Item 1.01. Entry into a Material Definitive Agreement.
On June 30, 2023 (the “Closing Date”), Amphastar Pharmaceuticals, Inc., a Delaware corporation (“Amphastar” or the “Company”), entered into a Credit Agreement (the “Credit Agreement”) by and among the Company, certain subsidiaries of the Company party thereto, as guarantors, the lenders party thereto, and Wells Fargo Bank, National Association, as Administrative Agent (in such capacity, “Agent”), Swing Line Lender and L/C Issuer.
The Credit Agreement provides for a senior secured revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of $200.0 million, with a $15.0 million letter of credit sublimit and a $15.0 million swingline loan sublimit. The Revolving Credit Facility matures on June 30, 2028 (the “Maturity Date”). As of the Closing Date, the Company had no borrowings outstanding under the Revolving Credit Facility.
The Credit Agreement also provides for the incurrence by Amphastar of a senior secured term loan in an aggregate principal amount of $500.0 million (the “Term Loan”, and together with the Revolving Credit Facility, the “Credit Facilities”). The Term Loan matures on the Maturity Date. The Term Loan was fully funded on the Closing Date.
The proceeds of the Credit Facilities were used to finance the acquisition of BAQSIMI® glucagon nasal powder (“BAQSIMI®”) and related assets (the “Transferred Assets”) from Eli Lilly and Company, an Indiana corporation (“Lilly”), to refinance certain of Amphastar’s and its subsidiaries’ existing third-party indebtedness, and to pay fees and expenses incurred in connection with each of the foregoing. Any remaining but otherwise unused proceeds from the Credit Facilities will be used for general corporate purposes.
Outstanding borrowings under the Credit Facilities initially accrue interest, at the Company’s option, at a per annum rate equal to either (i) a base rate equal to the highest of (x) the federal funds rate, plus 0.50%, (y) the prime rate then in effect and (z) an adjusted daily SOFR rate determined on the basis of a one-month interest period plus 1.00%, in each case, plus an applicable margin of 1.25%, or (ii) an adjusted Term SOFR rate, subject to a floor of 0.00%, plus an applicable margin of 2.25%. Following delivery of financial statements for the Company’s first fiscal quarter following payment in full of the Guaranteed Payment, the applicable margin for outstanding borrowings under the Credit Facilities will range from 0.50% to 1.50% in the case of base rate loans and 1.50% to 2.50% in the case of Term SOFR rate loans, in each case, depending on the Company’s consolidated net leverage ratio as of the most recently ended fiscal quarter. The Company is required to pay commitment fees ranging from 0.15% to 0.35% per annum on the daily undrawn commitments under the Revolving Credit Facility, depending on the Company’s consolidated net leverage ratio as of the most recently ended fiscal quarter. The Company is also obligated to pay other customary closing fees, arrangement fees, administration fees, commitment fees and letter of credit fees for a credit facility of this size and type.
The Company may borrow, repay and reborrow revolving loans under the Revolving Credit Facility until the Maturity Date, at which time the commitments under the Revolving Credit Facility will terminate and all outstanding loans thereunder, together with all accrued and unpaid interest thereon, must be repaid.
The Term Loan amortizes at a rate equal to 2.5%, 5.0%, 7.5%, 7.5% and 10.0% per annum in years 1, 2, 3, 4, and 5 following the Closing Date, respectively (based on the original principal amount of the Term Loan). The remaining outstanding principal amount of the Term Loan, together with all accrued and unpaid interest, is due on the Maturity Date. The Credit Facilities are also required to be prepaid with the proceeds of certain customary events, including certain asset sales, casualty events, and non-permitted debt incurrence.
The Credit Agreement permits the Company to add one or more incremental term loan facilities (in addition to the Term Loan) and/or increase the commitments under the Revolving Credit Facility from time to time, subject, in each case, to the receipt of additional commitments from existing and/or new lenders and, among other things, pro forma compliance with the financial covenants set forth in the Credit Agreement.
The Company’s obligations under the Credit Agreement are guaranteed by certain of its domestic subsidiaries meeting materiality thresholds set forth in the Credit Agreement. To secure the Company’s obligations under the Credit Agreement and the subsidiary guarantors’ obligations under the guarantees, each of the Company and the subsidiary guarantors has granted a security interest in substantially all its assets, subject to certain exceptions and limitations.
The Credit Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict the Company and its subsidiaries’ ability to, among other things, incur indebtedness, grant liens, merge or consolidate, dispose of assets, make investments, make acquisitions, enter into certain transactions with affiliates, pay dividends or make distributions, repurchase stock, enter into restrictive agreements and enter into sale and leaseback transactions, in each case subject to customary exceptions for a credit facility of this size and type. The Credit Agreement also includes a financial maintenance covenant, requiring the Company to maintain compliance with a maximum consolidated net