There isn't an interest rate. We can only calculate an effective interest rate or equivalent interest rate when payments are made. In last year's deal, I believe it ended up being over 100% APR if you took the timing and amount of payments compared to how much capital they had to use. Yes... over ONE HUNDRED PERCENT!
Current deal equivalent:
"from the Date of Issuance to December 16, 2017, 1.2375 times the Original Purchase Price"
If they paid the $15.3M on December 16th they would be paying $18,933,750. Paying 23.75% premium for 6 months is over 50% APR as an interest rate equivalent. Now they don't get the full $15.3M. The underwriter (B. Riley, one of the two "analysts" allowed to ask questions at conference calls) gets $500,000 plus expenses.
It goes up to 1.575X the purchase price plus can go as high as 2.8X the purchase price if it gets spread out long enough. You need to remember they are forced to make payments along the way as a percentage of licensing and litigation revenue so they don't get the full "principle" for these durations. When all is said and done, they will probably end up paying the equivalent of over 100% APR again while issuing 2M dilutive warrants this time.
I don't expect them to get treasury rate plus a point like many other companies, but even riskier companies can get financing at 7% or less these days. Why are they paying 100%? Doesn't pass the smell test. This is a horrible deal at the present time. It indicates they feel revenue will be sparse in the next year and they aren't as confident in collecting the full amount of Blue Coat 1.
