Penn Treaty Sweetens Note Exchange Offer

NU Online News Service, Oct. 11, 11:15 a.m. –Penn Treaty American Corp., Allentown, Pa., is sweetening the terms of a previously announced note exchange and giving noteholders still more time to participate.

The long-term care insurer has offered to exchange $74.75 million in subordinated convertible notes due in 2003 for the same amount of convertible notes due in 2008.

Penn Treaty originally set a Sept. 26 deadline and a conversion price of $5.31 per share. The company has since extended the deadline twice, and now it is extending the deadline a third time, to Oct. 18. The company is also lowering the price holders must pay to convert the exchanged notes into common stock to $4.50 per share.

The reduction in the conversion price will apply to notes already tendered as well as notes tendered over the next week, Penn Treaty said.

Holders have now offered to tender a total of $50 million in notes, and they have discussed plans to tender another $13 million in notes, Penn Treaty says.

Absolute Recovery Hedge Fund, New York, and other entities associated with Wilbur Ross have bought $10 million in notes from an existing noteholder, Penn Treaty says.

If the Ross entities tender the notes, they will end up controlling at least 6% of Penn Treaty's outstanding shares, Penn Treaty says.

Ross published a statement reporting that his hedge fund persuaded Penn Treaty to lower the conversion price to $4.50.

The exchange itself should be good for both Penn Treaty and its investors, Ross says.

"We believe that this is the most attractive alternative available to bondholders and that relieving near term liquidity pressure on the company will facilitate PTA's ability to fund its premium growth," Ross says.

Penn Treaty Sweetens Note Exchange Offer

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Penn Treaty Sweetens Note Exchange Offer

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