Teligent entered into amendments related to its first lien revolving credit agreement with ACF Finco I LP, a limited partnership affiliated with Ares Management, as administrative agent and its definitive second lien credit agreement with Ares Capital as administrative agent.
The nature of the amendments is to, among other things, reduce the minimum financial performance required by Teligent to comply with quarterly trailing-12-month financial covenants for an increase in the cost of capital.
First Lien Amendment
The first lien amendment amends the first lien credit agreement to, among other things, (i) increase interest rates, (ii) reset prepayment premiums and modify the terms of certain mandatory prepayments and (iii) modify certain financial covenant levels.
Pursuant to the first lien amendment, the interest rate on the loans issued under the first lien credit agreement increases from and after the amendment closing date with respect to eurodollar loans, from 3.75% to 5.50%, and with respect to ABR loans, from 2.75% to 4.50%. In addition, from and after the amendment closing date, the interest rate floor applicable to such loans increases by 0.50% with respect to both the eurodollar loans and ABR loans.
The first lien credit agreement also provides that in the event of receipt of net proceeds from a disposition triggering a mandatory prepayment under the first lien credit agreement, net proceeds of such disposition will be applied as follows: (i) first, to be retained by the company or applied to amounts outstanding under the first lien credit agreement until such time as liquidity of the company and its subsidiaries equals $10 million, (ii) next to amounts outstanding under the first lien credit agreement (without a permanent reduction in the revolving loan commitments of the lenders) until such amounts are paid in full (with the first lien administrative agent having the right to waive such prepayment, in which event, such net proceeds are applied to amounts outstanding under the second lien credit agreement), and (iii) finally, to amounts outstanding under the second lien credit agreement.
In addition, pursuant to the first lien amendment, Teligent agreed at all times to maintain book cash of the company and its subsidiaries not in excess of $10 million with any excess being required to prepay the outstanding obligations under the first lien credit agreement.
The first lien amendment resets the period during which a prepayment premium may be required under the first lien credit agreement until the date that is 30 months after the amendment closing date.
In addition, the following additions and changes to financial covenants set forth in the first lien credit agreement are made pursuant to the first lien amendment: (i) a new minimum net revenue covenant is added that is tested on the last day of each fiscal quarter until the quarter ending December 31, 2020, (ii) a minimum consolidated adjusted EBITDA covenant that is tested on the last day of each fiscal quarter ending during the period from March 31, 2021 to September 30, 2022 is reset, (iii) a total net leverage covenant is eliminated and (iv) a minimum liquidity covenant is added and will be tested at all times during the term of the first lien credit agreement.
Second Lien Amendment
The second lien amendment amended the second lien credit agreement to, among other things, (i) increase interest rates and modify provisions relating to interest payable in kind, (ii) modify the terms of certain mandatory prepayments, (iii) modify certain covenants, including financial covenants.
Pursuant to the second lien amendment, the interest rate on the loans issued under the second lien credit agreement increases from and after the amendment closing date with respect to eurodollar loans, from 8.75% to 13.00%, and with respect to ABR loans, from 7.75% to 12.00%. In addition, from and after the amendment closing date, the interest rate floor applicable to such loans increases by 0.50% with respect to both the eurodollar loans and ABR loans.
The second lien amendment extends the period in which Teligent is permitted to pay interest in kind on the loans from December 13, 2020 to December 13, 2021 but only if the following occurs: (1) the company receives a “warning letter close-out letter” from the Federal Drug Administration in response to corrective actions taken by the company since receipt of a warning letter in November 2019 and (2) the company receives a written recommendation from the Federal Drug Administration setting forth its approval decision in respect of the pre-approval inspection for commercial production on the newly installed injectable line at the company’s New Jersey facility. If only one of those items occurs by December 13, 2020, then the company may still elect to pay interest in kind during 2021, but only from the time the second condition has been satisfied until December 13, 2021. Thereafter, a portion of interest on the loans accruing at a rate of 4.25% per annum may continue to be paid in kind.
The second lien credit agreement also provides that in the event of receipt of net proceeds from a disposition triggering a mandatory prepayment under the second lien credit agreement, net proceeds of such disposition will be applied as follows: (i) first, to be retained by Teligent or applied to amounts outstanding under the first lien credit agreement until such time as liquidity of the company and its subsidiaries equals $10 million, (ii) next to amounts outstanding under the first lien credit agreement (without a permanent reduction in the revolving loan commitments of the lenders) until such amounts are paid in full, and (iii) finally, to amounts outstanding under the second lien credit agreement.
Pursuant to the second lien amendment, Ares Capital will have the right to appoint one non-voting board observer to attend meetings of Teligent’s board of directors.
In respect of financial covenants set forth in the second lien credit agreement, the second lien amendment makes corresponding changes to those described above with respect to the first lien amendment.
Teligent is a specialty generic pharmaceutical company.
