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Long Term Debt | 12 Months Ended
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May 31, 2023
Debt Disclosure [Abstract] |
Long Term Debt | 4. Long-Term Debt The Company’s long-term debt consists of the following:
|  | May 31, 2023 |
Term Loan |  | $ | 550,000 |
Senior Notes |  |  | 350,000 |
Total long-term debt |  |  | 900,000 |
Less: Unamortized debt issuance costs |  |  | (14,561 | )
Total non-current debt, net |  | $ | 885,439 |
The Company had a financing agreement with a bank providing for a $15,000 unsecured revolving line of credit, which originally expired on November 30, 2023, but was replaced by the five-year senior secured revolving facility as part of the Credit Facilities described below. There were no advances against the line of credit during fiscal 2022 and there were no advances in fiscal 2023 before the line of credit was extinguished. Interest on any borrowings under that agreement was at LIBOR plus 100 basis points. Financial covenants included maintaining specified levels of tangible net worth, debt service coverage, and funded debt to EBITDA, each of which the Company was in compliance with during the period the line of credit was available. As of May 31, 2022, the Company had no outstanding debt. In connection with the acquisition of 3M’s Food Safety business as described more fully in Note 8, Neogen incurred financing through Neogen Food Safety Corporation as follows: Credit Facilities On June 30, 2022, Neogen Food Safety Corporation entered into a credit agreement consisting of a five-year senior secured term loan facility (“term loan facility”) in the amount of $650,000 and a five-year senior secured revolving facility (“revolving facility”) in the amount of $150,000 (collectively, the “Credit Facilities”) to fund the FSD transaction. The term loan facility was drawn on August 31, 2022, to fund the closing of the FSD transaction on September 1, 2022 while the revolving facility was undrawn and continues to be undrawn as of May 31, 2023. The Credit Facilities bear interest based on term SOFR plus an applicable margin which ranges between 150 to 225 basis points, determined for each interest period and paid monthly. During the twelve months ended May 31, 2023, the interest rates ranged from 4.81% to 7.33% per annum. The term loan facility matures on June 30, 2027 and the revolving facility matures at the earlier of June 30, 2027 and the termination of the revolving commitments. The Company paid $60,000 of the term loan facility’s principal in September 2022 and an additional $40,000 of the term loan facility's principal in December 2022, in order to decrease the outstanding debt balance. The term loan facility contains an optional prepayment feature at the discretion of the Company. The Company determined that the prepayment feature did not meet the definition of an embedded derivative and does not require bifurcation from the host liability and, accordingly, has accounted for the entire instrument at amortized cost. In November 2022, the Company entered into an interest rate swap agreement, whereby interest on $250,000 of the total $550,000 principal balance is paid at a fixed rate. See Note 9. "Fair Value and Derivatives" for further detail on the interest rate swap agreement. The Company can draw any amount under the revolving facility up to the $150,000 limit, with the amount to be repaid on the termination date of the revolving commitments. Debt issuance costs of $2,361 were incurred related to the revolving facility. These costs are being amortized as interest expense in the consolidated statements of (loss) income over the contractual life of the revolving facility using the straight line method. Amortization of the deferred debt issuance costs for the revolving facility was $366 during the twelve months ended May 31, 2023. Debt issuance costs of $489 were recorded in Prepaid expenses and other current assets and $1,506 were recorded in Other non-current assets on the consolidated balance sheet as of May 31, 2023. The Company must pay an annual commitment fee ranging from 0.20% and 0.35% on the unused portion of the Revolving Credit Facility, paid quarterly. As of May 31, 2023, the commitment fee was 0.35% and $473 was recorded as interest expense in the consolidated statements of income (loss) during the twelve months ended May 31, 2023. Accrued interest payable on the term loan as of May 31, 2023 was $164. The Company incurred $10,232 in total debt issuance costs on the term loan which is recorded as an offset to the term loan facility and amortized over the contractual life of the loan to interest expense using the straight line method. The amortization of deferred debt issuance costs of $1,588 and interest expense of $27,254 (excluding swap credit of $577) for the term loan was included in the consolidated statements of income (loss) during the twelve months ended May 31, 2023. Financial covenants include maintaining specified levels of funded debt to EBITDA, and debt service coverage. As of May 31, 2023, the Company was in compliance with its debt covenants. Senior Notes On July 20, 2022, Neogen Food Safety Corporation closed on an offering of $350,000 aggregate principal amount of 8.625% senior notes due 2030 (the “Notes”) in a private placement at par. The Notes were initially issued by Neogen Food Safety Corporation to 3M and were transferred and delivered by 3M to the selling securityholder in the offering, in satisfaction of certain of 3M’s existing debt. Upon closing of the FSD transaction on September 1, 2022, the Notes became guaranteed on a senior unsecured basis by the Company and certain wholly-owned domestic subsidiaries of the Company. The Company determined that the redemption features of the Notes did not meet the definition of a derivative and thus does not require bifurcation from the host liability and accordingly has accounted for the entire instrument at amortized cost. Total accrued interest on the Notes was $10,985 as of May 31, 2023 based on the stated interest rate of 8.625%. This amount was included in current liabilities on the consolidated balance sheets. The Company incurred total debt issuance costs of $6,683, which is recorded as an offset to the Notes and amortized over the contractual life of the Notes to interest expense using the straight line method. The amortization of deferred debt issuance costs of $766 and interest expense of $26,079 for the Notes was included in the consolidated statements of income (loss) during the twelve months ended May 31, 2023. There are no required principal payments on the Term Loan or the Senior Notes through fiscal year 2026, due to $100,000 in prepayments made on the Term Loan in fiscal 2023. The expected maturities associated with the Company’s outstanding debt as of May 31, 2023, were as follows:
|  | Amount |
Fiscal Year |  |  |
2024 |  | $ | — |
2025 |  |  | — |
2026 |  |  | — |
2027 |  |  | 34,063 |
2028 |  |  | 515,937 |
Thereafter |  |  | 350,000 |
Total |  | $ | 900,000 |

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