Turtle Beach retires $19.3 million 8% series B preferreds in exchange

By Susanna Moon

Chicago, April 27 – Turtle Beach Corp. said its subsidiary VTB Holdings, Inc. exchanged about $19.3 million of series B preferred stock for common stock and pre-funded warrants.

In exchange, holders received about 1,857,143 shares with a market value of $8.4 million, based on the closing price of the company's common stock on April 24, according to a press release.

Specifically, the company carried out a series of transactions as follows:

• Retired 8% series B preferred stock issued by VTB Holdings with a redemption value of about $19.3 million as of March 31;

• The Special Situations Funds and 180 Degree Capital Corp. purchased the series B preferred stock from the previous owner and subsequently exchanged the preferreds for 1,307,143 newly issued shares and pre-funded warrants exercisable for 550,000 shares;

• The company's total diluted share count increases to about 14.2 million shares taking into account full exercise of the pre-funded warrants, with public float increasing to about 8.7 million shares; and

• Litigation against the company brought by the former series B preferred stockholder is settled for an additional $950,000 cash payment and the right to receive a contingent future payment of $1.25 million if the company completes a change-of-control transaction meeting specific requirements within three years.

The series B preferreds were previously reported as a long-term liability of the company and, as of Dec. 31, 2017, represented about 41% of the company's total long-term debt and preferred stock.

Lake Street Capital Markets is the placement agent.

“We facilitated a transaction to retire, at a discount in excess of 50%, a nearly $20 million liability, which was growing at 8% per year, in exchange for common stock and pre-funded warrants,” Juergen Stark, chief executive officer of Turtle Beach, said in the press release.

“On top of the recent renegotiation of our term loan, revolver, and subordinated notes, this transaction represents another significant improvement of our balance sheet and is expected to result in a significant reduction in non-cash interest expense going forward.”

Turtle Beach is a San Diego-based sound card and headset manufacturer.

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