XML 22 R12.htm IDEA: XBRL DOCUMENT v3.23.1
Long-Term Debt
 3 Months Ended
Mar. 31, 2023
Debt Disclosure [Abstract]  
Long-Term Debt Long-Term Debt
Long-term debt is summarized as follows:
March 31, 2023December 31, 2022
Principal amount of 4.50% exchangeable senior notes due October 2023
$117,375 $117,375 
Principal amount of 4.50% exchangeable senior notes due February 2023
— 17,500 
Less: unamortized debt discount and issuance costs, net (3,721)(5,593)
Net carrying amount of debt113,654 129,282 
Less: current maturities, net of $672 and $1,019 unamortized debt discount and issuance costs, respectively
20,515 37,668 
     Long-term debt$93,139 $91,614 

For the three months ended March 31, 2023 and 2022, the total interest expense was $3,259 and $2,017, respectively, with coupon interest expense of $1,386 and $1,617 for each period, respectively, and the amortization of debt issuance costs and debt discount of $1,873 and $312 for each period, respectively.

February 2023 Notes

On February 16, 2018, the Issuer issued $125,000 aggregate principal amount of its February 2023 Notes in a private placement (the “Offering”) to qualified institutional buyers pursuant to Rule 144A under the Securities Act. In connection with the Offering, the Issuer granted the initial purchasers of the February 2023 Notes a 30-day option to purchase up to an additional $18,750 aggregate principal amount of the February 2023 Notes, which was fully exercised on February 16, 2018. Net proceeds received by the Company, after issuance costs and discounts, were approximately $137,560. The February 2023 Notes were the Company’s senior unsecured obligations and ranked equally in right of payment with all of the Company’s existing and future senior unsecured indebtedness and effectively junior to any of the Company’s existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness.

October 2023 Notes

On April 5, 2022, the Issuer completed the exchange of $117,375 of its February 2023 Notes for a new series of its October 2023 Notes (the “2022 Exchange Transaction”). The remaining $26,375 aggregate principal amount of the February 2023 Notes were not exchanged and maintained a maturity date of February 1, 2023. On November 4, 2022, the Company repurchased $8,875 of its February 2023 Notes and on the maturity date of February 1, 2023, the Company repaid, with cash on hand, the remaining $17,500 aggregate principal amount of its February 2023 Notes.

The Company accounted for the October 2023 Notes as a modification to the February 2023 Notes. The Company paid $4,804 in fees to note holders of the October 2023 Notes that are amortized over the remaining term of the October 2023 Notes. The Company paid approximately $5,450 in fees to third parties that were expensed as part of the completed 2022 Exchange Transaction. Additionally, the fair value of the unseparated, embedded conversion feature increased by $5,508, which reduced the carrying amount of the convertible debt instrument as an unamortized debt discount, with a corresponding increase in additional paid-in capital. The $5,508 is amortized over the remaining term of the October 2023 Notes as a component of interest expense.
The October 2023 Notes are exchangeable at the option of the holders at an initial exchange rate of 92.6956 ADSs per $1 principal amount of 2023 Notes, which is equivalent to an initial exchange price of approximately $10.79 per ADS. Such initial exchange price represents a premium of approximately 20% to the $8.99 per ADS closing price on The Nasdaq Global Market on February 13, 2018. Upon the exchange of any October 2023 Notes, the Issuer will pay or cause to be delivered, as the case may be, cash, ADSs or a combination of cash and ADSs, at the Issuer’s election.

The Company, at its option, may redeem for cash all of the October 2023 Notes if the last reported sale price (as defined by the indenture) of the ADSs has been at least 130% of the Exchange Price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice to redeem the October 2023 Notes.

April 2027 Notes

Over the course of April 3 and April 4, 2023, the Issuer completed an exchange of $96,188 of its $117,375 October 2023 Notes for $106,268 of new April 2027 Notes. The remaining $21,187 aggregate principal amount of the October 2023 Notes will maintain a maturity date of October 2, 2023. Due to the 2023 Exchange Transaction, the $96,188 principal amount of the October 2023 Notes is classified as long-term debt, net of unamortized debt discount and issuance costs, as of March 31, 2023.

Holders of the April 2027 Notes may convert their April 2027 Notes, at their option, only under the following circumstances prior to the close of business on the business day immediately preceding January 15, 2027, under the circumstances and during the periods set forth below and regardless of the conditions described below, on or after January 15, 2027 and prior to the close of business on the business day immediately preceding the maturity date:

•Prior to the close of business on the business day immediately preceding January 15, 2027, a holder of the April 2027 Notes may surrender all or any portion of its April 2027 Notes at an initial exchange rate (the “Exchange Rate”) of 102.3018 ADSs of the Company (each of which represents as of the date hereof one ordinary share of the Company, nominal value $0.01 per share (the “Ordinary Shares”)) per $1,000 principal amount of the April 2027 Notes (so long as the principal amount of such holder’s April 2027 Notes not exchanged is at least $200,000), which is equal to an initial exchange price of approximately $9.78 per ADS. Upon exchange, the April 2027 Notes may be settled in cash, ADSs, or a combination of cash and ADSs, at the Issuer’s election. The Exchange Rate is subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. Following a “Make-Whole Fundamental Change” (as defined in the Indenture) or upon the Issuer’s issuance of a notice of redemption, the Issuer will increase the Exchange Rate for a holder who elects to exchange its April 2027 Notes in connection with such “make-whole fundamental change” or during the related redemption period in certain circumstances. In addition, the Issuer will increase the Exchange Rate for a holder who elects to exchange its April 2027 Notes prior to January 15, 2027 or whose April 2027 Notes are subject to a Mandatory Exchange (as defined below) in certain circumstances.

•The Issuer may cause the then outstanding principal amount of the April 2027 Notes to be exchanged, in whole but not in part, at its option (the “Mandatory Exchange”), prior to the close of business on January 15, 2027, if the last reported sale price of the ADSs has been at least 130% of the exchange price then in effect on (x) each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the trading day immediately before the date that the Issuer provides notice of the Mandatory Exchange in accordance with the Indenture (the “Mandatory Exchange Notice Date”); and (y) the trading day immediately before such Mandatory Exchange Notice Date, at the then prevailing Exchange Rate, subject to adjustment described above. The Issuer may settle Mandatory Exchanges in cash, ADSs, or a combination of cash and ADSs, at the Issuer’s election. Accrued and unpaid interest, if any, on April 2027 Notes subject to Mandatory Exchange to, but excluding, the exchange date in respect of the Mandatory Exchange shall be paid by the Issuer to holders of the April 2027 Notes in cash concurrently with the delivery of the other exchange consideration

The Issuer may redeem for cash all of the April 2027 Notes in connection with certain tax-related events at a redemption price equal to 100% of the principal amount of the April 2027 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date, but may not otherwise redeem the April 2027 Notes. No sinking fund is provided for the April 2027 Notes, which means that the Company is not required to redeem or retire the April 2027 Notes periodically.

The Company considered the guidance in ASC 815-15, Embedded Derivatives, to determine if this instrument contains an embedded feature that should be separately accounted for as a derivative. ASC 815 provides for an exception to this rule when convertible notes, as host instruments, are deemed to be conventional, as defined by ASC 815-40. The Company determined that this exception applies due, in part, to the Company’s ability to settle the October 2023 Notes in cash, ADSs or a combination of cash and ADSs, at the Company’s option. The Company has therefore applied the guidance provided by ASC 470-20, Debt with Conversion and Other Options, as amended by ASU 2020-06.
Royalty Financing Agreement

On March 29, 2023, the Company and Avadel CNS entered into a royalty purchase agreement with RTW Investments, L.P. that could provide the Company up to $75,000 of royalty financing in two tranches. The first tranche of $30,000 is available subject to the Company’s first shipment of LUMRYZ. The second tranche is available to use, at the Company’s election, upon achieving quarterly net revenue of $25,000. The second tranche will expire on August 31, 2024, if the quarterly net revenue target is not reached and if it is not used by the Company by that time.