Long Term Debt Long Term Debt

6 Months Ended

Jun. 30, 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.

On April 22, 2020, the Company amended its BT Loan Agreement with Blue Torch. The amendment provided for an increase in the maximum Total Leverage Ratio, which was a quarterly test, for the remainder of 2020, and also provided for a reduction in the minimum Liquidity requirement from April 2020 through and including November 2020. In connection with the amendment, the Company agreed to pay a one-time fee of approximately $0.7 million, added to the principal balance, and a 1 percentage point increase in the interest rate to LIBOR plus 9%.

As of June 30, 2020, interest applicable to any borrowings under the BT Term Loan accrued at a rate equal to LIBOR plus a margin of 9.00% 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 of 10.50% as of June 30, 2020.

The BT Loan Agreement, as amended, 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 the previous four fiscal quarters, as calculated as of June 30, 2020, September 30, 2020 and December 31, 2020 of not more than 5.0 to 1.0. For all subsequent quarters, the Maximum Total Leverage Ratio of not more than 3.0 to 1.0 as of the last day of the quarter.

•

Minimum Liquidity, defined as unrestricted cash and cash equivalents, of not less than $20.0 million as of the last business day of each fiscal month from April through November 2020. 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 could not be less than $20.0 million.

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):



	June 30, 2020					December 31, 2019
	Current portion		Long-term			Current portion		Long-term
Liability component - principal	$	3,750	$	68,222		$	3,750	$	69,375
Original issue discount	—		(1,540		)	—		(1,890		)
Amendment fee	—		(671		)	—		—
Deferred financing cost	—		(4,539		)	—		(5,579		)
Liability component - net carrying value	$	3,750	$	61,472		$	3,750	$	61,906

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



	For the Three Months Ended				For the Six Months Ended
	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Interest on principal balance	$	1,891	$	393	$	3,731	$	393
Accretion of original issue discount	183		31		350		31
Accretion of amendment fee	51		—		51		—
Amortization of deferred financing costs	542		85		1,040		85
Total term loan interest expense	$	2,667	$	509	$	5,172	$	509

The future principal payments for the BT Term Loan as of June 30, 2020 are as follows (in thousands):



Year ending December 31,	Principal
2020 (excluding the six months ended June 30, 2020)	$	1,875
2021	3,750
2022	66,347
2023	—
2024	—
Thereafter	—
Total Long Term Debt	$	71,972

As of June 30, 2020, the fair value of the Company’s BT Term Loan was $69.2 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 June 30, 2020 with this calculated discount rate to derive the fair value as of that date.

On July 2, 2020, a portion of the proceeds from the Preferred Stock Transaction and the Hayfin Loan Transaction was 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. As of June 30, 2020, the Company was in compliance with all covenants under the Hayfin Term Loan.

Paycheck Protection Program Loan

The Company applied for and on April 24, 2020 received proceeds $10 million in the form of a loan under the Paycheck Protection Program (the “PPP Loan”).

On May 11, 2020, the Company repaid the PPP Loan in full. There are no continuing obligations under the PPP Loan as of June 30, 2020.