What is the effective interest rate (or yield) on the Investor Notes given the maturity date of July 4 2026 and the terms of the financing? | SOND (Aug 08, 2025) | Candlesense
SOND

What is the effective interest rate (or yield) on the Investor Notes given the maturity date of July 4 2026 and the terms of the financing?

Short answer: Based on the excerpt you posted, there isn’t enough detail in the news release to calculate the effective interest rate (or yield) of the “Investor Notes.” The filing only tells us that the notes are senior‑secured, will mature on July 4 2026, and that they were sold as part of a $24.54 million financing package that also includes a warrant. The specific terms that are needed to compute a yield—such as the face (principal) amount of each note, the price paid for each note (or the discount/premium on issuance), any stated coupon (interest‑rate) and whether the interest is fixed, floating, or “accrues interest” on a particular schedule—are not disclosed in the excerpt you provided.

Below is a step‑by‑step guide you can use to calculate the effective interest rate (or yield) once the missing details are known. This will also help you verify the calculation against any other public filings (e.g., the company’s Form 8‑K, the private placement memorandum, or the prospectus for the notes).

1. What information is required?

Parameter Why it matters Typical source
Face value (principal) of each note The amount that will be repaid at maturity. Offering memorandum / 8‑K
Issue price (or net proceeds) per note Determines the discount/premium you paid relative to the face value. “Sold $24.54 M of units” – need breakdown per note.
Coupon or interest rate Determines the cash interest you receive each period. Usually stated as “x% per annum, payable (monthly/quarterly/annually).”
Interest accrual method Determines how interest compounds (simple vs. compound). Usually “simple interest” for most corporate notes, but sometimes “accrues interest at a rate of …”.
Maturity date Needed to calculate the time horizon. Already given – July 4 2026.
Issue date Needed to compute the exact number of days until maturity. In the filing: August 5 2025 (the date the units were issued).
Any additional fees, issuance costs, or redemption premiums Adjusts the effective yield. Usually disclosed in the “use of proceeds” or “fees” section.
Cash flows from the warrant (optional) If the warrant has value, it may affect the “effective” yield for the investor. Typically excluded from “note” yield but worth noting if you want a total‑project yield. Not needed for pure note yield.

2. How to compute the effective yield

2.1. Simple “Yield‑to‑Maturity” (YTM) Approximation

If the note pays simple, fixed‑rate interest (e.g., 7% per year, paid annually) and the price is a discount to face value, you can approximate the effective annual yield (YTM) with the standard bond‑yield formula:

[
\text{YTM} \approx \frac{ \text{Annual interest} + \frac{( \text{Face} - \text{Price})}{\frac{(\text{Face} + \text{Price})}{2} } }{ \frac{\text{Face} + \text{Price}}{2} }
]

But a more precise method uses time‑value‑of‑money equations:

[
\text{Present value of cash flows} = \text{Price}
]

[
\text{Price} = \sum_{t=1}^{N} \frac{C}{(1+r)^{t}} + \frac{F}{(1+r)^{N}}
]

where

  • (C) = coupon payment per period (usually (\text{Face} \times \text{coupon rate}) divided by # of periods per year),
  • (F) = face value (principal) repaid at maturity,
  • (N) = total number of periods until maturity, and
  • (r) = periodic yield (e.g., semi‑annual if coupons are semi‑annual).

Solve for (r) with a financial calculator or spreadsheet (IRR, RATE, or YIELD functions).

Annual effective yield = ((1+r)^{\text{periods per year}} - 1).

2.2. Example (illustrative)

Assume (fictional numbers, just to illustrate):

Item Value
Face value per note (F) $1,000
Issue price per note (P) $950
Coupon rate 8% annual, paid semi‑annually
Issue date August 5 2025
Maturity date July 4 2026 (≈ 11 months)
Coupon payment $40 every six months (8% of $1,000 / 2)
Days to maturity ~334 days (≈ 0.915 years)

Steps:

  1. Cash‑flow schedule

    • t = 0: –$950 (cash out).
    • t = 0.5 yr: +$40 (interest).
    • t = 0.915 yr: +$40 + $1,000 = $1,040 (final interest + principal).

  2. Solve for r (using Excel =XIRR or =IRR with dates) → ~9.3% annualized (the exact number will vary).

  3. Interpretation: The investor earns a 9.3% effective annual yield on the notes, which is higher than the 8% coupon because the investor bought the note at a discount ( $950 vs. $1,000 ).

2.3. When the note has “accrues interest” but no explicit coupon

Sometimes a note is issued “interest‑only” and the interest is accrued (i.e., added to the principal at maturity). The effective yield can be approximated as:

[
\text{Effective rate} \approx \left( \frac{F}{P} \right)^{\frac{365}{\text{days}}} - 1
]

where F is the total cash at maturity (principal + accrued interest). You need to know the interest rate (even if not explicitly called a “coupon”) to compute F.

If the press release only says “accrues interest at a rate of X% per annum, payable at maturity,” the calculation becomes:

[
\text{Future value} = P \times (1 + X \times \frac{days}{365})
]

Then the annualized yield is simply the quoted “X%” (since the interest accrues linearly). If there is also a discount (P < face), the effective yield will be higher than X%.

3. Why you can’t compute it from the excerpt

The press release you supplied only tells us:

  1. Total amount: $24.54 M of “units.”
  2. Structure: each unit = one senior‑secured promissory note + one warrant.
  3. Maturity: July 4 2026.
  4. Interest clause: “accrue interest” (but the actual rate is truncated in the snippet).

Missing pieces:

  • Exact price per note (or the discount/premium).
  • Exact interest rate (the “X%” that was cut off).
  • Whether the interest is simple or compounded.
  • Number of notes (i.e., how the $24.54 M breaks down into notes vs. warrants).

Because the interest rate is the most critical variable, we cannot compute the yield at all without it.

4. What to do next

  1. Locate the full press release (usually on Business Wire, the company’s investor‑relations site, or the SEC’s EDGAR filing for the 8‑K).

    • Look for the section titled “Terms of the Investor Notes” – it will list the interest rate (e.g., “6.5% per annum, simple interest”).
    • Look for the “Purchase Price per Unit” or “Net proceeds” breakdown to find the price per note.

  2. Gather the exact dates:

    • Issue date: August 5 2025 (from the news).
    • Maturity date: July 4 2026.

  3. Calculate the days (or use a spreadsheet date function) to obtain the exact number of days between the two dates (typically 334–336 days depending on leap‑year considerations).

  4. Use a financial calculator (or Excel =YIELD / =IRR) to solve for the effective yield using the formula in Section 2.2 or the simple “discount yield” formula if the note is a pure discount instrument.

  5. If you need to include the warrant:

    • The warrant is separate from the note’s yield. You can value the warrant using a Black‑Scholes or binomial model (input: current stock price, $1.50 strike, volatility, time to expiry, risk‑free rate, etc.) if you want an overall project return. But the note’s yield is calculated only on the note portion.

5. Sample Calculation (assuming hypothetical terms)

Suppose the full announcement says:

  • Each note has a face value of $1,000.
  • Issue price = $950 per note (i.e., 5% discount).
  • Interest = 7% per year, simple interest, paid at maturity (no periodic coupon).
  • Maturity = 334 days.

Then:

  1. Interest accrued = $1,000 × 7% × (334/365) ≈ $63.89.
  2. Total cash at maturity = $1,000 + $63.89 = $1,063.89.
  3. Effective annual yield:

[
r = \left( \frac{1,063.89}{950} \right)^{\frac{365}{334}} - 1 \approx 0.123 \text{ or } 12.3\%
]

So the effective yield would be about 12.3% (higher than the 7% coupon because of the discount).

If the discount were larger (e.g., 10% discount), the yield would be even higher.

6. Bottom line

The current news excerpt does not contain enough quantitative detail (the coupon rate, the per‑unit price, and whether the interest is simple or compound) to compute the effective interest rate of the Investor Notes.

Once you obtain the missing terms—interest rate, price per note, and any fees or premiums—the effective yield can be calculated by:

  1. Determining the total cash flow at maturity (principal + accrued interest).
  2. Using the price paid to compute a discount‑yield or YTM based on the exact number of days to maturity.

If you can share the missing piece(s) from the full filing, I can plug the numbers into the formula and give you the precise yield. Until then, the calculation remains indeterminate from the information provided.

Other Questions About This News

How will the issuance of $24.54 million in senior secured notes and warrants affect Sonder's current share price and trading volume? Will the proceeds from the note issuance be allocated to specific growth initiatives, debt repayment, or working capital, and how will that allocation influence the company's financial outlook? How dilutive could the $1.50‑per‑share warrants be if they are exercised, and what impact might that have on existing shareholders' equity? How does this financing structure compare to recent capital‑raising activities by peer companies in the short‑term rental or hospitality sector? Are there any potential upside or downside scenarios for the stock based on different timelines for warrant exercise and note repayment? How might the warrant exercise price of $1.50 per share compare to current and projected fair value, and what is the likelihood of warrant conversion before maturity? What impact could this financing have on Sonder's credit rating or future borrowing costs? What are the covenants or security provisions attached to the senior secured promissory notes, and how might they restrict Sonder's operational flexibility? What is the market's perception of Sonder's liquidity needs based on this financing, and does it signal any underlying cash‑flow concerns?