Clarient, an anatomic pathology and molecular testing services resource for pathologists, oncologists and the pharmaceutical industry, has entered into a USD50m convertible preferred st
Clarient, an anatomic pathology and molecular testing services resource for pathologists, oncologists and the pharmaceutical industry, has entered into a USD50m convertible preferred stock private placement with Oak Investment Partners.
USD40m of the preferred stock will be sold in two initial tranches. The additional USD10m of preferred stock will only be sold upon further mutual agreement of the parties.
The company received USD29.1m in proceeds from the first tranche. The proceeds of this first tranche were used to retire approximately USD23.8m of Clarient’s existing debt obligations, pay transaction expenses, and provide working capital.
It is expected that the second tranche will close within 60 days. The second tranche proceeds of USD10.9m will be used to retire any remaining debt obligations of the company to Safeguard Scientifics and provide additional working capital to fund the company’s growth.
The purchase price of the preferred stock equates to an effective purchase price of USD1.90 per share of underlying common stock, which represents an 11 per cent premium to Clarient’s closing price of USD1.71 on 25 March 2009. Under the terms of the private placement, Oak may convert one preferred share into four shares of Clarient common stock.
After one year, the preferred shares convert automatically into common shares if Clarient’s common stock trades above USD4.75 per share for 20 days in any 30 consecutive trading-day period. After four years, Clarient may redeem all unconverted preferred shares at USD7.60 per share, subject to certain adjustments. The preferred shares do not accrue dividends, and there are no warrants being issued in this transaction.
Clarient’s vice chairman and chief executive officer Ron Andrews says: ‘Our transaction with Oak is of significant value to shareholders. It will allow the retirement of most of the Company’s outstanding debt, avoid approximately USD11.0m in interest expense and fees for the remainder of 2009, provide added resources to fuel growth, and will move Clarient closer to the goal of sustained profitability at the net income level. Four years ago, Clarient embarked upon a new anatomic pathology and molecular testing strategy with no laboratory revenues, and financing alternatives were few and expensive. But today, Clarient is in a very different situation. We are rapidly approaching a USD100m annual revenue run rate and positive cash flow, which has allowed us to secure more favourable financial terms, thereby enabling our robust revenue growth to reach the bottom line.’
Upon the closing of the first tranche, the existing USD30m mezzanine debt facility from Safeguard was amended to reduce the borrowing availability to USD10m. The balance outstanding under the mezzanine facility, after the application of USD14m of the first tranche proceeds, is approximately USD5.5m.
It is the Company’s plan to retire the remaining outstanding balance of, and terminate, the mezzanine facility upon the closing of the second tranche. The mezzanine debt facility bears an annual interest rate of 14 per cent and would require the issuance of a substantial number of warrants beginning 1 June 2009, if the facility is not terminated earlier. There is no penalty for early termination or prepayment of the mezzanine debt facility. The company will maintain its USD8m Gemino Healthcare Finance secured credit facility.
Ann H. Lamont, managing partner at Oak, and Andrew W. Adams, vice president at Oak, have been nominated to Clarient’s nine-member board of directors, replacing Michael J. Pellini, Clarient’s president and chief operating officer, and Jon Wampler, both of whom have agreed to step down from the board to facilitate the transaction.
