Cinedigm Corp (NASDAQ: CIDM) streaming company stated that they had paid the remaining part of the company’s Prospect Digital Camera Loan worth US$3.5 million.
Higher cash flow strengthens the balance sheet: The company sold specific digital equipment in the recent past. The proceeds received from the equipment sale helped the company to pay the remaining portion of the loan ($3.5 million). In addition, it also strengthens the company’s balance sheet. The company stated that with the payment of the last tranche of the Prospect debt, the company is now a net cash company compared to the debt of $49 million at the end of the last year. As a result, the current debt position for the company stands “Zero.”
Higher balance sheet to support future growth: The debt-free balance sheet will help the company grow the streaming business. In addition, the cash balance will help the company to expand its business through acquisition. Cash is the key in the current environment, as pandemic has hit several smaller companies badly. Therefore, it provided opportunities to the strong company to quickly acquire the small company and expand its business. Moreover, it helps the acquirer generate the revenue quickly against the gestation period required to set up a new business.
As per the street, the net cash balance sheet always stands to have the edge over its peers, primarily on higher earnings, as interest components will be negligible. A strong balance sheet also helps the company go for the significant acquisition, even if they need to borrow. The financial institutions are also comfortable lending the company having a solid balance sheet, as they fulfill all their financial covenants. It is believed that now Cinedigm will focus on improving its business operations and focus more on delivery of premium content and technology services globally to the technology, retail, and media companies.