Images Closes Stock Sale

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Image Entertainment Inc. said Monday that it closed the sale of $22 million in preferred shares to affiliates of a San Francisco private equity firm that is acquiring control of the Chatsworth home entertainment distributor.

Image is using $15 million of the expected $19 million net proceeds, along with the issuance of 3.5 million shares of common stock, to retire its senior secured convertible note due 2011. Last month it defaulted on a debt payment on the $15.7 million note. It plans to use the remainder of the net proceeds to repay other debts and for general working capital.

The company sold new Series B and C preferred stock to affiliates of JH Partners LLC. The investors will be able to purchase up to $8 million worth of additional series B and C stock in two later transactions.

Image, which had been facing a possible Chapter 11 reorganization and delisting from the Nasdaq, has struggled for years to make the transition from VHS and DVD discs to downloadable and other digital media. Last month’s default was on a $4 million debt payment on its note.

JH Partners has said it plans to provide assistance to Image to help the company grow.

Image shares were up 3 cents, or 12 percent, to 28 cents in midday trading on the Nasdaq.

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