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Netlist Inc. Message Board

  • cherk_on cherk_on Jul 18, 2013 9:35 AM Flag

    Keys points from the new financing deal

    * $15m speaks volume about Fortress Investment Group (FIG)'s believe in NLST's IP.

    * NVvault IP excluded from deal (I personally consider this point especially important!)

    * Dilution is minimal even with warrants and IP revenue sharing considering that it will give FIG a vested interest in helping NLST succeed in monetizing their IP.

    * Financial stability ensured for at least the next 18 months.

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    • Here's why I think this is a great financing deal given the situation NLST is in.
      1. 11% interest rate is a fair rate considering the company's risk profile and revenue/lost from the past year.

      2. "Interest only payment" for the next 18 months ensures preservation of cash as much as possible to give time for NVvault/EXPRESSvault and HyperCloud revenue to ramp up.
      3. NVvault IP was excluded from the deal.

      4. The IP revenue sharing and warrants are pretty standard and is really the only reason why a firm like Fortress would lend because again, such firms do not lend the money just for the interest income since 11% would not be an acceptable margin for this kind of risk and it would also not be enough to support the cost structure at Fortress. While this does dilute the shares/future profits, it is better than a pure stock offering which would have definitely tank the stock price. Remember how bad the stock offering/warrants from Dec 2012 was and how little cash they raised that time?

      5. By using about half of the $6 million loan from Fortress to pay back Silicon Valley Bank (SVB), it proved to SVB that NLST can get financing when needed and therefore were willing to relax some of the covenants and also basically back to being current with this lender. That means NLST can draw on the lower interest rate revolver from SVB for working capital when needed instead of the higher interest revolver from Fortress. The other half of the $6 million from Fortress would add to the cash balance. Therefore they will not need the other $4 million term loan and $5 million revolver from Fortress for awhile. I suspect they might only draw on them just enough to make the cash balance look good on 12/31/13 if necessary.

      For anyone who thinks this is a bad deal, explain to me how it could have been better? Be realistic!

    • If Inphi was hoping NLST would accept a small settlement when NSLT is in financial stress, they can forget about that now! NLST can now afford to fight them all the way until LRDIMM revenue are in the $billions if they had to.

      Same goes for Google. Google will need to new servers that include NLST IP before NLST are in financial stress again (if ever).

    • Firms like Fortress Investment Group (FIG) does not give out these type of loans just for the interest income. They will provide NLST with contacts/connections, advice/guidance, etc... to help NLST succeed.

 
NLST
1.31+0.04(+3.15%)Jul 25 4:00 PMEDT

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