11. Financing Arrangements

Term Facility

On June 30, 2015, LMI entered into a new $365.0 million seven-year Term Facility, which was issued net of a 1.25% discount of $4.6 million. LMI has a right to request an increase of the Term Facility in an aggregate amount up to $37.5 million plus additional amounts subject to certain leverage ratios. The net proceeds of the Term Facility, together with the net proceeds of the IPO and cash on hand, were used to refinance in full the aggregate principal amount of the Notes and pay related premiums, interest and expenses.

The term loans under the Term Facility bear interest, with pricing based from time to time at LMI’s election at (i) LIBOR plus a spread of 6.00% (with a LIBOR rate floor of 1.00%) or (ii) the Base Rate (as defined in our Term Facility) plus a spread of 5.00%. Interest under term loans based on (i) the LIBOR rate is payable at the end of each interest period (as defined in our Term Facility) and (ii) the Base Rate is payable at the end of each quarter. At December 31, 2015, the Company’s interest rate under the Term Facility was 7.00%.

LMI is permitted to voluntarily prepay the Term Facility, in whole or in part, with a premium applicable for the first six months of the Term Facility in connection with a repricing transaction. LMI is required to make quarterly payments, which began on September 30, 2015, in an amount equal to a quarter of a percent (0.25%) per annum of the original principal amount of the Term Facility. The remaining unpaid principal amount of the Term Facility will be payable on the maturity date, or June 30, 2022.

The Term Facility will require LMI to prepay outstanding term loans, subject to certain exceptions, with:

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100% of the net cash proceeds of all non-ordinary course sales or other dispositions of assets (including as a result of casualty or condemnation, subject to certain exceptions); the Company may reinvest or commit to reinvest certain of those proceeds in assets useful in our business within twelve months;

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100% of the net cash proceeds from issuances or incurrence of debt, other than proceeds from debt permitted under the Term Facility and Revolving Facility;

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50% (with two leverage-based stepdowns) of the Company’s excess cash flow; and

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50% of net payments from the Zurich insurance settlement (as defined therein).

The foregoing mandatory prepayments will be applied to the scheduled installments of principal of the Term Facility in direct order of maturity.

The Term Facility is guaranteed by the Company and Lantheus Real Estate, and obligations under the Term Facility are secured by substantially all the property and assets and all interests of the Company, LMI and Lantheus Real Estate.

The Company’s minimum payments of principal obligations under the Term Facility are as follows as of December 31, 2015:


(in thousands)
2016	$	3,650
2017		3,650
2018		3,650
2019		3,650
2020		3,650
2021 and thereafter		344,925

Total debt		363,175
Unamortized debt discount		(4,210	)
Unamortized debt issuance costs		(5,457	)

Total		353,508
Less current portion		(3,650	)

Total long-term debt	$	349,858

Term Facility Covenants

The Term Facility contains a number of affirmative, negative, reporting and financial covenants, in each case subject to certain exceptions and materiality thresholds. The Term Facility requires the Company to be in quarterly compliance, measured on a trailing four quarter basis. The financial covenants are displayed in the table below:

Term Facility Financial Covenants


Period	Total Net Leverage Ratio
Q3 2015 to Q1 2016		6.25 to 1.00
Q2 2016 to Q4 2016		6.00 to 1.00
Q1 2017 to Q2 2017		5.50 to 1.00
Thereafter		5.00 to 1.00

The Term Facility contains usual and customary restrictions on the ability of the Company and its subsidiaries to: (i) incur additional indebtedness (ii) create liens; (iii) consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; (iv) sell certain assets; (v) pay dividends on, repurchase or make distributions in respect of capital stock or make other restricted payments; (vi) make certain investments; (vii) repay subordinated indebtedness prior to stated maturity; and (viii) enter into certain transactions with its affiliates.

Senior Notes

LMI had $400.0 million in aggregate principal amount of the Notes outstanding. The interest on the Notes was at a rate of 9.750% per year, payable on May 15 and November 15 of each year. The net proceeds of the Term Facility, together with the net proceeds of the IPO and cash on hand, were used to refinance in full the aggregate principal amount of the Notes and pay related premiums, interest and expenses. The Company satisfied and discharged its obligations under the Notes as of June 30, 2015. The notes and accrued interest were redeemed in full on July 30, 2015.

The Company recorded a loss on extinguishment of debt totaling $15.5 million, which included a redemption premium of $9.7 million and a $5.8 million write-off of unamortized debt issuance costs associated with the Senior Notes. On June 30, 2015, the Company also paid the accrued interest to the redemption date totaling $3.3 million, which is included in interest expense for the twelve months ended December 31, 2015 on the consolidated statement of operations.

Revolving Line of Credit

At December 31, 2015, LMI has a Revolving Facility with an aggregate principal amount not to exceed $50.0 million. The loans under the Revolving Facility bear interest subject to a pricing grid based on average historical excess availability, with pricing based from time to time at the election of LMI at (i) LIBOR plus a spread ranging from 2.00% or (ii) the Reference Rate (as defined in the agreement) plus 1.00%. The Revolving Facility also includes an unused line fee of 0.375% and expires on June 30, 2020.

As of December 31, 2015, the Company has an unfunded Standby Letter of Credit of $8.8 million. The unfunded Standby Letter of Credit requires an annual fee, payable quarterly, which is set at LIBOR plus a spread of 2.00% and expired during February 2016. It automatically renewed for a one year period and will continue to automatically renew for a one year period at each anniversary date, unless the Company elects not to renew in writing within 60 days prior to such expiration.

The Revolving Facility is guaranteed by Holdings and Lantheus Real Estate and is secured by a pledge of substantially all of the assets of each of the loan parties including accounts receivable, inventory and machinery and equipment. Borrowing capacity is determined by reference to a Borrowing Base, which is based on a percentage of certain eligible accounts receivable, inventory and machinery and equipment minus any reserves. As of December 31, 2015, the aggregate Borrowing Base was approximately $48.2 million, which was reduced by an outstanding $8.8 million unfunded Standby Letter of Credit and $0.1 million in accrued interest, resulting in a net Borrowing Base availability of approximately $39.3 million.

Revolving Line of Credit Covenants

The Revolving Facility contains affirmative and negative covenants, as well as restrictions on the ability of the Company and its subsidiaries to: (i) incur additional indebtedness or issue preferred stock; (ii) repay subordinated indebtedness prior to its stated maturity; (iii) pay dividends on, repurchase or make distributions in respect of capital stock or make other restricted payments; (iv) make certain investments; (v) sell certain assets; (vi) create liens; (vii) consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; and (viii) enter into certain transactions with its affiliates. The Revolving Facility also contains customary default provisions as well as cash dominion provisions which allow the lender to sweep its accounts during the period certain specified events of default are continuing under the Revolving Facility or excess availability under the Revolving Facility falls below (i) the greater of $7.5 million or 15% of the then-current line cap (as defined in the Revolving Facility) for a period of more than five consecutive Business Days or (ii) $5.0 million. During a cash dominion period, the Company is required to comply with a consolidated fixed charge coverage ratio of not less than 1: 00: 1:00. The fixed charge coverage ratio is calculated on a consolidated basis for Lantheus Holdings and its subsidiaries for a trailing four fiscal quarter period basis, as (i) EBITDA (as defined in the agreement) minus capital expenditures minus certain restricted payments divided by (ii) interest plus taxes paid or payable in cash plus certain restricted payments made in cash plus scheduled principal payments paid or payable in cash. Upon an event of default, the lender has the right to declare the loans and other obligations outstanding immediately due and payable and all commitments immediately terminated or reduced, and the lender may, after such events of default, require LMI to make deposits with respect to any outstanding letters of credit in an amount equal to 105% of the greatest amount for which such letter of credit may be drawn.

Financing Costs

On June 30, 2015, LMI incurred and capitalized approximately $5.9 million in debt issuance costs, consisting primarily of underwriting fees and expenses and legal fees in connection with the issuance of the Term Facility.

During the years ended December 31, 2015 and 2014, LMI incurred approximately $0.4 million and $0.2 million in fees and expenses, in connection with amendments under the previous facility, which are being amortized on a straight-line basis over the term of the Revolving Facility.