Debt and Interest
|9 Months Ended|
Sep. 30, 2021
|Debt and Interest|
|Debt and Interest||
10. Debt and Interest
Total debt consists of the following as of September 30, 2021 and December 31, 2020:
On August 27, 2020 (the “Closing Date”), Fortress, as borrower, entered into a $60.0 million senior secured credit agreement with Oaktree (the “Oaktree Agreement” and the debt thereunder, the “Oaktree Note”). The Oaktree Note bears interest at a fixed annual rate of 11.0%, payable quarterly and maturing on the fifth anniversary of the Closing Date, August 27, 2025, (the “Maturity Date”). The Company is required to make quarterly interest-only payments until the Maturity Date, at which point the outstanding principal amount is due. The Company may voluntarily prepay the Oaktree Note at any time subject to a Prepayment Fee, the mechanics of which are set forth therein. The Company is required to make mandatory prepayments of the Oaktree Note under various circumstances set forth in the Oaktree Agreement. No amounts paid or prepaid may be reborrowed without Oaktree consent.
Pursuant to the terms of the Oaktree Agreement on the Closing Date the Company paid Oaktree an upfront commitment fee equal to 3% of the $60.0 million, or $1.8 million. In addition, the Company paid a $35,000 agency fee to the Oaktree administrative agent entity, which was due on the Closing Date and will be due annually, together with $2.5 million, in fees that were due to third parties involved in the transaction.
In connection with the Oaktree Note, the Company issued warrants to Oaktree and certain of its affiliates to purchase up to 1,749,450 shares of common stock (see Note 15) with a relative fair value of $4.4 million.
The Company recorded the fees totaling $8.7 million ($1.8 million to Oaktree, $2.5 million of expenses paid to third-parties and $4.4 million representing the relative fair value of the Oaktree Warrants) to debt discount. These costs are being amortized over the term of the Oaktree Note.
AstraZeneca’s notification of its intent to acquire Caelum, received on September 28, 2021, is defined in the Oaktree Agreement as a monetization event and as such, triggered a $10 million prepayment and an applicable prepayment fee of $0.5 million. Accordingly, as of September 30, 2021, the prepayment amount and the fee were classified as short-term on the Company’s unaudited condensed consolidated balance sheet. The prepayment fee of $0.5 million was included in interest expense for the three months ended September 30, 2021. The Company paid the $10.5 million on October 12, 2021.
Partner Company Installment Payments – Licenses
The following tables show the details of partner company installment payments – licenses for the periods presented.
Note 2: Imputed interest rate of 4.03%and maturity date of July 29, 2023.
Note 3: Imputed interest rate of 4.25%and maturity date of January 1, 2022.
The following table shows the details of interest expense for all debt arrangements during the periods presented. Interest expense includes contractual interest; fees include amortization of the debt discount and amortization of fees associated with loan transaction costs, amortized over the life of the loan.
Note 2: Imputed interest expense related to Ximino, Accutane and inti-itch cream acquisitions.
Journey Working Capital Line of Credit
On March 31, 2021, Journey entered into an agreement with East West Bank (“EWB”) in which EWB agreed to provide a $7.5 million working capital line of credit. eredit is secured by Jounrey’s receivables and cash. Interest on the line is the greater of 4.25% or the Prime Rate plus 1%. The agreement matures in 36 months. There have been no amounts drawn upon this line of credit during the three or nine months ended September 30, 2021.
Journey paid an origination fee of $56,250 in connection with the issuance of the working capital line of credit. In addition, Journey agreed to pay certain third party fees incurred by EWB, as well as legal fees incurred by Journey in connection with the EWB Loan totaling approximately $0.1 million. As of September 30, 2021 fees totaling approximately $0.1 million were recorded as a deferred asset on the unaudited condensed consolidated balance sheet.
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef