Under the terms of the deal, Cinedigm will sell Bison Capital 20 million shares of Class A common stock for up to $30 million. (The company currently has about 11.8 million shares outstanding and a market capitalization of $24 million.) In addition, Bison Capital has committed to loan the company $10 million for additional working capital purposes within 60 days of the stock sale closing.
A significant portion of the cash from Bison Capital will go toward paying down debt. Cinedigm said it is advanced discussions with debt holders representing $50 million in debt to exchange their long-term notes for cash, stock or a combination of the two.
Cinedigm chairman and CEO Chris McGurk said the company expects to work with Bison Capital to continue to refinance or retire the remaining debt on the balance sheet.
“We think this is exactly what the doctor ordered for the company,” McGurk said. “We believe Bison Capital’s significant investment and potential additional refinancing and debt retirement will be a transformative event.”
Also Thursday, Cinedigm reported results for the quarter and full year ended March 31, 2017, its fiscal fourth quarter of 2017. For the fiscal 2017, revenue declined 13.5% to $90.4 million and the company posted a net loss of $15.5 million (versus a net loss of $42.1 million in the year-earlier period).
Both Bison Capital and Cinedigm see an opportunity to expand Cindedigm’s content distribution, digital cinema and over-the-top businesses into China, as well as launch Chinese OTT networks in North America. “Strategically, we think it’s an enormous move for the company. Part of the plan is to open the door into China, particularly in the digital space,” said McGurk, noting that Cinedigm controls a library of 52,000 independent films and TV episodes.
According to Bison Capital founder Peixin Xu, despite the rapid growth in China’s media and entertainment sector the country remains underserved in terms of content quality and diversity. “Through our investment, we will leverage Cinedigm’s content access and distribution capabilities to bring more premium, independent content into the China market,” he said in a statement. “Our long-term goal is to help build Cinedigm into a leading distributor of global content, as well as help the company unleash the residual value of the digital cinema equipment.”
Cinedigm currently operates three OTT channels in the U.S.: the Dove Channel, with family-oriented programming; CONtv, catering to Comic-Con fans with 2,500 hours of original programming, films and TV episodes; and Docurama, aimed at documentary buffs with over 1,200 titles. According to the company, the three channels currently have approximately 3.98 million app downloads, 797,000 registered users and 85,000 active subscribers. Cinedigm plans a fall 2017 launch for its fourth OTT channel — WHAM Network, a 24-hour news, information and entertainment channel for eSports and gamers.
Bison Capital, founded in 2014, focuses on media and entertainment, health care, and financial services industries. The firm has invested in 14 companies to date, including Bona Film, a Chinese movie production and distribution company and movie theater operator; Hua Sheng Tai Tong TV Production, a TV production company in China; and Xunlei, a Chinese downloading service and entertainment portal operator.
With the investment, Bison Capital will be entitled to designate two additional members to Cinedigm’s board, expanding the board to seven members.
Cinedigm will hold a stockholders meeting in the third quarter of 2017 to seek approval for the Bison deal. Regions Securities acted as financial adviser and Kelley Drye & Warren LLP acted as legal counsel to Cinedigm. Shearman & Sterling LLP advised Bison on the transactions.