‘Rescue loan’ worries exhibitor’s shareholders
Atlanta Business Chronicle - by J. Scott Trubey Staff Writer
For a $30 million company, Premier Exhibitions Inc. has had its share of drama, interim CEO Chris Davino said.
In the past year, the company has faced a fight for shareholder control, unsolicited bids for its richest assets and sinking exhibit attendance.
The top officer of Atlanta-based Premier (Nasdaq: PRXI), the company behind the popular “Titanic Aquatic,” “Bodies ... The Exhibition” and “Dialog in the Dark” exhibitions, said the struggling company is turning things around, but needs a bailout from its largest shareholder to right the listing ship. And there aren’t any other options.
But the deal has caused concerns among some smaller investors.
Premier has struck a deal to sell $12 million in unsecured convertible notes to Sellers Capital LLC, the company’s largest shareholder and leader of a successful proxy fight earlier this year. The loan, which matures in three years or can be converted to 16 million shares of stock, is needed to the keep the company afloat, Davino said.
But it has some investors worried their stake would be diluted, with Sellers Capital’s stake growing from 16.3 percent to 44 percent.
If rejected by shareholders at the company’s annual meeting Aug. 6, the $12 million loan will convert to secured debt and come due in 180 days at 18 percent interest. It’s a lousy choice either way, some investors said, as they would be picking between a diluted investment or losing everything if Premier is unable to pay and is liquidated.
Davino said he believes the board has the shareholder votes necessary to approve the notes, and that with the financing, the company will finally be stabilized. The company also is righting flawed operations.
“I think we’ve covered a tremendous amount of ground, candidly,” he said. “When we got here we were literally a month away every month from hitting the wall.”
The company — and shareholders — have endured a lot in recent years.
The stock price has fallen more than 90 percent from an all-time high of $18.62 in May 2007.
Premier has been battered by recent legal and financial turmoil. It has been locked in litigation over the artifacts in the Titanic exhibition, and its Bodies exhibit has been dogged by allegations the cadavers used are those of executed and tortured Chinese prisoners. The company settled a lawsuit with the state of New York over the matter in May 2008.
Last July, an investor called on Premier to sell itself and liquidate its Titanic artifacts. Sellers Capital chief Mark Sellers, currently chairman of Premier’s board, led a successful proxy fight and wrested control of the company from founder Arnie Geller, whom Sellers Capital accused of mismanagement.
In April, a former executive made an unsolicited bid to buy out Sellers Capital and control the management rights to Premier’s most-prized Titanic assets. For the past few years, a number of executives fled or were fired, and attendance to some shows sank.
Now there’s the issue of the “rescue financing.”
One institutional investor, who declined to be named, said the company has overhead to cut, and it would be more fair for all shareholders to have rights to a capital raise if the company needs liquidity.
The fear among some institutional investors is that the company could be sold. Davino said a sale is not on the table. Even if Sellers converts the note into shares, under terms of the deal it cannot vote them, except in extraordinary circumstances, like a change of control.
Davino said he understands investor fears, but the financing needed wasn’t available from traditional sources.
Davino, a turnaround specialist brought in by Sellers Capital to join the board, took the reins of the company when Geller was fired in February. He said Premier’s problems were typical for a distressed company: great concept but completely out of sorts and lacking the managerial ability to generate cash.
When he stepped in, Davino said Premier had “a high rate of cash burn,” and needed to fix contracts with third-party promoters and venue managers to “control its own destiny.” Several Bodies exhibits were located in venues with overly high fixed costs, while others were locked in storage and not producing money.
“We believe we can get these Bodies working and hopefully making a profit,” he said.
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