San Diego, CA – July 22, 2015 – Turtle Beach Corporation (NASDAQ: HEAR), the leading-edge audio technology company and #1 in gaming audio, today announced the successful completion of a new $15 million term loan and amendments to its existing subordinated notes, $13.8 million of which will remain outstanding, which taken together with its existing $60 million revolving credit facility are anticipated to fund the Company’s growth for the next several years.
Highlights:
• Secured new $15 million term loan with Crystal Financial LLC that matures in 2019 and bears interest at LIBOR plus 10.25%
• Amended terms of $13.8 million of existing subordinated debt held by affiliates of Stripes Group LLC to extend maturities and lower long-term interest rates in exchange for warrants representing 4% of outstanding shares with a strike price 20% above the closing price on July 21, 2015
• Total debt of $28.8 million outlined above is in addition to the Company’s existing $60 million global credit facility with Bank of America Merrill Lynch
“We are very pleased to have successfully secured this additional capital which along with the amendment to our subordinated debt results in $28.8 million in long-term debt in addition to our $60 million working capital line,” said Juergen Stark, Chief Executive Officer, Turtle Beach Corporation. “With the term loan in place and maturity of all sub-debt extended, Turtle Beach is now well-positioned to support future growth. The combination of our global credit facility, long-term debt, and cash flow generated by our gaming headset business will allow us to cover start-up expenses related to the upcoming launch of HyperSound Clear™ and one-time costs associated with the transition to our new manufacturing partner. At the same time, our improved capital structure provides increased liquidity to fund our annual working capital needs, particularly during the gaming industry’s seasonal slow period in the first half of the year. We are excited to move forward with the improved capital structure in order to best capitalize on the many opportunities that lie ahead.”
The net proceeds of the $15 million Term Loan with Crystal Financial will be used to repay $4 million of the outstanding subordinated debt held by affiliates of Stripes Group LLC (“Stripes”) and for general corporate purposes. $13.8 million of subordinated debt held by affiliates of Stripes will remain outstanding with maturities extended to 2019 and an interest rate of LIBOR plus 10.25% to align with the new term loan. The Company approved a grant to those affiliates of Stripes for warrants to purchase approximately 1.7 million shares of common stock with an exercise price set at $2.54, a 20% premium to the closing price on July 21, 2015, as consideration for the amended terms. The warrants represent 4% of the currently outstanding shares and increase the number of fully diluted shares from approximately 48.7 million to approximately 50.4 million. In connection with the term loan, the Company also amended its revolving credit facility with Bank of America Merrill Lynch.
Stripes is a private equity firm focused on internet, software, healthcare IT and branded consumer products businesses and is the largest shareholder of Turtle Beach. Kenneth A. Fox, a director of Turtle Beach, is the managing general partner of Stripes, and Ronald Doornink, Chairman of the Board of Turtle Beach, is an operating partner of Stripes. Collectively, affiliates of Stripes Group LLC own, of record, approximately 43.7% of the Company’s outstanding shares.
Crystal Financial LCC, a portfolio company of Solar Capital Ltd., is an independent commercial finance company that provides senior and junior secured loans for both asset-based and cash flow financings to middle market companies. It has underwritten, closed and managed more than $20 billion in secured debt commitments across a wide range of industries. For more information please visit www.crystalfinco.com.
Additional information will be available in the Current Report on Form 8-K the Company will file with the SEC with respect to the transactions.