Item 1.01. Entry into a Material Definitive Agreement.
On July 26, 2023 (the “Closing Date”), Harmony Biosciences Holdings, Inc. (the “Company”) entered into a Credit Agreement (the “New Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, and certain lenders. The New Credit Agreement provides for a five-year senior secured term loan (the “Loan”) in an aggregate principal amount of $185.0 million. The proceeds of the Loan, together with the Company’s cash on hand, were used to repay existing debt and to pay transaction fees and expenses in connection with the establishment of the New Credit Agreement.
The Loan bears interest at a per annum rate equal to, at the Company’s option, (i) a base rate plus a specified margin ranging from 2.50% to 3.00%, based on the Company’s senior secured net leverage ratio (as defined in the New Credit Agreement) or (ii) Term SOFR plus a credit spread adjustment of 0.10% plus a specified margin ranging from 3.50% to 4.00%, based on the Company’s senior secured net leverage ratio, which shall increase, in each case, by an additional 2.00% on all past due obligations if the Company fails to pay any amount when due or following any acceleration of the Loan. In addition, the Company paid an upfront fee of 0.50% of the aggregate principal amount of the Loan on the Closing Date.
The Loan is guaranteed by the Company’s subsidiary, Harmony Biosciences, LLC (the “Initial Guarantor”), pursuant to the terms of the Guaranty. The Company’s obligations under the New Credit Agreement and the guarantee of such obligations are secured by a pledge of substantially all of the assets of the Company and the Initial Guarantor pursuant to the terms of the Pledge and Security Agreement.
The repayment schedule for the Loan consists of quarterly $3.5 million principal payments, which commence on December 31, 2023, increasing to quarterly $4.6 million principal payments beginning on December 31, 2025, with the balance paid on the maturity date of July 26, 2028. Subject to certain exceptions, the Company is required to make mandatory prepayments of the Loan with the proceeds of asset sales, casualty and condemnation events and prohibited debt issuances. In addition, the Company may, subject to certain parameters, voluntarily prepay the Loan, in whole or in part, at any time.
The New Credit Agreement provides that the Company has the right at any time to establish incremental revolving facilities or incremental term facilities, subject to the agreement of one or more new or existing lenders to provide such additional amounts and certain other customary conditions.
The New Credit Agreement also contains customary affirmative and negative covenants, financial covenants, representations and warranties, events of default and other provisions.
The foregoing descriptions of the New Credit Agreement, the Pledge and Security Agreement and the Guaranty do not purport to be complete and are qualified in their entirety by reference to the full text of the New Credit Agreement, the Pledge and Security Agreement, and the Guaranty, which are filed, respectively, as Exhibits 10.1, 10.2 and 10.3 hereto and incorporated herein by reference.
Item 1.02. Termination of a Material Definitive Agreement.
On August 9, 2021, the Company entered into a credit agreement with Blackstone Alternative Credit Advisors LP and the other lenders party thereto from time to time and Wilmington Trust, National Association, as administrative agent, providing for a loan with an aggregate amount of $200 million (the “Blackstone Loan”), which was scheduled to mature on August 9, 2026.
On July 26, 2023, upon entry into the New Credit Agreement described in Item 1.01 above, together with cash on hand, the Blackstone Loan was repaid in full, and all commitments thereunder were terminated. In connection with the repayment of the Blackstone Loan, the Company paid a repayment premium of 2.00% of the principal amount of the Blackstone Loan outstanding at the time of repayment.
Item 7.01. Regulation FD Disclsoure.
On July 27, 2023, the Company issued a press release relating to the entry into the New Credit Agreement. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.
