By Angela McDaniels
Tacoma, Wash., Nov. 22 – TetraLogic Pharmaceuticals Corp. issued new convertible preferred stock in exchange for a portion of its 8% convertible senior notes due 2019 as part of a plan to avoid bankruptcy, according to an 8-K filing with the Securities and Exchange Commission.
The Paoli, N.Y.-based clinical-stage biopharmaceutical company has been unable to launch a product and is running out of cash.
A search for transactional and strategic alternatives lead to the decision to sell substantially all of the company’s property and assets to Medivir AB for $12 million of cash at closing plus future milestones and earn-out payments.
The initial proceeds will be used to redeem an equal amount of convertible notes, and any future payments will be applied toward paying down the remaining convertible notes.
As of Oct. 29, the company had $5.33 million of available cash and no revenues.
The company does not expect to have enough cash on hand to make the Dec. 15 interest payment on the convertible notes. If not for the provisions of the note exchange agreement, the convertible notes would be in default and subject to acceleration by the noteholders.
In addition, if the asset sale is not completed, the company will be in default under the convertible notes as a result of the delisting of its common stock from the Nasdaq Global Market, effective Nov. 24. The company is not in compliance with Nasdaq’s minimum market value rule, $1.00 minimum bid price requirement or $15 million minimum market value rule.
The company said that if the asset sale is not completed, it will have limited alternatives and those alternatives may include a bankruptcy and liquidation of the company.
Exchange agreement.
The company issued $2.2 million of 8% series A convertible cumulative preferred stock in exchange for the cancellation of $2.2 million principal amount of the convertible notes.
The exchange was made on Nov. 21 under an agreement reached with the holders of 100% of the convertible notes on Nov. 14.
The noteholders waived any put right in connection with the suspension of trading and delisting of the common stock and agreed to receive interest in kind instead of in cash.
The noteholders also agreed to waive the conversion rights of the notes and extend the maturity date to June 15, 2024.
These waivers and extensions are conditional on the completion of the asset sale.
Following the exchange, $41.55 million principal amount of the convertible notes plus $1,322,222.49 of accrued interest as of Oct. 31 remains outstanding.
As part of the exchange agreement, the company agreed to use the $12 million of cash proceeds from the sale to Medivir to redeem $12 million principal amount of the remaining convertible notes in priority to any payments to holders of capital stock, including the preferreds.
The redemption will leave $29.55 million principal amount of convertible notes outstanding and $1,818,055 of accrued interest.
Medivir will pay future milestones of up to $153 million based on the development and commercialization of TetraLogic’s product candidates and earn-out payments that become payable once specified annual sales are achieved.
Any future contingent payments, if received, will be used first to pay all remaining accrued obligations under the remaining convertible notes until paid in full and then all accrued dividends and other amounts on the outstanding preferreds. Once all accrued dividends and other amounts owed on the preferred stock have been paid in full, the holders of the preferreds will also be entitled to share equally with the common stock any additional dividends or other distributions on an as-converted basis.
All noteholders have consented to the asset sale in the note exchange agreement, and all preferred holders have agreed to vote all of their preferreds at the special meeting in favor of the asset sale.
As a result of the sale, the company will terminate all remaining employees no later than Dec. 1, and it will voluntarily deregister its common stock.
Preferred stock terms
The 12,222,220 convertible preferreds have a liquidation preference of $0.18 each.
Each preferred is convertible into one share of common stock during the period beginning on the business day immediately following the later of the date on which the common stock has been deregistered and the company receives a milestone or earn-out payment from Medivir.
Dividends are payable semiannually. In addition, if the company declares or pays a dividend or distribution on its common stock, it will simultaneously declare and pay a dividend on the preferreds on a pro rata basis with the common stock, determined on an as-converted basis.
The preferreds are non-callable.
| Issuer: | TetraLogic Pharmaceuticals Corp.
|
| Issue: | Series A convertible cumulative preferred stock
|
| Amount: | $2.2 million
|
| Shares: | 12,222,220
|
| Price: | $0.18
|
| Dividends: | 8%
|
| Call option: | Non-callable
|
| Settlement date: | Nov. 21
|
© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere.
For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.
