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Borrowings | 3 Months Ended
--- | ---
Mar. 31, 2024
Debt Disclosure [Abstract] |
Borrowings | 8. Borrowings Carrying amount of the Company's borrowings consisted of the following (in thousands):
|  | March 31, 2024 |  |  | December 31, 2023 |
Senior convertible notes |  | $ | 227,214 |  |  | $ | 226,851 |
MidCap credit facility |  |  | 28,105 |  |  |  | 33,019 |
Mann Group convertible note |  |  | 8,829 |  |  |  | 8,829 |
Total debt – net carrying amount |  | $ | 264,148 |  |  | $ | 268,699 |
The following table provides a summary of the Company’s principal balance of debt and key terms:
|  | Amount Due |  | Terms
|  | March 31, 2024 |  | December 31, 2023 |  | Annual Interest Rate |  | Maturity Date |  | Conversion Price
Senior convertible notes |  | $230.0 million |  | $230.0 million |  | 2.50% |  | March 2026 |  | $5.21 per share
MidCap credit facility |  | $28.3 million |  | $33.3 million |  | one-month SOFR (1% floor) plus 6.25%; cap of 8.25% |  | August 2025 |  | N/A
Mann Group convertible note |  | $8.8 million |  | $8.8 million |  | 2.50% |  | December 2025 |  | $2.50 per share
In early April 2024, the Company repaid all obligations owed under the MidCap credit facility and the Mann Group convertible notes. See Note 16 – Subsequent Events. The maturities of the Company’s borrowings as of March 31, 2024 are as follows (in thousands):
|  | Amounts |
Remainder of 2024 |  | $ | 15,000 |
2025 |  |  | 22,163 |
2026 |  |  | 230,000 |
Total principal payments |  |  | 267,163 |
Unamortized discount and prepayment fee |  |  | (155 | )
Debt issuance costs |  |  | (2,860 | )
Total debt |  | $ | 264,148 |
Senior convertible notes – In March 2021, the Company issued $230.0 million aggregate principal amount of Senior convertible notes in a private offering. The Senior convertible notes were issued pursuant to an indenture, dated March 4, 2021 (the “Indenture”), between the Company and U.S. Bank National Association, as trustee. The Senior convertible notes are general unsecured obligations of the Company and will mature on March 1, 2026, unless earlier converted, redeemed or repurchased by the Company. The Senior convertible notes will bear cash interest from March 4, 2021 at an annual rate of 2.50% payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2021. The Senior convertible notes are convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding December 1, 2025, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock, par value $0.01 per share, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price for the Senior convertible notes on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period in which the trading price (as defined in the Indenture) per $1,000 principal amount of the Senior convertible notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the common stock and the conversion rate on each such trading day; (3) if the Company calls such Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the Senior convertible notes called (or deemed called) for redemption; or (4) upon the occurrence of specified corporate events as set forth in the Indenture. On or after December 1, 2025 until the close of business on the business day immediately preceding the maturity date, holders may convert all or any portion of their Notes at any time, regardless of the foregoing circumstances. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election, in the manner and subject to the terms and conditions provided in the Indenture. The initial conversion rate is 191.8281 shares of common stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $5.21 per share of common stock). The initial conversion price of the Senior convertible notes represents a premium of approximately 30% to the last reported sale price of the common stock on the Nasdaq Global Market on March 1, 2021. The conversion rate for the Senior convertible notes is subject to adjustment under certain circumstances in accordance with the terms of the Indenture, but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date of the Senior convertible notes or if the Company delivers a notice of redemption in respect of the Senior convertible notes, the Company will, in certain circumstances, increase the conversion rate of the Senior convertible notes for a holder who elects to convert its Senior convertible notes in connection with such a corporate event or convert its Notes called for redemption during the related redemption period (as defined in the Indenture), as the case may be. The Company may not redeem the Senior convertible notes prior to March 6, 2024. The Company may redeem for cash all or any portion of the Senior convertible notes, at its option, on or after March 6, 2024 and prior to the 36th scheduled trading day immediately preceding the maturity date, if the last reported sale price of common stock has been at least 130% of the conversion price for the Senior convertible notes then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such 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 Senior convertible notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If the Company elects to redeem less than all of the outstanding Senior convertible notes, at least $75.0 million aggregate principal amount of Senior convertible notes must be outstanding and not subject to redemption as of the relevant redemption notice date. No sinking fund is provided for the Senior convertible notes. If the Company undergoes a fundamental change (as defined in the Indenture), then, subject to certain conditions and except as described in the Indenture, holders may require the Company to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Senior convertible notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. The Indenture includes customary covenants and sets forth certain events of default after which the Senior convertible notes may be declared immediately due and payable. If certain bankruptcy and insolvency-related events of default involving the Company (and not just any of its significant subsidiaries) occur, 100% of the principal of and accrued and unpaid interest on the Senior convertible notes will automatically become due and payable. If an event of default with respect to the Senior convertible notes, other than certain bankruptcy and insolvency-related events of default involving the Company (and not just any of its significant subsidiaries), occurs and is continuing, the trustee, by notice to the Company, or the holders of at least 25% in principal amount of the outstanding Senior convertible notes by notice to the Company and the trustee, may, and the trustee at the request of such holders shall, declare 100% of the principal of and accrued and unpaid interest, if any, on all the Senior convertible notes to be due and payable. Notwithstanding the foregoing, the Indenture provides that, to the extent the Company so elects, the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture will, for the first 365 days after the occurrence of such an event of default consist exclusively of the right to receive additional interest on the Senior convertible notes as set forth in the Indenture. The Indenture provides that the Company shall not consolidate with or merge with or into, or sell, convey, transfer or lease all or substantially all of the consolidated properties and assets of the Company and its subsidiaries, taken as a whole, to, another person (other than any such sale, conveyance, transfer or lease to one or more of the Company’s direct or indirect wholly owned subsidiaries), unless: (i) the resulting, surviving or transferee person (if not the Company) is a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia, and such corporation (if not the Company) expressly assumes by supplemental indenture all of the Company’s obligations under the Senior convertible notes and the Indenture; and (ii) immediately after giving effect to such transaction, no default or event of default has occurred and is continuing under the Indenture. The Company’s net proceeds from the March 2021 offering were approximately $222.7 million, after deducting the initial purchasers’ discounts and commissions and the estimated offering expenses payable by the Company. As of March 31, 2024, the unamortized debt issuance cost was $2.8 million. MidCap credit facility — In August 2019, the Company entered into the MidCap credit facility and borrowed the first advance of $40.0 million (“Tranche 1”) in August 2019 and the second advance of $10.0 million (“Tranche 2”) in December 2020. In April 2021, $10.0 million was prepaid. Under the terms of the MidCap credit facility, a third advance of $60.0 million (“Tranche 3”) became available to the Company after the Tyvaso DPI approval by the FDA through June 30, 2022 (see Note 9 – Collaboration, Licensing and Other Arrangements). The Company did not exercise its right to borrow Tranche 3. In connection with an April 2021 amendment to the MidCap credit facility, the Company made a $10.0 million principal prepayment against outstanding term loans under the MidCap credit facility and paid a related $1.0 million exit fee in lieu of the unaccrued portion of the original exit fee and prepayment penalties that would otherwise have been due with respect to the partial prepayment. The prepayment penalty of $1.0 million related to the payment of $10.0 million was capitalized and amortized over the remaining life of the debt. As of March 31, 2024, the unamortized debt discount was $0.1 million and the unamortized prepayment penalty was $0.2 million. Tranche 1 and Tranche 2 accrued interest at an annual rate equal to the lesser of (i) 8.25% and (ii) the one-month Secured Overnight Financing Rate ("SOFR") (subject to a one-month SOFR floor of 1.00%) plus 6.25%. Interest on each term loan advance was due and payable monthly in arrears. Principal on each term loan advance under Tranche 1 and Tranche 2 was payable in 24 equal monthly installments that began September 1, 2023. On April 1, 2024, the Company exercised its option to prepay the existing term loans in whole in exchange for a payment of approximately $31.6 million, which included an early termination fee in an amount equal to 1.00% of principal prepaid as well as an exit fee in an amount equal to 7.00% of the initial Tranche 1 balance of $40.0 million. See Note 16 – Subsequent Events. The Company’s obligations under the MidCap credit facility were secured by a security interest on substantially all of its assets, including intellectual property, all of which were released as of April 2, 2024. The MidCap credit facility, as amended, contained customary affirmative covenants and customary negative covenants limiting the Company’s ability and the ability of the Company’s subsidiaries to, among other things, dispose of assets, undergo a change in control, merge or consolidate, make acquisitions, incur debt, incur liens, pay dividends, repurchase stock and make investments, in each case subject to certain exceptions. The Company was also required to comply with a financial covenant relating to trailing twelve month minimum Afrezza net revenue, tested on a monthly basis, unless the Company has $90.0 million or more of unrestricted cash and short-term investments. As of March 31, 2024, the Company was in compliance with the financial covenant. The MidCap credit facility also contained customary events of default relating to, among other things, payment defaults, breaches of covenants, a material adverse change, listing of the Company’s common stock, bankruptcy and insolvency, cross defaults with certain material indebtedness and certain material contracts, judgments, and inaccuracies of representations and warranties. Upon an event of default, the agent and the lenders could have declared all or a portion of the Company’s outstanding obligations to be immediately due and payable and exercise other rights and remedies provided for under the MidCap credit facility. During the existence of an event of default, interest on the term loans could have been increased by 2.00%. Mann Group convertible note — In August 2019, the Company issued a $35.0 million note that is convertible into shares of the Company’s common stock at $2.50 per share (the “Mann Group convertible note”) as part of a restructuring of its then existing indebtedness to Mann Group. The Mann Group convertible note accrued interest at the rate of 2.5% per year on the principal amount, payable quarterly in arrears on the first day of each calendar quarter, with a maturity date of December 31, 2025. The principal and any accrued and unpaid interest under the Mann Group convertible note was convertible, at the option of Mann Group, at any time on or prior to the close of business on the business day immediately preceding the stated maturity date, into shares of the Company’s common stock at a conversion rate of 400 shares per $1,000 of principal and/or accrued and unpaid interest, which is equal to a conversion price of $2.50 per share. Interest on the convertible note was payable in kind by adding the amount thereof to the principal amount; provided that with respect to interest accruing from and after January 1, 2021, the Company had the option to pay any such interest on any interest payment date, if certain conditions are met, in shares of the Company’s common stock at a price per shall equal to the last reported sale price on the trading day immediately prior to the payment date. During the three months ended March 31, 2023, Mann Group converted $0.1 million of interest into 10,491 shares of common stock. During the three months ended March 31, 2024, Mann group converted $0.1 million of interest into 15,285 shares of common stock. On April 2, 2024, the Company and Mann Group agreed to discharge and terminate the Mann Group convertible note in exchange for (i) the Company’s issuance to Mann Group of 1,500,000 shares of the Company’s common stock and (ii) the Company’s payment to Mann Group of approximately $8.9 million. See Note 16 – Subsequent Events. Amortization of the premium and accretion of debt issuance costs related to all borrowings were as follows (in thousands):
|  | Three Months Ended March 31, |
|  | 2024 |  |  | 2023 |
Amortization of debt discount and prepayment fee |  | $ | 85 |  |  | $ | 106 |
Amortization of debt issuance cost |  |  | 363 |  |  |  | 363 |

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