Clean Diesel Technologies, Inc. (NASDAQ: CDTI) has come up with a plan to strengthen its balance. The company recently announced that it will convert nearly $8 million in debt into equity. The company’s balance sheet reflected total debt of $11.7 million at the end of the last quarter.
Clean Diesel Technologies, Inc. (NASDAQ: CDTI)’s lender Kanis S.A has agreed to take equity stake in CDTI in place of its $7.5 million debt. As such, the debt owed to Kanis S.A is being converted to equity at the rate of $0.3243 per share, which is near the stock’s 52-week low.
In another debt to equity transaction, CDTI is converting $0.5 million promissory note into common stock shares. The note was issued to the company’s director by the name Lon E. Bell. As with Kanis S.A’s debt, the note is being converted at the rate of $0.3243 per share.
Shareholder approval – Clean Diesel Technologies, Inc. (NASDAQ: CDTI)
In both cases of debt-to-equity conversation, shareholders of Clean Diesel Technologies, Inc. (NASDAQ: CDTI) are required to approve the transactions. As such, the company said it plans to convene a special meeting of its stockholders in August to seek approval of the proposal to convert the nearly $8 million debt to common stock.
Such debt–to-equity transactions have the impact of diluting value for existing shareholders. But CDTI is hoping that its shareholders will see the benefit that the transaction is giving it so that they can approve the deal. Converting debt to shares provides the company with an opportunity to lower its borrowing costs. There is also the benefit of increased financial flexibility because the funds that would have been directed to repaying debt plus interest can be channeled to more productive courses.
Besides successfully negotiating to convert $8 million debt into common stock, CDTI said it has reached a deal for a $1.25 million credit from Haldor Topsoe. In addition to the funding, the two entities have also signed other commercial agreements relating to CDTI’s technology.
Clean Diesel Technologies, Inc. (NASDAQ: CDTI) generated revenue of $9.7 million and EPS loss of $0.15 in 1Q2016. While revenue declined from $10.3 million, EPS loss improved from $0.21 a year ago.