NorthWest Biotherapeutics Inc (NWBO)

[sentiment_stocks]

Because of your insistence that the May 22 exchanges are separate from the White Box repayment, I looked more closely at several items, including the original notes dating back to August 2014.

In doing so, I'll concede that the exchanges cited aren't as clear as I originally thought, and so now I'm not entirely sure that these exchanges were for the same White Box deals or not. I still think they are, but dang if that 8-K doesn't make you jump through hoops to figure these stupid things out.

What I'm thinking is that these WhiteBox Convertible Senior Note holders could have exchanged their notes with the company for shares and warrants, then the company will re-exchange those same notes with the institutional investors that seem to want to purchase them.

Now the company refers to the WhiteBox note holders as NOT actually being WhiteBox (an institution I presume) but as people affiliated with them:

…announced today that it has signed a Note Repurchase Agreement with a group of bondholders affiliated with Whitebox Advisors (“Whitebox”), holder of $11 million of NW Bio convertible senior notes.
https://www.nwbio.com/nw-bio-reaches-agreement-convertible-note-holders/

That makes them "unaffiliated investors" and not an institution. They are affiliated with an institution (WhiteBox), but they aren't WhiteBox.

The recent 2016 10-K indicates that all of these “Convertible Senior Notes” date back to an August 2014 Purchase Agreement, so let's look back at the original Purchase Agreement that was done in August 2014, which is what the March 9, 2017 Note Repurchase Agreement was based on.

On March 9, 2017, the Company and certain debt holders (the “Holders”) of Convertible Senior Notes that were issued in August, 2014 (the “Notes”) - page F-35

https://www.sec.gov/Archives/edgar/data/1072379/000114420417020754/v464066_10k.htm

So I went back to look and see exactly what were the details behind these Convertible Senior Notes.

On August 13, 2014, NWBO entered into a Purchase Agreement with Oppenheimer & Co - who were the Initial Purchaser - of $17.5 million of Convertible Senior Notes due in 2017.

Purchase Agreement
 
On August 13, 2014, Northwest Biotherapeutics, Inc. (the “Company”) entered into a Purchase Agreement with Oppenheimer & Co. Inc., (the “Initial Purchaser”), with respect to the Company’s issuance and sale of $17.5 million aggregate principal amount of the Company’s 5.00% Convertible Senior Notes due 2017 (the “Notes”). The Company previously announced the pricing of the Notes on August 14, 2014.

https://www.sec.gov/Archives/edgar/data/1072379/000114420414051450/v387098_8-k.htm

Now in the Purchase Agreement under the Term Sheet (Annex C), it states that the notes will be partially secured by a pledge of the a portion of the proceeds from the sale of these same notes, and that these monies will be deposited into an escrow account. these monies will be invested in permitted securities. That amount is approximately $2.63 million.

Our obligations under the notes will be secured in part until August 15, 2017 by a pledge of a portion of the proceeds from the sale of the notes. During the three year term of the escrow, the proceeds held in the escrow account will be invested in noncallable direct obligations of, or noncallable obligations, the payment of principal of and interest on which are unconditionally guaranteed by, the United States of America, or money market securities issued by permitted money market funds (collectively, ‘‘permitted securities’’). Approximately $2.63 million will be deposited in the escrow account. The escrow account will contain an amount of permitted securities sufficient to fund, when due, the total aggregate amount of the first six scheduled semi-annual interest payments on the notes, excluding additional interest, if any. See ‘‘Description of the Notes — Interest Escrow.’’ - page C-3

https://www.sec.gov/Archives/edgar/data/1072379/000114420414051450/v387098_ex1-1.htm

The 8-K for this deal stated that it was the interest payments that are to be secured by those funds that were set aside.

The Notes will mature on August 15, 2017, unless previously converted or repurchased. The Notes are unsecured obligations of the Company, except that the interest payments are secured by funds that have been set aside in an escrow account for that purpose.

https://www.sec.gov/Archives/edgar/data/1072379/000114420414052298/v387677_8-k.htm

Now is that money still in that escrow account? Could the interest portions have been released from the escrow when the semi-annual payments came due? Or are they still being held and can they be applied to any of the remaining payments?


Here is the PR from August 14, 2014 that announces this arrangement.

… announced the pricing of $17.5 million aggregate principal amount of its unsecured convertible notes (the “Notes”) in a private placement. The Notes are initially convertible at $7.30 per share, a 10% premium above the closing market price of $6.64 per share on August 13, 2014. NW Bio plans to use the offering proceeds to fund new manufacturing capacity in Europe and for general corporate purposes.
 
The Notes will bear interest at a rate of 5.00% per year, and mature in three years unless earlier converted. The Notes will be subject to certain adjustments as provided in the Indenture.
 
The investors in the Notes will have the right, exercisable for three months, to purchase up to an additional 30% of the aggregate principal amount of the Notes on the same terms and conditions.

https://www.sec.gov/Archives/edgar/data/1072379/000114420414051450/v387098_ex99-1.htm

And in this PR that came out on August 19, 2014, it states that…

The notes and the shares of common stock underlying the notes have not been and will not be registered under the Securities Act of 1933, as amended, or any applicable state securities laws. Unless so registered, such notes and such shares of common stock may not be offered or sold in the U.S. except pursuant to an exemption from the registration requirements of the Securities Act and applicable state securities laws.

https://www.sec.gov/Archives/edgar/data/1072379/000114420414051450/v387098_ex99-2.htm

Now a few days later, another 8-K came out announcing that Bank of New York Mellon was to be the trustee for these “Convertible Senior Notes” that were due in 2017.

https://www.sec.gov/Archives/edgar/data/1072379/000114420414052298/v387677_8-k.htm

On the same day, Exhibit 4.1 with 101 pages is also released that details all the terms and rules that apply to these Convertible Senior Notes.

https://www.sec.gov/Archives/edgar/data/1072379/000114420414052298/v387677_ex4-1.htm

These Notes are issued in denominations of $1000 principal and integral multiples thereof. Now it seems these notes are registered to "Persons" - so I don’t know if that means they aren’t registered to institutions.

It seems that these Notes can be exchanged or transferred, and when doing so, all the same benefits are also transferred and exchanged.

Section 2.06.         Exchange and Registration of Transfer of Notes; Restrictions on Transfer; Depositary. (a) The Company shall cause to be kept at the Corporate Trust Office a register (the register maintained in such office or in any other office or agency of the Company designated pursuant to Section 5.02 being herein sometimes collectively referred to as the “Note Register”), in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Notes and of transfers of Notes. Such register shall be in written form or in any form capable of being converted into written form within a reasonable period of time. The Trustee is hereby appointed “Note Registrar” for the purpose of registering Notes and transfers of Notes as herein provided. The Company may appoint one or more co-registrars in accordance with Section 5.02. - page 17

So it would appear that these Convertible Senior Notes were, at least originally, held by multiple parties. I’m not sure when the group of bond holders affiliated with White Box entered the picture, or if they were part of the note holders from the beginning.

But as I referenced earlier, the March 9, 2017 PR from this year indicted that White Box itself doesn’t seem to hold the notes… but instead a group of bondholders affiliated with White Box do.

I can’t find any reference to these notes having ever been transferred to White Box in prior years, so unless there is evidence otherwise, it would seem that these investors affiliated with White Box were the original investors back in 2014.

Now it seems that some unaffiliated institutional investors want to purchase the notes from the Holders. The price for this delay in payment to the Holders is both 150,000 shares and a forbearance fee of $300k to the current Holder (presumably the group affiliated with White Box).

One possibility is that the Company exchanged the .18¢ shares and the A and B warrants with the "group of bondholders affiliated with WhiteBox" for the Notes, and then they will in turn sell the notes to the unaffiliated Institutional Investors.

It certainly appears that the two transactions are related because the first item (2.04) is incorporated by reference into the second item (3.02), implying the two are absolutely connected, and not separate.

But they are making one (namely me) jump through some hoops to sort this transaction out.

I mean, that would be a really bullish thing, because the company would then, in turn, be paid the money by the institutional investors who would buy the Notes.


l'll admit, ex, some clarity from the company would be extremely helpful.