Term Loan Agreements and Long-Term Debt
|9 Months Ended|
Sep. 30, 2018
|Term Loan Agreements and Long-Term Debt|
|Term Loan Agreements and Long-Term Debt||
8. Term Loan Agreements and Long-Term Debt
Term Loan Agreement and Long-Term Debt consist of the following:
MidCap Term Loan Agreement
On October 25, 2016 (the “Closing Date”), AxoGen and AC, each as borrowers, entered into a Credit and Security Agreement (Term Loan) (the ''MC Term Loan Agreement") with the lenders party thereto and MidCap Financial Trust (“MidCap”), as administrative agent and a lender. Under the MC Term Loan Agreement, MidCap provided the Company a term loan in the aggregate principal amount of $21 million (the "Term Loan") which had a maturity date of May 1, 2021 and required interest only payments through December 1, 2018, and thereafter, 30 monthly payments of principal and interest resulting in the Term Loan being fully paid by the maturity date. Interest was payable monthly at 8.0% per annum plus the greater of LIBOR or 0.5%. In addition to the interest charged on the Term Loan, the Company was also obligated to pay certain fees, including an annual agency fee of 0.25% of the aggregate principal amount of the Term Loan.
The Company had the option at any time to prepay the Term Loan in whole or in part, subject to certain conditions, a prepayment fee and a 5.0% exit fee as specified in the MC Term Loan Agreement. The prepayment fee was determined by multiplying the amount being prepaid by the following applicable percentage amount: (a) 3.0% during the first year following the Closing Date; (b) 2.0% during the second year following the Closing Date, and (c) 1.0% thereafter. However, no prepayment fee would be due in the event the prepayment was a result of refinancing the Term Loan and Revolving Loan with MidCap or an affiliate of MidCap. On May 22, 2018, the Company paid $22.5 million to prepay the Term Loan in full, which included exit and pre-payment fees of 5% and 2%,respectively, of the outstanding balance for a total of $1.5 million. Included in the loss on extinguishment is the unamortized deferred financing costs associated with the Term Loan of $473,000.
MidCap Revolving Loan Agreement
In addition, on October 25, 2016, AxoGen and AC, each as borrowers, also entered into a Credit and Security Agreement (Revolving Loan) (the ''Revolving Loan Agreement") with the lenders party thereto and MidCap, as administrative agent and a lender. Under the Revolving Loan Agreement, MidCap agreed to lend to the Company up to $10 million under a revolving credit facility (the "Revolving Loan") which amount could be drawn down by the Company based upon an available borrowing base which included certain accounts receivable and inventory. The Revolving Loan could be increased to up to $15 million at the Company’s request and with the approval of MidCap. The maturity date of the Revolving Loan was May 1, 2021. Interest was payable monthly at 4.5% per annum plus the greater of LIBOR or 0.5% on outstanding advances. In addition to the interest charged on the Revolving Loan, the Company was also obligated to pay certain fees, including a collateral management fee of 0.5% per annum of the principal amount outstanding on the Revolving Loan from time to time and an unused line fee of 0.5% per annum on the difference between the average amount outstanding on the Revolving Loan minus the total amount of the Revolving Loan commitment. The Revolving Loan was subject to a minimum balance, such that the Company paid the greater of: (i) interest accrued on the actual amount drawn under the Revolving Loan Facility; and (ii) interest accrued on 30% of the average borrowing base. If the Revolving Loan was terminated or permanently reduced prior to the maturity date, MidCap was owed a deferred revolving loan origination fee as specified in the Revolving Loan Agreement. No deferred revolving loan origination fee would be due in the event the Revolving Loan was paid in full or the termination of the revolving credit facility was a result of refinancing the Term Loan and Revolving Loan with MidCap or an affiliate of MidCap.
The MC Term Loan Agreement and the Revolving Loan Agreement each contained covenants that placed restrictions on AxoGen’s operations, including, without limitation, covenants related to debt restrictions, investment restrictions, dividend restrictions, restrictions on transactions with affiliates and certain revenue covenants. MidCap, on behalf of the lenders under the agreements, had a first perfected security interest in the assets of the Company to guarantee the payment in full of the agreements. On May 22, 2018, the Company paid $3.0 million to prepay the Revolving Loan in full, which included pre-payment fees of $236,000.
Interest expense for the three months ended September 30, 2018 was zero, as compared to approximately $578,000 for the three months ended September 30, 2017, and for the nine months ended September 30, 2018 and 2017, was approximately $1.1 million and $1.6 million, respectively.
Annual maturities of the Company’s long-term obligations are as follows:
The entire disclosure for long-term debt.
Reference 1: http://www.xbrl.org/2003/role/presentationRef