Clarient, an anatomic pathology and molecular testing services resource for pathologists, oncologists and the pharmaceutical industry, has completed the second tranche of a private plac
Clarient, an anatomic pathology and molecular testing services resource for pathologists, oncologists and the pharmaceutical industry, has completed the second tranche of a private placement of convertible preferred stock with Oak Investment Partners.
The second tranche for approximately USD10.9m, combined with USD29.1m in proceeds from the first tranche that closed 26 March 2009, will retire USD31m in Clarient borrowings and bolster working capital.
"As we stated in the initial financing announcement, this transaction strengthens Clarient’s financials, streamlining our balance sheet and moving us tangibly closer to our goal of sustainable profitability," says Ron Andrews, vice chairman and chief executive officer. "Oak is an excellent strategic partner with deep expertise in life sciences that will help Clarient continue its robust growth and expand our share of the dynamic cancer-diagnostic services market."
Clarient intends to retire a USD10m mezzanine debt facility from Safeguard Delaware, a wholly owned subsidiary of Safeguard Scientifics, a provider of growth capital for entrepreneurial and innovative technology and life sciences companies. The mezzanine debt would have matured 28 February 2010.
In addition, the facility carries an annual interest rate of 14 per cent and would have required the issuance of a substantial number of warrants beginning 1 June 2009, if it were not terminated before that date.
"This transaction has the added benefit of reducing interest expense, fees and amortization expense by USD12m for the remainder of 2009 which greatly enhances Clarient’s potential for net earnings by year end," Andrews says.
The purchase price of the Clarient Series A convertible preferred stock was USD7.60 per share, which equates to an effective purchase price of USD1.90 per share of underlying common stock or approximately market price at the date the financing was agreed upon.
Under terms of the private placement, Oak may convert at any time one convertible preferred share into four shares of Clarient common stock. After one year, preferred shares, which do not accrue dividends, convert automatically into common shares if Clarient shares trade above USD4.75 per share for 20 days of a 30 consecutive trading-day period. After four years, Clarient may redeem any unconverted preferred shares at USD7.60 per share plus any undeclared but unpaid dividends.
Upon mutual agreement after the closing of the second tranche, Oak may purchase up to an additional USD10m of Clarient preferred shares, providing the company access to capital for strategic opportunities that would accelerate the company’s growth.
The private placement gives Oak effective control of approximately 21 per cent of Clarient’s outstanding shares and reduces Safeguard’s position to approximately 47 per cent from nearly 62 per cent at 31 December 2008. With certain exceptions, preferred shares will be voted with common shares on an as-converted basis. Safeguard first took an ownership stake in Clarient in 1996, increasing its position over time.
