Cinedigm Shares Plunge After Borrowing Deal Unveiled

Wall Street has given a chilly response to Cinedigm’s disclosure of a private $60 million borrowing deal.

Shares hit an all-time low in trading Thursday, declining 33 cents to 93 cents in mid-session. Two years ago, the stock hit an all-time high at $3.06 a share.

The convertible senior notes are due in 2035. Cinedigm plans to use $18.2 million of the proceeds from the offering to repay borrowings and terminate its term loan. It will use the rest of the net proceeds to fund repurchasing shares of its common stock.
Cinedigm warned that the transaction could impact its stock price, noting that debtholders could short the stock.
“The forward stock purchase transaction is generally expected to facilitate privately negotiated derivative transactions between the forward counterparty and holders of the notes, including swaps, relating to our shares of the Company’s common stock by which holders of the notes will establish short positions relating to the Company’s common stock and otherwise hedge their investments in the notes concurrently with, or shortly after, the pricing of the notes,” it said.

Cinedigm Corp. last reported earnings in February, disclosing a 32% jump in revenues to $31.3 million for its third quarter, which ended Dec. 31 from the prior quarter. The company, which is launching ConTV and the Dove Movie Channel, reported a 27% rise in adjusted EBITDA of $15.7 million and announced it had signed new distribution deals for 74 original, cast-driven films with partners including the Asylum, American International Pictures, Great Point Media, Brand Entertainment and Moguldom.

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