XML 28 R14.htm IDEA: XBRL DOCUMENT
v3.20.2

Financing Arrangements | 9 Months Ended
--- | ---
Sep. 30, 2020
Debt Disclosure [Abstract] |
Financing Arrangements | Note 8. Financing Arrangements The carrying amount of our long-term debt as of September 30, 2020 and December 31, 2019 was as follows (in thousands, except interest rates):
|  | September 30, 2020 |  | December 31, 2019 |  | Maturity |  | Interest Rate
2020 Senior Secured Term Loan |  | $ | 422,960 |  |  | $ | — |  |  | June 2025 |  | LIBOR (1% Floor) | + | 6.50%
2020 Cash Exchangeable Senior Notes |  | 208,954 |  |  | — |  |  | December 2025 |  | 3.00%
Bank of America Merrill Lynch Banco Múltiplo S.A. |  | 6,000 |  |  | 8,422 |  |  | July 2021 |  | 5.61%
Mediocredito Italiano |  | 5,835 |  |  | 6,222 |  |  | December 2023 |  | 0.50 | % | - | 2.77%
Bank of America, U.S. |  | 2,011 |  |  | 2,004 |  |  | January 2021 |  | 2.08%
2019 Debt Facility |  | — |  |  | 184,275 |  |  |  |  |  |  |
2017 European Investment Bank |  | — |  |  | 103,570 |  |  |  |  |  |  |
2014 European Investment Bank |  | — |  |  | 28,053 |  |  |  |  |
Other |  | 1,041 |  |  | 965 |  |  |  |  |  |  |
Total long-term facilities |  | 646,801 |  |  | 333,511 |  |  |  |  |  |  |
Less current portion of long-term debt |  | 9,692 |  |  | 73,181 |  |  |  |  |  |  |
Total long-term debt |  | $ | 637,109 |  |  | $ | 260,330 |  |  |  |  |  |  |
Revolving Credit The outstanding principal amount of our short-term unsecured revolving credit agreements and other agreements with various banks was $4.3 million and $4.2 million, at September 30, 2020 and December 31, 2019, respectively, with interest rates ranging from 3.21% to 7.20% and loan terms ranging from overnight to 10 months, as of September 30, 2020. 2020 Senior Secured Term Loan On June 10, 2020, we entered into a $450.0 million five-year senior secured term loan (the “Term Loan”) through our wholly owned subsidiary LivaNova USA Inc., with funds managed by affiliates of Ares Management Corporation, as administrative agent and collateral agent, resulting in cash proceeds of approximately $421.7 million, net of discounts and issuance costs. The obligations under the Term Loan are guaranteed on a senior secured basis by each of LivaNova’s existing and future wholly owned material subsidiaries, and are secured by a perfected first priority security interest in substantially all tangible and intangible assets of LivaNova and certain U.S. and UK subsidiaries of LivaNova, subject in each case to certain exceptions contained in the Term Loan. Borrowings under the Term Loan bear interest at a variable annual rate equal to the three-month LIBOR rate (subject to a 1% floor), plus an applicable margin of 6.5% per annum. The effective interest rate of the Term Loan at September 30, 2020 was 9.0%. The Term Loan will mature on June 30, 2025 and includes certain affirmative, negative and financial covenants. The financial covenants under the Term Loan state (i) the net revenue of LivaNova PLC, LivaNova USA, Inc. and any restricted subsidiaries on a consolidated basis shall not be lower than $700 million for each trailing 12 month period, such threshold to decrease pro rata (not below $550 million) upon prepayments of the Term Loan made by LivaNova USA, Inc. out of the proceeds of certain asset sales, and (ii) the total secured leverage ratio (as defined in the debt agreement) for LivaNova PLC, LivaNova USA, Inc. and any restricted subsidiaries on a consolidated basis shall not be greater than the applicable ratio set forth below:
Test Period |  | Total Secured Leverage Ratio
4 Quarters ending June 30, 2020 through each fiscal quarter thereafter until (and including) the fiscal quarter ending June 30, 2021 |  | 5.625 | : | 1.00
4 Quarters ending September 30, 2021 and ending each fiscal quarter thereafter |  | 4.5 | : | 1.00
Debt discounts and issuance costs related to the Term Loan were approximately $28.3 million and included various legal, bank and accounting fees. Amortization of debt discount and issuance costs was $1.1 million and $1.3 million for the three and nine months ended September 30, 2020, respectively, and was included in interest expense on the condensed consolidated statement of income (loss). 2020 Cash Exchangeable Senior Notes On June 17, 2020, our wholly-owned subsidiary, LivaNova USA, Inc., issued $287.5 million aggregate principal amount of 3.00% cash exchangeable senior notes (the “Notes”) by private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The sale of the Notes resulted in approximately $278.0 million in net proceeds to the Company after deducting issuance costs. Interest is payable semiannually in arrears on June 15 and December 15 of each year, beginning on December 15, 2020. The effective interest rate of the Notes at September 30, 2020 was 9.9%. The Notes mature on December 15, 2025 unless earlier exchanged, repurchased, or redeemed. Debt discounts and issuance costs related to the Notes were approximately $82.0 million and included $75.0 million of discount attributable to the embedded exchange feature, discussed below, and $7.0 million of allocated issuance costs to the Notes related to legal, bank and accounting fees. Amortization of debt discount and issuance costs was $3.0 million and $3.4 million for the three and nine months ended September 30, 2020 and is included in interest expense on the condensed consolidated statement of income (loss). The Notes are exchangeable at the option of the holders only under certain circumstances and solely into cash in an amount based on the trading prices of LivaNova’s ordinary shares during a related observation period. The Notes are not exchangeable into ordinary shares of LivaNova or any other security under any circumstances. The initial exchange rate for the Notes is 16.3980 ordinary shares per $1,000 principal amount of Notes (equivalent to an initial exchange price of approximately $60.98 per share). The exchange rate is subject to adjustment in certain circumstances, as set forth in the indenture governing the Notes. The Company may redeem the Notes at its option, on or after June 20, 2023, in whole or in part, if the last reported sale price per ordinary share has been at least 130% of the exchange price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. Additionally, the Company may redeem the Notes at its option, prior to December 15, 2025, in whole but not in part, in connection with certain tax-related events. Embedded Exchange Feature The embedded exchange feature of the Notes requires bifurcation from the Notes and is accounted for as a derivative liability. The fair value of the Notes’ embedded exchange feature derivative at the time of issuance was $75.0 million and was recorded as debt discount on the Notes. This discount is amortized as interest expense using the effective interest method over the term of the Notes. The Notes’ embedded exchange feature derivative is carried on the condensed consolidated balance sheets at its estimated fair value and is adjusted at the end of each reporting period, with unrealized gain or loss reflected in the consolidated statements of income (loss). The fair value of the embedded exchange feature derivative liability was $59.4 million as of September 30, 2020. Capped Call Transactions In connection with the pricing of the Notes, the Company entered into privately negotiated capped call transactions with certain of the initial purchasers of the Notes or their respective affiliates. The capped call transactions cover, subject to anti-dilution adjustments substantially similar to those applicable to the Notes, the number of LivaNova’s ordinary shares underlying the Notes and are expected generally to offset any cash payments the Company is required to make upon exchange of the Notes in excess of the principal amount thereof in the event that the market value per ordinary share, as measured under the capped call transactions, is greater than the strike price of the capped call transactions, with such offset being subject to an initial cap price of $100.00 per share. The aggregate cost of the capped calls derivative assets was $43.1 million. The capped call transactions expire on December 15, 2025 and must be settled in cash. The capped calls are carried on the condensed consolidated balance sheets as a derivative asset at their estimated fair value and are adjusted at the end of each reporting period, with unrealized gain or loss reflected in the condensed consolidated statement of income (loss). The fair value of capped call derivative assets was $39.0 million as of September 30, 2020. The current and non-current classification is evaluated at each balance sheet date and may change depending on whether any exchange conditions are met. As of September 30, 2020, no exchange conditions have been met and the Notes, embedded exchange feature derivative liability, and the capped call derivative assets are classified as non-current. Please refer to “Note 7. Fair Value Measurements” for details on the valuation of the embedded exchange feature derivative liability and capped call derivative assets. Extinguishment of Debt The Company used the net proceeds from the Term Loan, together with a portion of the net proceeds of the Notes, after fees, discounts, commissions and other expenses, to repay outstanding indebtedness under the Company’s 2017 European Investment Bank loan, 2014 European Investment Bank loan, Banca Nazionale del Lavoro S.p.A loan, and 2019 Debt Facility and related expenses. The Company repaid approximately $528.0 million in aggregate outstanding principal, accrued interest and associated fees, including breakage fees and legal fees. The Company recognized a loss on debt extinguishment of $1.4 million during the nine months ended September 30, 2020. The loss on debt extinguishment was recognized in foreign exchange and other losses in the condensed consolidated statements of income (loss). The remainder of the proceeds from the concurrent financing transactions were used to pay the cost of capped call transactions and for general corporate purposes.

X
- References No definition available. + Details
Name: | us-gaap_DebtDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
Name: | us-gaap_DebtDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration