Long-Term Debt

6 Months Ended

Dec. 31, 2020

Long-Term Debt

Long-Term Debt

Note 10. Long-Term Debt

Long-term debt, net consisted of the following:

	December 31,		June 30,
(In thousands)	2020		2020
Term Loan A	$	—	$	48,844
Unamortized discount and other debt issuance costs		—		(433)
Term Loan A, net		—		48,411
Term Loan B due 2022; 6.38% as of December 31, 2020		553,185		572,857
Unamortized discount and other debt issuance costs		(18,746)		(23,278)
Term Loan B, net		534,439		549,579
4.50% Convertible Senior Notes due 2026		86,250		86,250
Unamortized discount and other debt issuance costs		(2,861)		(3,111)
4.50% Convertible Senior Notes, net		83,389		83,139
$125 million Revolving Credit Facility		—		—
$30 million ABL Credit Facility		—		—
Total debt, net		617,828		681,129
Less short-term borrowings and current portion of long-term debt		(39,345)		(88,189)
Total long-term debt, net	$	578,483	$	592,940

The weighted average interest rate for the three months ended December 31, 2020 and 2019 was 7.8% and 8.6%, respectively. The weighted average interest rate for the six months ended December 31, 2020 and 2019 was 7.9% and 9.2%, respectively. The Company paid off the outstanding balance of the Term Loan A of $42.0 million on November 25, 2020 with cash on hand. The Company’s undrawn $125 million Revolving Credit Facility also expired on November 25, 2020.

Long-term debt amounts due, for the twelve-month periods ending December 31 are as follows:

	Amounts Payable
(In thousands)	to Institutions
2021	$	39,345
2022		513,840
2023		—
2024		—
2025		—
Thereafter		86,250
Total	$	639,435

On December 7, 2020, the Company entered into a credit and guaranty agreement, which provides for an asset-based revolving credit facility (the “ABL Credit Facility”) of up to $30 million, subject to borrowing base availability, and includes letter of credit and swing line sub-facilities. Borrowing availability under the ABL Credit Facility is determined by a monthly borrowing base collateral calculation that is based on specified percentages of eligible accounts receivable less certain reserves and subject to certain other adjustments as set forth in the ABL Credit Agreement. Availability is reduced by issuance of letters of credit as well as any borrowings. The final maturity of the ABL Credit Facility is December 7, 2023, unless the aggregate outstanding principal amount of any of the Term Loan B Facility (as defined below) or other material indebtedness exceeds $35,000,000 on the date that is 91 days prior to the maturity date with respect to such other indebtedness, in which case the final maturity shall instead be such earlier date. Loans outstanding under the ABL Credit Agreement bear interest at a floating rate measured by reference to an adjusted London Inter-Bank Offered Rate (“LIBOR”), subject to a floor of 0.75%, plus an applicable margin of 2.50% per annum. Unused commitments under the ABL Credit Facility are subject to a per annum fee of 0.50%. The obligations under the ABL Credit Agreement are guaranteed by the Company and all of the Company’s existing and future subsidiaries, subject to certain exceptions (collectively, the “Guarantors”), and such obligations and the obligations of the Guarantors are secured by:

● a perfected security interest in all present and after-acquired accounts receivable, payment intangibles, inventory, deposit accounts, securities accounts, and any cash, cash equivalents or other assets in such accounts and other related assets owned by each Guarantor and the proceeds of the foregoing, except to the extent such proceeds constitute Cash Flow Priority Collateral (as defined below), and subject to certain exceptions (the “ABL Priority Collateral”), which security interest is senior to the security interest in the ABL Priority Collateral securing the Company’s existing Term Loan B Facility; and

● a perfected security interest in substantially all present and after-acquired tangible and intangible assets of each Guarantor other than the ABL Priority Collateral (the “Cash Flow Priority Collateral”), which security interest is junior to the security interest in the Cash Flow Priority Collateral securing the Term Loan B Facility.

The ABL Credit Agreement contains customary representations and warranties and customary affirmative covenants and negative covenants. The negative covenants include restrictions on, among other things: the incurrence of additional indebtedness; the incurrence of additional liens; dividends or other distributions on equity; the purchase, redemption or retirement of capital stock; the payment or redemption of certain indebtedness; the nature of the business activity of the Company and its subsidiaries; loans, guarantees and other investments; entering into other agreements that create restrictions on the ability to pay dividends or make other distributions on equity or create or incur certain liens; asset sales; consolidations or mergers; amendment of certain material documents; changes in fiscal year; and affiliate transactions. The negative covenants are subject to customary exceptions and also permit dividends and other distributions on equity, consolidations, mergers and asset sales, certain acquisitions and other investments, and payments or redemptions of certain indebtedness, in each case upon satisfaction of the “payment conditions”. The payment conditions are deemed satisfied upon Excess Availability (as defined in the ABL Credit Agreement) on the date of the designated action and Excess Availability for the prior 30-day period exceeding agreed-upon thresholds, the absence of the occurrence and continuance of any event of default and, in certain cases, pro forma compliance with a fixed charge coverage ratio of no less than 1.10 to 1.00.

The ABL Credit Agreement includes a minimum fixed charge coverage ratio of no less than 1.10 to 1.00, which is tested only when Excess Availability is less than 15.0% of the lesser of (A) the borrowing base and (B) the then effective commitments under the ABL Credit Facility for three consecutive business days, and continuing until the first day immediately succeeding the last day of 30 consecutive days on which Excess Availability is in excess of such threshold.

The ABL Credit Agreement provides for events of default, which, if any of them occurs, would permit or require the principal, premium, if any, and interest on all of the then outstanding obligations under the ABL Credit Facility to be due and payable immediately and the commitments under the ABL Credit Facility to be terminated.

The Company also entered into Amendment No. 4 to the Credit and Guaranty Agreement, which amends the Term Loan B Facility to permit the incurrence of the ABL Credit Facility and requires the Company to maintain at least $5 million in a deposit account at all times, subject to control by the administrative agent, and a minimum cash balance of $15 million as of the last day of each month. At December 31, 2020, the Company classified the $5 million required deposit account balance as restricted cash, which is included in other assets caption in the Consolidated Balance Sheet. The amendment also replaced Morgan Stanley Senior Funding, Inc. with Alter Domus (US) LLC as administrative agent and collateral agent under the Term Loan B Facility.

The outstanding Term Loan B and ABL Credit Facility amounts above are guaranteed by all of Lannett’s significant wholly-owned domestic subsidiaries and are collateralized by substantially all present and future assets of the Company.