Baan has reached an agreement to raise nearly $41m (£26m) in equity funding to try to shore up its position on the Amsterdam Stock Exchange.
The ailing supplier of enterprise resource planning applications, which has been without a chief executive for two months, will issue 6.5 million shares to unidentified institutional investors in exchange for $40.86m worth of debt that will not mature until December.
The move will increase the equity on the company's balance sheet by the value of the shares.
Last month the Amsterdam stock exchange gave Baan a month to boost its shareholder equity following the erosion of the company's value. Shareholders have started to desert the company after it reported six straight quarters of losses.
If Baan had not succeeded in convincing the debt holders to switch, the stock exchange would have put the company's stock in a 'special listing'.
Baan is paying a high price to avoid the embarrassment of such a listing. The number of shares being issued under the debt for equity deals is worth more than three times what the shares were originally expected to be worth.
The debt holders are receiving 160 shares for each $1000 proffered and the number of shares per $1000 will revert to 45.45 when the conversion offer concludes.
Baan also said it would extend the conversion offer to investors holding another $149m worth of the same notes. The wider offer is expected to start by the end of this month and last until the end of May.
In February, the supplier announced a second year of big losses. For the whole of fiscal 1999, Baan posted a net loss of $289m compared with losses of $315m for the previous year. Revenue fell from $736m in 1998 to $635m last year.
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