New York, Oct. 21 - Castle Brands Inc., the maker of premium branded spirits, today announced that it closed the previously announced private placement pursuant to the purchase agreement entered into on October 11, 2008 with investors led by Dr. Phillip Frost, I.L.A.R. S.p.A., the owner of Pallini liqueurs, and Vector Group Ltd., and received a cash infusion of $15 million.
Under the terms of the purchase agreement, the Company issued 1,200,000 shares of newly created Series A Convertible Preferred Stock for a price per share of $12.50 (which is, in effect upon conversion, $0.35 per share of the Company’s common stock). After approval by the Company’s stockholders at a special meeting of an amendment to the Company’s charter to increase its authorized shares, each outstanding share of Series A Preferred Stock will be automatically converted into 35.7143 shares of the Company’s common stock.
Concurrently with the closing, all of the Company’s 6% convertible notes, in the principal amount of $9 million, due March 1, 2010, plus accrued interest, were converted into shares of Series A Preferred Stock at a per share price of $23.21 (which is, in effect upon conversion, $0.65 per share of common stock). In addition, substantially all of the outstanding principal of Castle Brands (USA) Corp.’s 9% senior secured notes, in the principal amount of $10 million, due May 31, 2009, plus accrued interest, were converted into shares of Series A Preferred Stock at a per share price of $12.50 (which is, in effect upon conversion, $0.35 per share of common stock).
The closing of the private placement and the conversion of the notes (and subsequent automatic conversion of the Series A Preferred Stock issued in connection therewith) will result in the Company’s issuance of approximately 86 million shares of common stock. Holders of Series A Preferred Stock (comprised of the investors and the converting note holders, many of which are current stockholders of the Company) own, excluding present ownership, approximately 85% of the Company’s common stock on an as-converted basis.
Mark Andrews, Chairman of the Board, stated, “We are very glad to have successfully completed this transaction, particularly in such a difficult financial environment. It brings a critically important equity infusion and also eliminates virtually all of our debt. Together, these developments put our company on much firmer footing, which will enable us to pursue our original vision of building our own premium brands, supporting our existing agency brands, pursuing new agency relationships and making brand acquisitions.”