a21 Re-Allocates Cash, Explores Strategic Alternatives

Posted on 2/15/2008 by Julia Dudnik Stern | Printable Version | Comments (0)

a21, the owner of the ArtSelect, SuperStock and MediaMagnet brands, is deferring quarterly cash interest payments on $15.5 million Secured Convertible Term Notes. The cash will be used for short-term operational enhancements and strategic initiatives.

Under a new waver agreement, cash payments originally due to noteholders in January and April 2008 will be settled with new notes in the aggregate principal amount equal to the interest due. The company stated that the terms of the new notes are substantially the same.

In addition to re-allocating liquid assets, a21 is exploring other financial and strategic alternatives. To assist, it has engaged the services of Regency Strategic Advisors, a Florida-based investment bank.

The company said these initiatives will drive growth. Last September, a21 cited the same goals when it laid off 20 employees and consolidated ArtSelect operations from Iowa to Florida. This restructuring freed up about $1 million in operating capital and came on the heels of a 7% drop in second-quarter revenues.

The launch of a21's latest stock offering, MediaMagnet, did not reverse the downward slide of the company's stock. The still-in-beta Web site has not improved overall revenues, with a21 posting disappointing third-quarter results. Revenues were down 5.5% from previous quarter and 9% from the same time period of the previous year.

Reports filed by a21 executives in November expressed doubt about the company's ability to continue business as usual, and the probability of needing to raise cash from equity and debt financing. The latest announcement of seeking strategic alternatives makes it clear that such concerns were well-founded.

More importantly, this announcement sends a clear signal on the overall state of the industry. a21 is the second of three publicly traded stock-image companies to seek strategic alternatives this year. Getty Images recently used identical language to gauge interest of potential investors, without success.

However, a21 maintains an optimistic tone, describing cash re-allocation and search for financing as "key initiatives designed to position [it] for future success." In accordance with the new waiver agreement, a21 will resume paying quarterly interest in cash in July.

Copyright © 2008 Julia Dudnik Stern. The above article may not be copied, reproduced, excerpted or distributed in any manner without written permission from the author. All requests should be submitted to Selling Stock at 10319 Westlake Drive, Suite 162, Bethesda, MD 20817, phone 301-461-7627, e-mail: wvz@fpcubgbf.pbz


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