Enzo Biochem Inc. on Wednesday said it is offering holders ofthe company's debentures a new proposal to convert theirnotes to equity at a lower price in an attempt to restructure the$30 million in defaulted debt.

The Farmingdale, N.Y., company will temporarily reduce theconversion price of its 9 percent convertible subordinateddebentures due in 2001 to $5 from $12.75. The lower price willapply from Jan. 2 through Jan. 31, 1992, but Enzo said it mayextend the period at its discretion.

Enzo said the "Ad Hoc Committee of Debentureholders,"representing a majority of the outstanding debentures, hasindicated it supports the proposal.

Enzo shares (AMEX:ENZ) lost $1.13 on Wednesday, closing at$2.88. The stock soared $4.50 to $5.63 on Dec. 4 after thecompany announced that its Enzo Diagnostics Inc. subsidiaryhas begun marketing to the research community a test fordirect detection of the AIDS virus.

Under the terms of the proposal, each $1,000 principal amountof debentures will be convertible into 200 shares of commonstock instead of 78 shares obtainable prior to and after theprice reduction period.

Prior to the proposed offer, there are 11.4 million shares ofcommon stock outstanding on a fully diluted basis. Ifsubstantially all the bonds are converted, there would be 17.3million shares outstanding.

Assuming complete conversion, Enzo's current liabilities wouldbe reduced by about $34 million, including principal value,unpaid interest and the premium with respect to a "put" optiondebenture holders may have exercised in March.

Net worth would be increased by about $33 million, accordingto the company, with debt erased from the balance sheet andinterest expenses reduced by about $2.7 million annually.

If substantially all the debentures aren't converted and theremaining debt holders demand immediate payment, Enzo saidit will explore other avenues for restructuring the debt,including a Chapter 11 filing.

The proposed deal supersedes an earlier plan to create a newbond package that would have exchanged the old bonds fornew bonds. To secure acceptance of the original bond-for-bondexchange, Enzo had arranged a prepackaged Chapter 11settlement. That has also been superseded by the newproposal.

For the year ended July 31, Enzo lost $11.6 million, or $1.02 pershare, on revenues of $20.2 million. The operating loss was $6.2million.

-- Karen Bernstein BioWorld Staff

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