinancing capital here rather than taking on any massive new undertaking on top of a poor lupus drug reception so far. The size compares to a market capitalization rate of $1.95 billion.
There is still over two hours until the market opens and shares are indicated down another 2.5% after closing at $10.25 yesterday. The 52-week range is $9.68 to $30.15.
JON C. OGG
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