WILSONVILLE, OR -- Over the protest of its largest shareholders, Mentor Graphics issued $253 million in convertible debt, a move the company says will save money while having little effect on a possible sale.

The bonds sold by the printed circuit board design and IC software company are priced at 4% interest rates. In an SEC filing, Mentor said it would use the $245 million in net proceeds to pay off $196.5 million in outstanding 6.25% debentures.

Activist investor Carl Icahn, Mentor's largest shareholder, criticized the move, asserting the bonds would dilute the value of the company, making it less attractive to potential buyers. (Icahn has made stalking horse offer of $17 per share for Mentor, or roughly $1.9 billion; Mentor declined the offer.) Last week, he called the pending decision a "blatant attempt to derail" a possible acquisition.

Mentor in its filing countered that the move wouldn’t block any potential deal. While under one scenario the bonds could be converted to shares -- which would thus reduce the value of existing stock -- this would occur only if the buyer paid cash. The company added that such an occurrence would only modestly affect the share value.

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