Delcath Systems, Inc. (NASDAQ: DCTH) has successfully closed the earlier announced secured convertible notes fundraiser. The company issued $35 million worth of notes to institutional investors in a pre-negotiated deal. DCTH said the funds it was raising through the notes didn’t carry any ordinary interest.
8% issue discount
According to Delcath Systems, Inc. (NASDAQ: DCTH), the notes it sold carried an 8% original issue discount. As such, a $1,000 principal amount had a purchase price of $920. Therefore, the company generated $32.2 million in net proceeds from the note offering after factoring in the original discount. The discount explains the lack of typical interest on the notes.
Delcath Systems, Inc. (NASDAQ: DCTH) Retiring the notes
Delcath Systems, Inc. (NASDAQ: DCTH) said that although the convertible notes it was issuing didn’t carry ordinary interest, it agreed to repay the amounts in equal monthly installments. The repayment of the notes will beginning in the seventh month from the date of issuance. As such, the company has several months of grace period before it can start worrying about repaying the notes.
Converting into common stock
But the notes can also convert into DCTH’s common stock. When it comes to conversion, the note will convert at the rate of $0.2743, which is expected to be about 110% of the market price at the time of conversion.
Access to the funds
Initially, Delcath Systems, Inc. (NASDAQ: DCTH) will be able to access $3 million of the funds raised through the note immediately. However, the balance will be restricted and the company will only have access to them in a gradual process.
Using the money
Delcath Systems, Inc. (NASDAQ: DCTH) hopes to use the money for a variety of product development programs. One of the targets for the funds is in the Phase 2 and Phase 3 study of its Melphalan/HDS. Besides channeling the funds to clinical programs, the company also hopes to spend a portion of the money on operational activities.