Debt

12 Months Ended

Dec. 31, 2019

Debt

Debt

7. Debt

2018 Credit Agreement

In June 2018, we entered into a credit agreement (the 2018 Credit Agreement) with Wells Fargo Bank, National Association (Wells Fargo), as administrative agent and a swingline lender, and various other lender parties, providing for: (1) an unsecured revolving credit facility of up to $1.0 billion; and (2) a second unsecured revolving credit facility of up to $500.0 million (which facilities may, at our request, be increased by up to $300.0 million in the aggregate subject to obtaining commitments from existing or new lenders for such increase and other conditions). In accordance with the terms of the 2018 Credit Agreement, in June 2019, we extended the maturity date of the 2018 Credit Agreement by one year, to June 2024. The 2018 Credit Agreement provides the lenders the ability to extend the maturity date by one additional year, to June 2025, if we request such an extension.

At our option, amounts borrowed under the 2018 Credit Agreement bear interest at either the LIBOR rate or a fluctuating base rate, in each case, plus an applicable margin determined on a quarterly basis based on our consolidated ratio of total indebtedness to EBITDA (as calculated in accordance with the 2018 Credit Agreement). To date, we have elected to calculate interest on the outstanding balance at LIBOR plus an applicable margin.

7. Debt (Continued)

On June 27, 2018, we borrowed $250.0 million under the 2018 Credit Agreement, and used the funds to repay outstanding indebtedness under the 2016 Credit Agreement as discussed below under 2016 Credit Agreement.

On January 24, 2019, we paid $800.0 million under our exclusive license agreement with Arena Pharmaceuticals, Inc. (Arena) and funded the payment by borrowing $800.0 million under the 2018 Credit Agreement. In 2019, we paid down $200.0 million on our revolving credit facility under the 2018 Credit Agreement. This brought our aggregate outstanding balance under the 2018 Credit Agreement to $850.0 million as of December 31, 2019. Although our credit facility matures in 2024, we classified $250.0 million of the outstanding balance as a current liability on our consolidated balance sheet as of December 31, 2019 as we intend to repay this amount within one year.

The 2018 Credit Agreement contains customary events of default and customary affirmative and negative covenants. As of December 31, 2019, we were in compliance with these covenants. Lung Biotechnology PBC is our only subsidiary that guarantees our obligations under the 2018 Credit Agreement though, from time to time, one or more of our other subsidiaries may be required to guarantee our obligations.

In connection with the 2018 Credit Agreement, we capitalized debt issuance costs, which are being amortized to interest expense over the contractual term of the 2018 Credit Agreement. As of December 31, 2019, $3.4 million was recorded in other current assets and $9.3 million in other non-current assets on our consolidated balance sheets.

2016 Credit Agreement

In January 2016, we entered into a credit agreement (the 2016 Credit Agreement) with Wells Fargo, as administrative agent and a swingline lender, and various other lender parties, providing for an unsecured revolving credit facility of up to $1.0 billion. On June 1, 2017, we borrowed $250.0 million under this facility and used the funds to initiate an accelerated share repurchase program. Refer to Note 10—Stockholders’ Equity—Share Repurchases.

On June 27, 2018, we repaid in full all our obligations under the 2016 Credit Agreement in connection with the termination of the 2016 Credit Agreement and our entry into the 2018 Credit Agreement. There were no penalties associated with the early termination of the 2016 Credit Agreement.

Convertible Note Hedge and Warrant Transactions

In October 2011, we issued $250.0 million in aggregate principal value 1.0 percent Convertible Senior Notes due September 15, 2016 (Convertible Notes). Upon maturity of the Convertible Notes in September 2016, we fulfilled all remaining settlement and repayment obligations.

In connection with the issuance of the Convertible Notes, we sold to Deutsche Bank AG London (DB London) warrants to acquire up to approximately 5.2 million shares of our common stock at a strike price of $67.56 per share. The warrants expired incrementally on a series of expiration dates during December 2016 and January 2017. The warrants were settled on a net-share basis. As the price of our common stock exceeded the strike price of the warrants on each of the series of related incremental expiration dates, we delivered 2.8 million shares of common stock previously held as treasury stock to DB London, including 1.7 million shares that were delivered during the first quarter of 2017.

7. Debt (Continued)

Interest Expense

Details of interest expense presented on our consolidated statements of operations are as follows (in millions):

	Year Ended December 31,
	2019		2018		2017
Credit Facility interest expense (1)	$	44.2	$	13.9	$	7.1
Other interest expense		—		—		1.9
Total interest expense	$	44.2	$	13.9	$	9.0

(1) Represents interest expense related to debt and amortization of issuance costs associated with our 2018 and 2016 Credit Agreements.