Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
Debtor-in-Possession Financing
As previously disclosed, on December 11, 2022, Clovis Oncology, Inc. (the “Company”) and certain of its subsidiaries (such subsidiaries, together with the Company, the “Debtors”) filed voluntary petitions (the “Bankruptcy Petitions”) under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (such court, the “Court” and such cases, the “Cases”).
On December 16, 2022, after the filing of the Bankruptcy Petitions and in lieu of the debtor-in-possession financing disclosed in the Company’s Form 8-K filed on December 13, 2022, the Company, TOP IV TALENTS, LLC and TAO TALENTS, LLC (such entity, together with TOP IV TALENTS, LLC, the “DIP Lenders”) entered into a commitment letter (together with all exhibits and schedules thereto, the “Commitment Letter”), pursuant to which, and subject to the satisfaction of the applicable conditions precedent contained therein, the DIP Lenders (also being the lenders under the Prepetition Financing Agreement (as defined below) and affiliates of Sixth Street Partners LLC) committed to provide the Company with a debtor-in-possession term loan credit facility in an aggregate principal amount of up to $75,000,000 (the “DIP Credit Facility”) pursuant to the summary of terms and conditions set forth in Annex B to the Commitment Letter (including all exhibits and schedules thereto, the “DIP Term Sheet”) and the definitive documentation referred to therein. Subject to the satisfaction of certain other conditions precedent to drawing as set forth in the DIP Term Sheet, the DIP Credit Facility will be comprised of (i) $45,000,000 of new money term loans, which will be made available to the Debtors in two separate drawings described further below (the “New Money DIP Loans”) and (ii) $30,000,000 of existing Prepetition Financing Agreement Obligations (as defined below) under that certain Financing Agreement, dated as of May 1, 2019 (as amended, restated, amended and restated, supplemented, or otherwise modified from time to time prior to the Petition Date, the “Prepetition Financing Agreement” and the indebtedness and other obligations of the Debtors arising thereunder, the “Prepetition Financing Agreement Obligations”), by and among the Company, the other Debtors, as Guarantors, the lenders from time to time party thereto (the “Prepetition Lenders”), and Top IV SPV GP, LLC, as administrative agent, that will be converted on a dollar for dollar basis into the DIP Credit Facility, on the dates, and in the amounts, described below (the “Rolled Term Loans”). The New Money DIP Loans, subject to the satisfaction of other certain conditions precedent to drawing as set forth in the DIP Term Sheet, will be made available to the Debtors in two separate drawings as follows: (i) an initial draw of up to $30,000,000 (the “Initial Draw”) will be made available for drawing on the Monday after the entry of the Interim DIP Order (as defined in the DIP Term Sheet), which occurred on December 16, 2022, and (ii) a second draw of up to $15,000,000 will be made available for drawing following the Final Order Entry Date (as defined below), in each case, subject to the satisfaction (or waiver) of certain conditions precedent. On the date of the Initial Draw, $20,000,000 of Prepetition Financing Agreement Obligations will be converted into Rolled Term Loans. On the date of entry by the Court of an order authorizing and approving (among other things) the DIP Credit Facility on a final basis (the “Final Order Entry Date”), $10,000,000 of Prepetition Financing Agreement Obligations will be converted into Rolled Term Loans. The DIP Credit Facility is expected to include, among other things, conditions precedent, representations and warranties, affirmative and negative covenants and events of default set forth in the DIP Term Sheet or that are otherwise customary for financings of this type including, covenants prohibiting the Debtors’ operating expense disbursements and capital expenditures from exceeding the DIP Budget, subject to certain permitted variances. Subject to the DIP Budget, DIP Cash Flow Forecast (as defined in the DIP Term Sheet), and permitted variances, proceeds of the DIP Credit Facility may be used for the Debtors’ working capital needs, including to fund the costs of the administration of the Cases and to pay professional fees and expenses; provided that the Rolled Term Loans shall solely be used to effectuate the conversion of Prepetition Financing Agreement Obligations into the DIP Credit Facility as set forth above. In addition, the Debtors (and their subsidiaries) shall be subject to prohibitions on certain uses of the proceeds of the DIP Credit Facility and/or cash collateral, which are usual and customary for a debtor-in-possession financing of this type. In connection with the foregoing the Prepetition Lenders under the Prepetition Financing Agreement consented to the use of cash collateral of the holders of Prepetition Financing Agreement Obligations in connection with the Cases as more fully set forth in the Interim DIP Order and the DIP Term Sheet.
The foregoing description of the Commitment Letter does not purport to be complete and is qualified in its entirety by reference to the DIP Term Sheet, a copy of which is filed as Exhibit 10.1 hereto and incorporated by reference herein.
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