Cadmus has created a subsidiary, Cadmus Developments, to issue the secured notes.
Cadmus Developments, rather than the original parent company, Cadmus Technology, will receive subscriptions for the notes because doing it that way will offer noteholders greater security than if Cadmus Technologies had been the issuer, says Cadmus managing director Ian Bailey.
“It was done to enable us to transfer some intellectual property to Cadmus Developments, in order to provide a secured facility.”
The intellectual property — consisting of operating software and payment terminals — will be transferred to Cadmus Developments, which will license the use of the software and give the rights to sell the payment terminals to Cadmus Technology. Cadmus Developments will receive royalties from the terminal sales.
With the intellectual property and revenue streams from it, Cadmus Developments will have some assets to act as first debenture security for the noteholders, Bailey says.
Cadmus Technology isn’t issuing the notes itself, because if it did the noteholders would rank behind other debenture-holders, such as banks and other financiers, who have lent money to the company, he says.
It is Cadmus Technology, not Cadmus Developments, which will actually use the funds raised by the notes, however. The notes prospectus states that Cadmus Developments will lend, unsecured, the proceeds of the raising to Cadmus Technology, for the term of the notes.
“The loan will be utilised to repay existing debt facilities, fund working capital requirements and to develop and exploit export opportunities for its payment terminal products.”