Surmodics, a provider of medical device and in vitro diagnostic technologies to the healthcare industry, entered into a new, five-year credit agreement with MidCap Financial, comprised of up to $100 million in term loans and a $25 million revolving credit facility.
“We are pleased to significantly improve our access to capital on favorable, non-dilutive terms with credit facilities that provide increased borrowing capacity and financial flexibility,” Gary Maharaj, president and CEO of Surmodics, said. “Our initial borrowings, coupled with the expected milestone payment from our partner, Abbott, following the anticipated premarket approval from the Food and Drug Administration for our SurVeil drug-coated balloon, will provide important capital to strengthen our balance sheet and support our long-term growth strategy.”
The company drew $25 million on the term loan and $5 million on the revolving credit facility at close. These proceeds were partially used to retire the company’s existing $25 million revolving credit facility with Bridgewater Bank, of which $10 million was outstanding. Upon closing, the company’s cash balance increased by $19.5 million.
Additional draws on the term loan may be made in $10 million minimum increments, up to a total of $75 million through Dec. 31, 2024. A second tranche of up to $25 million may be available through Dec. 31, 2024 at MidCap’s option. Availability to draw on the five-year, $25 million revolving credit facility is based primarily on the company’s inventory and receivable balances.
The credit agreement calls for interest-only payments on the term loan over the first four years, which can be extended to five years if certain criteria are met. The revolving credit facility matures in five years. The credit agreement calls for interest to be paid based on a base rate of Term SOFR plus an applicable margin. In connection with the term loan, the company has also entered into an interest rate swap arrangement with Wells Fargo, whereby the initial borrowing on term loan’s variable base rate will be fixed for the five-year loan term. The company expects total interest expense and fees under the credit agreement to be approximately $3.4 million in fiscal 2023.
