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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Jul 19, 2012

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Rosetta Genomics, an Israeli and global leader in diagnostic testing technology, announced on June 22 that it entered into a release agreement with the holders of a $1,750,000 secured debenture which the company sold and issued on January 27, 2012.

A debenture is a type of debt instrument that is usually not secured by debt or collateral and is often borrowed by businesses to raise capital. Rosetta’s debenture, however, was secured by collateral.

Much like secured personal loans, a secured debenture for a business must have collateral. Examples of collateral for secured personal loans would be a home or a car title. Examples of collateral for a secured debenture would be company assets or stock. Rosetta offered company assets as collateral, allowing them to receive their loan and allowing their lender—investment holders—to minimize risk.

Rosetta also offered future corporate assets as well as those of any subsidiary that Rosetta would form in the future.

This large blanket-like application of collateral would be difficult to replicate for public secured personal loans. Perhaps a similar large breadth of collateral for secured personal loans would be deductions of future wages.

The debenture was scheduled to accrue interest at 10 percent per year until January 26, 2013.

The release agreement required Rosetta to prepay an aggregate of $1,450,000 in principal and $288,000 in interest, and the debenture holders agreed to convert the $300,000 that was remaining in principal into ordinary shares at the conversion prices of $1.416 per share prior to July 31 2012.

After the prepayment of $1,450,000 in principal and $288,000 in interest, all of Rosetta’s obligations—aside from the conversion of the remaining $300,000 in principal into ordinary shares—were terminated or considered satisfied.

The security interest was terminated in all current and future assets of Rosetta along with those of any potential subsidiary.

“We are very pleased to pay off our secured loan as this release agreement not only retires our debt, it frees up our assets from the liens on them, allowing us to monetize these assets through potential licensing, partnership or other arrangements,” said Kenneth A. Berlin, President and Chief Executive Officer of Rosetta Genomics according to a corporate press release.

Rosetta corporate leadership wasn’t the only group pleased by the debt repayment. The Israeli corporation’s shares spiked nearly 3 percent in early morning trading on June 22. The shares rose as high as $13.38. In the year prior to the payment of the debt shares traded between $1.40 and $35.45.

Had Rosetta Genomics not been able to pay off their corporate secured personal loan, lenders would have been able to seize their collateral. Unlike ordinary secured personal loans however, this would not have been as simple and quick as repossessing a car or home. Seizure of corporate assets takes much longer and involves property that is much harder to liquidate.

Rosetta Genomics develops and manufactures microRNA cancer tests. Its advanced technological products can test, identify and differentiate tumors. Hopefully a lack of debt will allow the corporation to continue research and development towards cancer detection.