Cannondale's new financing facility eliminates any defaults under its prior facility and will permit Cannondale to reclassify its debt to long term on its balance sheet.
"We are very pleased to obtain this new financing from Pegasus and to continue our financing relationship with CIT," said Cannondale founder and CEO, Joe Montgomery.
"This financing facility will help the company maintain its leadership position as bicycling's top innovator."
Gregory Gatta, vice president of Pegasus explained what attracted the firm to Cannondale.
"The company has a premium global brand in its core bicycle business, with stable historical performance and we believe that it has upside value that today's market is not recognizing. This stable platform, combined with the potential in their high-growth motorsports business make an attractive combination for an investor. We're extremely excited to be working with Cannondale through this funding package and stand ready to consider future investment in the company, should it be needed to help Cannondale realize its long-term goals."
Cannondale has sold to Pegasus $25 million of senior notes and warrants to purchase an aggregate of 2,944,552 shares of Cannondale's common stock. Net proceeds will be used to pay down approximately $10,320,000 in term debt and the remaining net proceeds of approximately $11,719,000 will be available for working capital needs.
The senior notes are due on July 25, 2007. Cannondale may prepay the senior notes without penalty at any time. Payments of interest at the rate of 7.5 percent per annum are payable in cash and payments of interest at the rate of 12.5 percent per annum are payable in additional senior notes, or at Cannondale's option, in cash.
The warrants are exercisable through July 26, 2012 at an exercise price of $2.05 per share. If Cannondale repays the senior notes in full by January 26, 2004, warrants to purchase 1,972,849 shares will be cancelled. If the senior notes are not repaid in full by that date, but are repaid in full by July 26, 2004, warrants to purchase 1,472,276 shares will be cancelled. The warrants subject to cancellation are not exercisable.
In addition, Cannondale has amended its existing revolving credit facility with CIT. The amended facility provides Cannondale with a five year revolving line of credit. The amount of the revolving line of credit is the lesser of $35 million or a percentage of eligible receivables and inventories.
Pegasus Capital Advisors, L.P., based in Greenwich, Connecticut, is a private equity investment firm with approximately $800 million under management.