Homeland Security pays $12.65 million to YA Global to reduce its debt

Safety & Ecology Holdings is sold to Perma-Fix for $18.39 million

By Devika Patel

Knoxville, Tenn., Nov. 3 - Homeland Security Capital Corp. sold a subsidiary to Perma-Fix Environmental Services, Inc. for $15.89 million and a $2.5 million promissory note on Oct. 31, according to an 8-K filed Thursday with the Securities and Exchange Commission. The company used $12.65 million of the proceeds to satisfy some of its debt to YA Global Investments, LP.

The company had renegotiated its forbearance agreement with investor YA Global on Oct. 26, extending the forbearance period to April 30. The company's subsidiaries have also agreed to guarantee the company's obligations to YA Global as a condition for the forbearance agreement.

Under the agreement, YA Global had agreed to forbear from exercising its rights in regards to a default that may have occurred when the company failed to pay the principal and interest due on its $14.19 million of debt at maturity. With interest, the company owes the investor $18.36 million.

The subsidiary sale was negotiated on July 15, but the purchase price was reduced by final net working capital deficiency, or $5.11 million.

Perma-Fix purchased the outstanding capital stock of Safety & Ecology Holdings Corp., which consisted of 20 common shares and 10.55 million series A preferred shares.

The 6% promissory note issued in exchange for the subsidiary's outstanding stock will be due over the course of three years, with $500,000 set to be prepaid in 10 days.

"Safety & Ecology has been a strong performing subsidiary during the past three and a half years. We have made the strategic decision to pursue different lines of business," Homeland Security's chairman and chief executive officer C. Thomas McMillen said in a press release.

"The proceeds from the sale of Safety & Ecology will be used to pay down debt, which will considerably strengthen our balance sheet."

Based in Arlington, Va., Homeland Security invests in homeland security companies.

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