Deep Down Reduces Indebtedness by $3,400,000
Deep Down, Inc. (OTC Bulletin Board: DPDW) has redeemed 4,000 shares ($4,000,000 aggregate face value) of Series E Redeemable Exchangeable Preferred Stock for $2,000,000.
The Preferred Stock had a face value and liquidation preference of $1,000 per share, no dividend preference, and was exchangeable at the holder's option after June 30, 2007, into 6% subordinated notes due three years from the date of exchange. The Company has paid the holder $1,400,000 in cash for 2,800 shares ($2,800,000 aggregate face value) of Preferred Stock and agreed to pay 30 equal monthly installments of $20,000, or a total of $600,000, for the remaining 1,200 shares ($1,200,000 aggregate face value) of Preferred Stock.
"With this Preferred Stock transaction, we have reduced indebtedness by $3,400,000 with the use of $1,400,000 in cash today and a monthly installment plan that aggregates to $600,000 in cash over 30 months. We believe the use of 12.5% current coupon, 3% PIK debt to retire a $4,000,000 obligation at 50% of its face value (or $2,000,000) is an excellent use of funds," commented Robert E. Chamberlain, Jr., Deep Down's chairman.
"If you credit the $2,000,000 in savings from the redemption of the Preferred Stock against total expected interest costs of approximately $3,476,098 over the life of our $6,000,000 financing from Prospect Capital Corporation, our net effective cash cost of the borrowing from Prospect is reduced significantly. This use of proceeds was contemplated in our recent financing and further reinforces our commitment to strengthening our balance sheet, improving liquidity, and enhancing shareholder value."