Affymax, Inc. (Nasdaq:AFFY) today announced the completion of the sale at par value of all auction rate securities (ARS) held by UBS AG and its affiliates (UBS) in a transaction which generated net proceeds of $5.0 million to Affymax, after payment of $5.4 million from the proceeds to retire a loan due to UBS. From April 1, 2010 through June 30, 2010, $3.7 million of the UBS ARS were settled at par value resulting in a corresponding reduction in the balance of UBS ARS and related loan since the first quarter 2010. The company now has no debt liability on its balance sheet.
In connection with settlement arrangements between UBS and various U.S. regulatory agencies, including the Securities and Exchange Commission relating to sales and marketing practices of ARS, in November 2008, the company accepted an offer from UBS AG of Series C-2 ARS Rights relating to the ARS that were purchased through UBS. These ARS Rights provided the company the option to require UBS to repurchase, at par, the ARS beginning on June 30, 2010, or prior to such date, UBS had the option to buy, at par, the ARS. In connection with the settlement, UBS offered a loan which the company accepted in December 2009. The loan was secured by the ARS and ARS Rights as collateral and was subject to collateral maintenance requirements.
After the sale to UBS, the company continues to hold ARS with a fair value of $3.8 million that remain classified as long-term securities. These remaining ARS are comprised of a municipal issuance collateralized by student loans guaranteed by the U.S. government under the Federal Family Education Loan Program and a closed end preferred issuance.