|9 Months Ended|
Sep. 30, 2021
A summary of outstanding senior notes payable is as follows:
Under the Credit Agreement and Guaranty, as amended from time to time, (the “Perceptive Credit Agreement”) with Perceptive Credit Holdings II, LP, as the lender and administrative agent (“Perceptive”), the Company has a principal balance outstanding to Perceptive in the form of senior secured notes payable to Perceptive aggregating to $100.0 million with a maturity date of March 1, 2024 (the “Maturity Date”), subject to acceleration pursuant to the Perceptive Credit Agreement, including upon an Event of Default (as defined in the Perceptive Credit Agreement). On the Maturity Date, the Company will pay Perceptive the entire outstanding principal amount and any accrued and unpaid interest thereon. Prior to the Maturity Date, there are no scheduled principal payments due under the Perceptive Credit Agreement.
Borrowings under the Perceptive Credit Agreement bear interest at a rate per annum equal to 7.5% plus the greater of (i) one-month LIBOR and (ii) 3.5%; provided, however, that upon, and during the continuance of, an Event of Default, the interest rate will automatically increase by an additional 400 basis points. Accrued interest is payable to Perceptive on the last day of each month during the term of the Perceptive Credit Facility. The rate of interest in effect as of September 30, 2021 was 11.0%, and the Company paid interest to Perceptive during the nine months ended September 30, 2021 and 2020 in the amount of $8.3 million and $6.8 million, respectively.
All of the Company’s obligations under the Perceptive Credit Agreement are secured by a first-priority lien and security interest in substantially all of the Company’s tangible and intangible assets, including intellectual property and all of the equity interests in the Company’s subsidiaries. The Perceptive Credit Agreement contains certain representations and warranties, affirmative covenants, negative covenants and conditions that are customarily required for similar financings. The negative covenants restrict or limit the ability of the Company and its subsidiaries to, among other things and subject to certain exceptions contained in the Perceptive Credit Agreement, incur new indebtedness; create liens on assets; engage in certain fundamental corporate changes, such as mergers or acquisitions, or changes to the Company’s or its subsidiaries’ business activities; make certain Investments or Restricted Payments (each as defined in the Perceptive Credit Agreement); change its fiscal year; pay dividends; repay other certain indebtedness; engage in certain affiliate transactions; or enter into, amend or terminate any other agreements that have the impact of restricting the Company’s ability to make loan repayments under the Perceptive Credit Agreement. In addition, the Company must (i) at all times prior to the Maturity Date maintain a minimum cash balance of $3.0 million; and (ii) as of the last day of each fiscal quarter commencing with the fiscal quarter ended June 30, 2019, report revenues for the trailing 12-month period that exceed the amounts set forth in the Perceptive Credit Agreement, which range from $7.0 million for the fiscal quarter ended June 30, 2019 to $55.0 million for the fiscal quarter ending December 31, 2021. At September 30, 2021, the Company was in compliance with all of the covenants contained in the Perceptive Credit Agreement.
As a result of the fees paid to Perceptive and the value of the warrants issued to Perceptive under the terms of the Perceptive Credit Agreement, the Company recognized an aggregate discount on the senior secured notes in the amount of $7.1 million. The Company records debt discount as a reduction to the face amount of the debt, and the debt discount is amortized as interest expense over the life of the debt using the interest method. Based on the fair value of the Perceptive Warrants and the aggregate amount of fees and expenses associated with obtaining the Perceptive Credit Facility, the effective interest rate on senior secured notes payable to Perceptive as of September 30, 2021 was approximately 13.7%.
The entire disclosure for long-term debt.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef