EXPLANATORY NOTE
On January 6, 2023, 89bio, Inc. filed a Current Report on Form 8-K (the “Original 8-K”) to report, among other things, that it had entered into the Loan Agreement and agreed to issue the Warrant to K2HV on the 16th VWAP Trading Day following the Closing Date.
This Current Report on Form 8-K/A amends the Original 8-K solely to (i) provide the conversion price for the Term Loan, (ii) provide the number of shares subject to the Warrant and the warrant price and (ii) file the form of Warrant as an exhibit. There are no other modifications or updates to any of the information made in the Original 8-K. All defined terms used in this Explanatory Note shall have the meanings set forth below.
| Item 1.01 | Entry into a Material Definitive Agreement. |
On January 4, 2023 (the “Closing Date”), 89bio, Inc. (the “Company”) and certain of its subsidiaries party thereto, as co-borrowers (together with the Company, the “Borrowers”), entered into a Loan and Security Agreement (the “Loan Agreement”) with the lenders referred to therein (the “Lenders”), K2 HealthVentures LLC (“K2HV”), as administrative agent for the Lenders, and Ankura Trust Company, LLC, as collateral agent for the Lenders. The Loan Agreement provides up to $100.0 million principal in term loans (the “Term Loan”) consisting of a first tranche of $25.0 million funded at closing, two subsequent tranches totaling $25.0 million to be funded upon the achievement of certain time-based, clinical and regulatory milestones, and a subsequent fourth tranche of up to $50.0 million upon the Company’s request, subject to review by the Lenders of certain information from the Company and discretionary approval by the Lenders. The Term Loan matures on February 1, 2027; provided, that the maturity date may be extended to August 1, 2027 if the second and third tranches are funded and the Company achieves certain other financing milestones.
The obligations of the Borrowers under the Loan Agreement are secured by certain assets of the Borrowers, including substantially all of the assets of the Company, excluding the Company’s intellectual property.
The Term Loan bears a variable interest rate equal to the greater of (i) 8.45% and (ii) the sum of (a) the Prime Rate as reported in The Wall Street Journal plus (b) 2.25%. The Company may prepay, at its option, all, but not less than all, of the outstanding principal balance and all accrued and unpaid interest with respect to the principal balance being prepaid of the Term Loan, subject to a prepayment premium to which the Lenders are entitled and certain notice requirements.
The Lenders may elect at any time following the Closing Date and prior to the full repayment of the Term Loan to convert any portion of the principal amount of the term loans then outstanding, up to an aggregate of $7.5 million in principal amount, into shares of the Company’s common stock (the “Conversion Shares”), at a conversion price equal to $12.6943, subject to certain beneficial ownership limitations.
The proceeds of borrowings under the Loan Agreement are expected to be used for working capital and general corporate requirements.
The Loan Agreement contains customary representations and warranties and affirmative and negative covenants, including covenants that limit or restrict the ability of the Borrowers or their subsidiaries to, among other things, dispose of assets, make changes to their business, management, ownership or business locations, merge or consolidate, incur additional indebtedness, pay dividends or other distributions or repurchase equity, make investments, and enter into certain transactions with affiliates, in each case subject to certain exceptions. In addition, starting in January 2024, the Company must maintain minimum unrestricted cash and cash equivalents equal to 5.0 times the average monthly consolidated change in cash and cash equivalents measured over the trailing three-month period.
The Loan Agreement contains customary events of default, including a change in control. Upon the occurrence and continuation of an event of default, all amounts due under the Loan Agreement become (in the case of a bankruptcy event), or may become (in the case of all other events of default and at the option of the administrative agent), immediately due and payable.
