| Borrowings | Note 14. Borrowings
As of As of
Borrowings at amortized cost (a)
Syndicated term loan (1) $ 40,191 $ 38,626
Other term loan (2) 93,788 95,720
Lease liabilities (3) 34,966 34,192
Factoring obligations (4) 4,017 2,317
Bank overdrafts (5) 357 80
Notes (6) 115,000 115,000
Total Interest bearing liabilities $ 288,319 $ 285,935
Current 118,684 257,525
Non- Current $ 169,635 $ 28,410
(a) Borrowings at amortized cost are
1. Syndicated term loan
Currency Range of Maturity As of As of
Syndicated term loan COP IBR + 5.30% 2023-2025 $ 40,652 $ 39,156
Amortized cost COP N/A 2023 (461 ) (530 )
Total Syndicated term loan $ 40,191 $ 38,626 On November 20, 2018, Procaps S.A. entered into
a syndicated term loan agreement the “Syndicated Loan Agreement”) with the following banks: Portion in Colombian pesos (COP)
- Davivienda and Bancolombia; US dollar portion (USD) - Banco de Credito del Peru, Bancolombia Panama and Banco Sabadell. The total value
of the syndicated loan amounts to $200,434 million COP (portion in COP) and $35 million USD (portion in USD), Fiduciaria Bancolombia acts
as the agent of the loan. C.I. Procaps S.A., Procaps S.A. de C.V, Biokemical S.A., Pharmarketing S.A. (Panama), Pharmarketing Salvador
S.A. de C.V., Pharmarketing S.A. (Guatemala S.A.), C.D.I. Salvador S.A. de C.V., C.D.I. Nicaragua S.A., C.D.I. Guatemala S.A., Pharmarketing
Dominicana SRL, and Pharmarketing Costa Rica S.A., act as co-debtors, while Pharmayect S.A., Inversiones Crynssen S.A.S., Inversiones
Ganeden S.A.S., Inversiones Henia S.A.S., Inversiones Jades S.A.S., and Industrias Kadima S.A.S., act as guarantors. The resources obtained were used for advance payment
and/or novation of some obligations to be refinanced. The conditions of the loan had a term of 5 years for installment payments and the
interest rates agreed are as follows: IBR + 5.30% for the portion in COP and Libor + 4.80% for the USD portion. The significant covenants required by the Syndicated
Loan Agreement are as follows: Financial covenants
● Indebtedness Indicator (Indebtedness/EBITDA) as of June 30 and December 31 of each year, during the loan
term, must be less than or equal to 3.5 times. If the indicator is greater than 3.0 and less than 3.5, it proceeds to the extent that
this value is originated by causes other than additional debt and the justification of the increase must be presented to the agent.
● Short-term leverage ratio < 1.0 on the last day of each semester.
● EBITDA ratio / financial expenses = or > 3.0 on the last day of each semester. Other covenants
● The Syndicated Loan Agreement establishes that each of the jointly obligated parties, unless they have
the express, prior and written authorization of the Agent, will refrain from incurring any type of financial debt when the proforma indebtedness
indicator, once acquired the additional financial debt, is greater than 3.0 times and maintaining any type of financial debt when the
pro forma indebtedness indicator, once the national debt is acquired, is greater than 3.5 times.
● Each of the joint obligated parties, except with express, prior and written authorization of the Agent
to do otherwise, will refrain from contracting finance and/or operating lease obligations with purchase option with a joint balance payable
greater than $85,000,000 (Eighty-Five Billion Pesos, local currency) or its equivalent in another currency. For purposes of clarity, the
reclassification of obligations as financial lease obligations by application of the Accounting Standards will not consume the balance
set forth herein and may not be renewed.
● The payment of dividends is restricted to anyone other than the jointly obligated parties. The Syndicated Loan Agreement establishes that,
in the event of breach of covenants by the debtor, the lenders shall be entitled to declare early maturity of the debts. As mentioned in Note 2.1. Going concern, as of
December 31, 2022, the Group was not in compliance with certain covenants under the Syndicated Loan Agreement. As a result, as of December
31, 2022, $19,665 unpaid principal balance previously classified as non-current borrowings, was reclassified to current borrowings within
the Group’s Consolidated Statement of Financial Position. On May 2, 2023 the Group obtained a Waiver for
the loan covenant breaches described above. Under the terms of the Waiver, the lenders agreed to
waive the event of default as of December 31, 2022.For the period ending June 30, 2023, as part of the Waiver negotiations, the lenders
agreed to adjust the convent ratios as noted below (the covenants will return to the original terms from December 31, 2023, onwards):
● Indebtedness Indicator (Indebtedness/EBITDA) must be less than or equal to 4.5 times (original covenant:
less than or equal to 3.5 times).
● Short-term leverage ratio less than 1.6 (original covenant: less than 1.0).
● EBITDA ratio / financial expenses greater than or equal to 1.8 (original covenant: greater than or equal
to 3.0). As a result, the unpaid principal balance is classified
as non-current borrowings as of June 30, 2023. Additionally,
as mentioned in Note 2.1. Going concern, on August 16, 2023, the Group renegotiated the terms of the Syndicated Loan Agreement which extends
the payment terms for a six-year period. Refer to Note 20. Events after the reporting period for further details regarding the renegotiation. 2. Other term loan
Currency Range of Interest Maturity As of As of
Other term loan COP IBR+ 9.0%, 23.5% 2022-2025 $ 12,407 $ 9,549
COP IBR + 2.25%- IBR 7.95% 2022-2025 23,342 21,267
Soles 8.0% - 14.50% (Fixed) 2022-2024 6,619 6,837
Reales 9.84% - 18% N.A. 2023-2024 1,137 2,176
USD SOFR+ (5.80%-7.00%), SOFR6M + (2%-3%) 2023 24,669 23,454
USD 6.5%-16.8% N.A. 2022-2025 25,614 32,437
Total Other term loans $ 93,788 $ 95,720 On June 28, 2022, Procaps, S.A. (the “Company”)
entered into a credit agreement with BTG to borrow $8,672. The covenants required by the loan contract are:
● The Company’s consolidated Indebtedness Indicator (Indebtedness / EBITDA) should not be greater than 3.5x.
● The Company’s consolidated EBITDA/Finance expense should not be less than 3x. As mentioned in Note 2.1. Going concern, as of
December 31, 2022, the Group was not in compliance with the loan covenants related to the BTG Credit Agreement. As a result, the $4,490
unpaid principal balance previously classified as a non-current borrowings, was reclassified to current borrowings within the Group’s
Consolidated Statement of Financial Position as of December 31, 2022. On March 28, 2023 the Group obtained a Waiver
for the loan covenant breach. Under the terms of the Waiver, BTG Pactual agreed to waive the event of default as of December 31, 2022.
For the period ending June 30, 2023, as part of the Waiver negotiations, the lenders agreed to adjust the covenant ratios as noted below
(the covenants will return to the original terms from December 31, 2023, onwards):
● The Company’s consolidated Indebtedness Indicator (Indebtedness / EBITDA) must not be greater than
4.5x (original covenant: greater than 3.5x).
● The Company’s consolidated EBITDA/Finance expense must
not be less than 1.8x (original covenant: less than 3.0x). As a result, the unpaid principal balance is classified
as non-current borrowings as of June 30, 2023. Along with the BTG Credit 3. Lease liabilities
Currency Range of Interest Maturity As of As of
Lease liabilities COP IBR+(3.82%-7.3%), DTF + 5.5% 2022-2030 $ 10,170 $ 10,475
COP IBR+ (4.2%-8.2%) 2022-2025 3,944 3,653
USD 0.75%-21.48%, DTF+5.50%, IBR+4.10% (2022: 0.75%-21.48%) 2023-2032 20,852 14,787
COP 1.91%-12.23%, IBR+4.68% 2023 — 4,703
Reales 0.70-8.72% (Fixed) 2023-2024 — 574
Total Lease Liabilities $ 34,966 $ 34,192 4. Factoring obligations
Currency Range of Interest Maturity As of As of
Portfolio factoring COP DTF+7% (2022: DTF+8%) 2023 $ 1,583 $ 1,508
COP 2% - 22.4% (2022: 15.0% - 27% N.A.) 2023 2,434 809
Total Factoring $ 4,017 $ 2,317 5. Bank overdraft
Currency Range of Interest Maturity As of As of
Overdrafts and credit cards COP 19.68% - 32% E.A. (Fixed) 2023 $ 357 $ 80 6. Notes On November 12, 2021, the Group closed the private
placement offering of $115 million aggregate principal amount of 4.75% guaranteed senior notes (the “Senior Notes”) issued
by Procaps, S.A., a subsidiary of the Group, due November 12, 2031, pursuant to the NPA entered into on November 5, 2021 with The Prudential
Insurance Company of America, Prudential Annuities Life Assurance Corporation, Healthspring Life & Health Insurance Company, Inc.
and Cigna Health and Life Insurance Company Inc. The Senior Notes are a senior unsecured obligations
of Procaps, S.A. and unconditionally guaranteed by Procaps Group, S.A. and the following subsidiaries of the Group: C.I. Procaps, S.A.,
Diabetrics Healthcare S.A.S., Pharmayect S.A., Procaps, S.A. de C.V., Biokemical, S.A. de C.V., Colbras Indústria e Comércio
Ltda., and Sofgen Pharmaceuticals LLC. Debt issuance costs related to the Senior Notes
of $2,142, comprised of commissions payable to the initial purchasers of $1,390 and attorneys’ costs of $752, were allocated to
the liability of the Notes based on their relative values. Issuance incremental costs are part of the effective rate and amortized to
interest expense using the effective interest method over the contractual term. As mentioned in Note 1. General Company Information,
the Notes Payoff did not occur on or prior to November 30, 2022, therefore triggering the 3.75% per annum waiver fee on the outstanding
principal amount of Senior Notes, raising the interest rate from 4.75% to 8.50%. As a result, the Group has treated the rate increase
as a debt extinguishment, derecognised a liability in the amount of $113,400, expensed $1,600 in unamortized transaction costs, and recognized
a new liability in the amount of $115,000 as of December 31, 2022. The Senior Notes require Procaps, S.A., the Group
and the following subsidiaries of the Group: C.I. Procaps, S.A., Diabetrics Healthcare S.A.S., Pharmayect S.A., Procaps, S.A. de C.V.,
Biokemical, S.A. de C.V., Colbras Indústria e Comércio Ltda., and Sofgen Pharmaceuticals LLC. to comply with the following
financial ratios:
● The consolidated total debt of Procaps, S.A., the Group and the other obligors thereunder to consolidated
EBITDA for the last twelve months of 3.50:1.00 or less (Indebtedness Indicator), measured at certain dates of determination and;
● An EBITDA interest coverage ratio (calculated as the consolidated EBITDA for the last twelve months of
Procaps, S.A. and the other obligors thereunder divided by the consolidated interest expenses of Procaps, S.A. and the other obligors
thereunder) in excess of, or equal to, 3.00:1.00, calculated at certain dates of determination.
● Short-term leverage ratio equal to or less than 1.00 Complying with the Note Purchase Agreement protocols
and as a result of the more favorable provisions of the Syndicated Loan Agreement, the Group gave notice on April 7, 2022 that specific
provisions related to reporting covenants, affirmative covenants, negative covenants, events of default, and mandatory prepayment events,
as set forth in the Syndicated Loan Agreement, shall apply to the Senior Notes. As mentioned in Note 2.1. Going concern, as of
December 31, 2022, the Group was not in compliance with the financial covenants related to the Senior Notes. As a result, the $115,000
unpaid principal balance previously classified as a non-current borrowings, was reclassified to current borrowings within the Group’s
Consolidated Statement of Financial Position as of December 31, 2022. On March 31, 2023 the Group obtained a Waiver
for the NPA covenant breaches described above. Under the terms of the Waiver, the noteholders agreed to waive the event of default as
of December 31, 2022. For the periods ending March 31, June 30 and September 30, 2023, as part of the Waiver negotiations, the lenders
agreed to adjust the covenant ratios as noted below (the covenants. will return to the original terms from December 31, 2023, onwards):
● The consolidated total debt of Procaps, S.A., the Group and the other obligors thereunder to consolidated
EBITDA for the last twelve months of 4.00:1.00 or less (original covenant: 3.50:1.00 or less).
● An EBITDA interest coverage ratio in excess of, or equal to, 2.20:1.00 (original covenant: in excess of,
or equal to, 3.00:1.00).
● Short-term leverage ratio equal to or less than 1.60:1:00 (original covenant: equal to or less than 1.00:1.00). As mentioned in Note 2.1. Going concern, as of
June 30, 2023 the Group obtained an Additional Waiver under the NPA in anticipation of a potential breach of the covenant ratios contained
within the March 31, 2023 Waiver. For the periods ending June 30 and September 30, 2023, the lenders agreed to adjust the covenant ratios
as noted below (the covenants will return to the original terms from December 31, 2023, onwards):
● The consolidated total debt of Procaps, S.A., the Group and the other obligors thereunder to consolidated
EBITDA for the last twelve months of 4.30:1.00 or less (original covenant: 3.50:1.00 or less).
● An EBITDA interest coverage ratio in excess of, or equal to, 1.90:1.00 (original covenant: in excess of,
or equal to, 3.00:1.00). The Additional Waiver was obtained on June
30, 2023, therefore, the unpaid principal balance is classified as non-current borrowings as of June 30, 2023.
Currency Range of Maturity As of As of
The Prudential Insurance Company Of America USD 8.50% (Fixed) 2031 $ 60,020 $ 60,020
Prudential Annuities Life Assurance Corporation USD 8.50% (Fixed) 2031 29,980 29,980
Healthspring Life & Health Insurance Company, Inc USD 8.50% (Fixed) 2031 18,350 18,350
CIGNA Health and Life Insurance Company USD 8.50% (Fixed) 2031 6,650 6,650
Total Senior Notes $ 115,000 $ 115,000 |
