Long Term Debt

3 Months Ended

Mar. 31, 2020

Long-Term Debt

On June 10, 2019, the Company entered into the BT Loan Agreement, pursuant to which the full amount was borrowed and funded (the “BT Term Loan”). The proceeds from the BT Term Loan were used (i) for working capital and general corporate purposes and (ii) to pay transaction fees, costs and expenses incurred in connection with the BT Term Loan and the related transactions. The BT Term Loan would have matured on June 20, 2022 and was repayable in quarterly installments of $0.9 million; the balance was due on June 20, 2022. Blue Torch maintained a first-priority security interest in substantially all the Company’s assets. The BT Term Loan was issued net of the original issue discount of $2.3 million. The Company also incurred $6.7 million of deferred financing costs.

As of March 31, 2020, interest applicable to any borrowings under the BT Term Loan accrued at a rate equal to LIBOR plus a margin of 8.00% per annum. The BT Term Loan had an interest rate equal to 10.46% at the time the BT Loan Agreement was executed and an interest rate as of March 31, 2020 was 9.95%.

The BT Loan Agreement originally contained financial covenants requiring the Company, on a consolidated basis, to maintain the following:


•	Maximum Total Leverage Ratio, defined as funded debt divided by consolidated adjusted EBITDA, of not more than 3.0 to 1.0 as of the last day of the previous four consecutive fiscal quarters.

•

Minimum Liquidity, defined as unrestricted cash and cash equivalents, of less than $40.0 million as of the last business day of each fiscal month following the BT Term Loan closing date through and including the fiscal month ending May 31, 2020. For fiscal months beginning June 30, 2020, the Company was not permitted to have liquidity of less than $30.0 million. Beginning with the fiscal month ending December 31, 2020, if the total leverage ratio is less than 2.50 to 1.0 as of the last business day of any fiscal month, the Company’s liquidity was not permitted to be less than $20.0 million.

The BT Term Loan was amended on April 22, 2020 to, among other things, modify the financial covenants. See Note 15, “Subsequent Events,” of the consolidated financial statements.

The BT Loan Agreement also specified that any prepayment of the loan, voluntary or mandatory, as defined in the BT Loan Agreement, subjected MiMedx to a prepayment penalty as of the date of the prepayment with respect to the BT Term Loan of:


•	During the period from June 10, 2019 through June 10, 2020, an amount equal to 3% of the principal amount of the BT Term Loan prepaid on such date; and


•	During the period from June 11, 2020 through June 10, 2021, an amount equal to 2% of the principal amount of the BT Term Loan prepaid on such date.

Principal prepayments after June 10, 2021 were not subject to a prepayment penalty.

The BT Loan Agreement also included events of default customary for facilities of this type, and upon the occurrence of such events of default, subject to customary cure rights, all outstanding loans under the BT Loan Agreement could have been accelerated and/or the lenders’ commitments terminated.

The balances of the BT Term Loan were as follows (amounts in thousands):



	March 31, 2020					December 31, 2019
	Current portion		Long-term			Current portion		Long-term
Liability component - principal	$	3,750	$	68,438		$	3,750	$	69,375
Original issue discount	—		(1,723		)	—		(1,890		)
Deferred financing cost	—		(5,078		)	—		(5,579		)
Liability component - net carrying value	$	3,750	$	61,637		$	3,750	$	61,906

Interest expense related to the BT Term Loan, included in Interest income (expense), net in the consolidated statements of operations, was as follows (amounts in thousands):



	For the Three Months Ended
	March 31, 2020
Interest expense - stated interest rate	$	1,840
Interest expense - amortization of original issue discount and costs	167
Interest expense - amortization of deferred financing costs	491
Total term loan interest expense	$	2,498

The future principal payments for the Company’s BT Term Loan as of March 31, 2020 were as follows (in thousands):



Year ending December 31,	Principal
2020 (excluding the three months ended March 31, 2020)	$	2,088
2021	3,750
2022	66,350
2023	—
2024	—
Thereafter	—
Total Long Term Debt	$	72,188

As of March 31, 2020, the fair value of the Company’s BT Term Loan was $62.7 million. This valuation was calculated based on a series of Level 2 and Level 3 inputs by calculating a discount rate based on the credit risk spread of debt instruments of a similar risk character in reference to U.S. Treasury instruments with identical securities, with an incremental risk premium for Company-specific risk factors. The remaining cash flows associated with the BT Term Loan were discounted to March 31, 2020 with this calculated discount rate to derive the fair value as of that date.

As described above in Note 3, “Liquidity and Capital Resources,” on July 2, 2020, a portion of the proceeds from the Preferred Stock Transaction and the Hayfin Loan Transaction were used to repay the outstanding balance of principal, accrued but unpaid

interest, and prepayment premium under the BT Loan Agreement. In connection with the repayment of the BT Term Loan, the Company terminated the BT Loan Agreement.

Additionally, on July 2, 2020, the Company borrowed an aggregate of $50 million pursuant to the Hayfin Loan Agreement, and obtained an additional committed but undrawn $25 million facility pursuant to the Hayfin Loan Agreement, as described above in Note 3, “Liquidity and Capital Resources.”