Long-Term Debt

6 Months Ended

Dec. 31, 2011

Long-Term Debt [Abstract]

Long-Term Debt

7. Long-Term Debt

Long-term debt consists of the following:

		September 30,		September 30,
	December 31, 2011		June 30, 2011
	(in thousands)
Mortgage loans	$	17,948	$	17,940
Secured lending facility		8,416		—
Bank term loans		2,088		2,095
Commonwealth of Pennsylvania financing authority loan		2,205		2,227
Other		362		425
		31,019		22,687
Less: current portion of long-term debt		5,276		2,274
Total long-term debt	$	25,743	$	20,413

Mortgage Loans

In October 2010, Unilife Cross Farm LLC, a wholly owned subsidiary of the Company, (“Cross Farm”) entered into a loan agreement with Metro Bank (“Metro”), pursuant to which Metro provided Cross Farm with two loans in the amounts of $14.25 million and $3.75 million. The proceeds received were used to finance the purchase of land and construction of the Company’s new corporate headquarters and manufacturing facility in York, Pennsylvania, including the repayment of a $6.9 million bridge construction loan.

The $14.25 million term note matures in December 2031 and the $3.75 million term note matures in October 2020. During construction, Cross Farm paid only interest on both term notes at the Prime Rate plus 1.50% per annum, with a floor of 4.50% per annum. Subsequent to construction, Cross Farm is paying principal and interest on both term notes, with interest at a fixed rate of 6.00%.

The loan agreement contains certain customary covenants, including the maintenance of a Debt Service Reserve Account in the amount of $2.4 million, classified as restricted cash on the consolidated balance sheet, which will remain in place until Cross Farm and Metro agree on the financial covenants. The Company was in compliance with its debt covenants as of December 31, 2011. Cross Farm may prepay the loan, but will incur a prepayment penalty of 2.0% during the first three years. The U.S. Department of Agriculture has guaranteed $10.0 million of the loan.

The loans are guaranteed by the Company and by Unilife Medical Solutions, Inc. (“USMI”). The Company and USMI pledged certain assets to secure their obligations under their respective guarantees, including a pledge by the Company of all of its membership interests in Cross Farm and 65% of its ownership interest in Unilife Medical Solutions (PTY) Ltd., a wholly owned subsidiary of the Company and the parent entity of USMI.

Secured Lending Facility

In August 2011, the Company entered into a Master Lease Agreement with Varilease Finance, Inc. (“Varilease”) for up to $10.0 million of secured financing for production equipment for the Unifill syringe. Based on the Company’s continuing involvement throughout the term of the agreement and the integral nature of the production equipment, the transaction is being accounted for under the financing method. Over the term of the agreement, the Company will make 24 monthly installments based upon the amount drawn. This facility has an effective interest rate of 12.85%. At the end of the 24 month initial term, the Company has the option to (i) return the equipment; (ii) extend the term for 12 months followed by optional 6 month extensions terminable by either party; or (iii) repurchase the equipment for a price to be agreed upon by both lessor and lessee. The secured lending facility contains covenants and provisions for events of default customarily found in lease agreements.

The aggregate maturities related to amounts outstanding as of December 31, 2011 under this secured lending facility will be $4.2 million during both the twelve months ending December 31, 2012 and 2013.

Bank Term Loans

Bank term loans consist of three term loans payable. The loans bear interest at rates ranging from prime (3.25% as of December 31, 2011) plus 1.50% (4.75% as of December 31, 2011) to 6.00% per annum and mature on dates ranging from October 2014 through August 2021. The borrowings under the bank term loans are collateralized by the Company’s accounts receivable, inventories and certain machinery and equipment.

Commonwealth of Pennsylvania Financing Authority Loan

In October 2009, the Company accepted a $5.45 million offer of assistance from the Commonwealth of Pennsylvania which included up to $2.25 million in financing for land and the construction of its new manufacturing facility. In December 2010, Unilife Cross Farm LLC, a wholly owned subsidiary of the Company , received the $2.25 million loan which bears interest at a rate of 5.0% per annum, matures in January 2021 and is secured by a third mortgage on the facility. In connection with the loan agreement, Cross Farm entered into an intercreditor agreement by which the Commonwealth of Pennsylvania agreed that it would not exercise its rights in the event of a default by Cross Farm without the consent of Metro, which holds the first and second mortgages on the facility.