Angiotech to sell notes in new unit to cut debt

The board of directors of Canada's Angiotech Pharmaceuticals has authorized a transaction to create a subsidiary, Angiotech Pharmaceutical Interventions, that will include all the assets of the parent firm other than the intellectual property and royalty revenue related to the Taxus coronary stent system, which is sold by Boston Scientific.

The company has entered into a note purchase agreement with Ares Management and New Leaf Venture Partners, under which the investors will buy between $200.0 million and $300.0 million, at the company's option, of notes issued by API that will be convertible into a significant minority equity interest. Angiotech and its shareholders will benefit from the future performance of API based on retaining a significant continuing equity interest in the newly-formed subsidiary. The net proceeds from the convertible notes will be used to reduce Angiotech's existing debt.

In the year to July 3, shares in Angiotech fell 58% to $2.95 in Nasdaq Stock Market composite trading. The Vancouver-based firm hopes to unlock the value in its non-Taxus assets to raise enough finance to address its capital structure issues with more limited dilution than would likely be possible using security structures available on a consolidated basis.