Clarient Stock Deal Frees Up Cash for Safeguard Scientifics

Safeguard Scientifics Inc. has received $19.5 million in cash, and freed up another $12.3 million in cash due to one of its portfolio companies completing the second part of a private placement of convertible preferred stock. Safeguard, a Pennsylvania-based investor in information-technology and life-sciences companies, received the $19.5 million from Clarient, a provider of anatomic pathology and molecular testing services. Clarient had borrowed that amount on a $30 million mezzanine debt facility it had with Safeguard.

The second part of Clarient’s private placement, which was for $10.9 million, extinguished the debt facility and released $12.3 million in cash that Safeguard had put up as collateral to support its guarantees of Clarient’s debt. The money also eliminated Safeguard’s remaining commitments to provide additional capital to Clarient. The second part of the private placement closed Thursday. The first part, for $29.1 million, closed on March 26. Oak Investment Partners, a Connecticut-based venture capital firm, may still purchase another $10 million in convertible preferred stock from Clarient in the private placement. The private placement gives Oak effective control of approximately 21 percent of Clarient’s outstanding shares.  It also extinguishes all of Clarient’s outstanding debt, aside from receivable financing, and eliminates interest expense, fees, and amortization for the rest of the year. The elimination of these expenses provides Clarient with additional working capital and moves the company toward its goal of achieving profitability in 2009. Earlier this month, Clarient announced a 41 percent increase in revenue for the first quarter of 2009, marking the company’s 19th consecutive quarter of revenue growth.

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