Cinedigm arranges to exchange 5.5% convertibles for cash, stock, notes

By Wendy Van Sickle

Columbus, Ohio, July 10 – Cinedigm Corp. said it entered into two exchange agreements with holders of about 99%, or $50 million, of its 5.5% convertible notes due 2035 to exchange the convertibles for cash, shares of the company’s class A common stock and second lien notes.

The note exchanges are expected to occur over time and to be completed concurrently with the closing of the previously announced sale of common stock to Bison Entertainment Investment Ltd., a wholly owned subsidiary of Bison Holding Co. Ltd., according to a press release.

Both exchange agreements provide for the holders of the convertibles to exchange their notes for cash and shares of common stock at a ratio of $350 in cash and 73.33 shares per $1,000 of convertibles.

One exchange agreement also provides for the holder to exchange $1,827,000 of its convertibles for $1,462,000 of second lien notes issued under the company’s second lien loan agreement dated July 14, 2016, with Cortland Capital Market Services LLC as agent.

Holders of convertibles may surrender them in exchange for common stock periodically until the closing of the transactions.

Prior to closing the transactions, the company will not issue more than 19.99% of the common stock of the company outstanding as of the date of signing the exchange agreements, according to the release.

At closing, the holders will exchange all of their remaining convertibles for cash and shares such that all of the exchanges with the holders (other than the exchange for second lien notes) reflect the exchange ratio.

Cinedigm has agreed with certain holders that the number of shares of common stock deliverable to them at closing of the transactions is subject to reduction in the event the volume weighted average price of the common stock for the 15 business days prior to the closing of the transactions (the reference price) is greater than $2.50, in which case the number of shares of common stock deliverable will be reduced by multiplying the shares deliverable by a fraction equal to $2.50 divided by the reference price.

In addition, if at the closing of the transactions the reference price is less than $1.50, the company will be obligated to pay those holders additional cash equal to the positive difference between $1.50 and the reference price, in which case the company may also opt to deliver cash in the amount of $1.50 per share of common stock in lieu of issuing any shares to the holder.

The exchange agreement may be terminated under certain circumstances, including if the transactions are not consummated under the stock purchase agreement.

Cinedigm expects to hold a meeting of stockholders in the third quarter of 2017, at which time it will ask stockholders to approve the transactions, including the issuance of the shares under the convertible note exchanges in excess of the 19.99% limit.

The transactions, including the convertible exchanges, are subject to a number of closing conditions, including the receipt of stockholder, lender and regulatory approvals.

“This agreement to retire approximately $50 million of our convertible notes in an accretive exchange transaction is a very positive step for Cnedigm and a significant element of our recently announced strategic investment by Bison Capital,” Chris McGurk, Cinedigm’s chairman and chief executive officer, said in the release.

Cinedigm is a Los Angeles-based independent content distributor.

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