Convertible Senior Notes

3 Months Ended

Mar. 31, 2015

6. Convertible Senior Notes

On November 3, 2014, Synergy closed a private offering of $200 million aggregate principal amount of 7.50% Convertible Senior Notes due 2019 (including the full exercise of the over-allotment option granted to the initial purchasers to purchase an additional $25 million aggregate principal amount of 7.50% Convertible Senior Notes due 2019, (the “Notes”). The net proceeds from the offering were $187.3 million after deducting the initial purchasers’ discounts and offering expenses.

The Notes are unsecured, senior obligations of Synergy and bear interest at a rate of 7.50% per year, payable semiannually in arrears on May 1 and November 1 of each year, beginning on May 1, 2015. Accrued interest as of March 31, 2015 and December 31, 2014 was $6.3 million and $2.5 million, respectively. On May 1, 2015 Synergy made its first semiannual interest payment of $7.4 million. The next semiannual payment of $7.5 million is due November 1, 2015. The May 1, 2015 payment was slightly less than a full six months (178 days) because the Notes were issued November 3, 2014.

The Notes will mature on November 1, 2019, unless earlier purchased or converted. The Notes are convertible, at any time, into shares of Synergy’s common stock at an initial conversion rate of 321.5434 shares per $1,000 principal amount of notes, which is equivalent to an initial conversion price of $3.11 per share.

Transaction costs associated with this financing of $12.7 million have been deferred and will be recognized as expense over the expected term of the Notes, calculated using the effective interest rate method. Amortization expense for three months ended March 31, 2015 was $.6 million and there were no such expenses in the three months ended March 31, 2014. A summary of the deferred transaction cost balance, as of and during the periods indicated, is presented below:

($ in thousands)
Deferred financing costs at issuance November 1, 2014	$	12,747
Less: amortization two months ended December 31, 2014	(411		)

Deferred financing costs, Balance at December 31, 2014	$	12,336
Less: amortization three months ended March 31, 2015	(617		)
Deferred financing costs, Balance at March 31, 2015	$	11,719

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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