Long Term Debt

6 Months Ended

Nov. 30, 2022

. LONG TERM DEBT

The Company’s long-term debt consists of the following:


(in thousands)	As of November 30, 2022			As of May 31, 2022
Term Loan	$	590,000		$	—
Senior Notes		350,000			—

Total long-term debt	$	940,000		$	—
Less: Unamortized debt issuance costs		(16,038	)		—

Total non-current debt, net	$	923,962		$	—

The Company had a financing agreement with a bank providing for a $15.0 million 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.

In connection with the acquisition of 3M’s Food Safety business as described more fully in Note 8, Neogen incurred financing through Garden SpinCo as follows:

Credit Facilities

On June 30, 2022, Garden SpinCo entered into a credit agreement consisting of a five-year senior secured term loan facility (“term loan facility”) in the amount of $650 million and a five-year senior secured revolving facility (“revolving facility”) in the amount of $150 million (collectively, the “Credit Facilities”) to fund the 3M Food Safety transaction. The term loan facility was drawn on August 31, 2022, to fund the closing of the 3M Food Safety transaction on September 1, 2022 while the revolving facility remained undrawn and continues to be undrawn as of November 30, 2022.

The Credit Facilities bear interest based on the term SOFR plus an applicable margin between a range of 150 to 225 basis points determined for each interest period and paid monthly. For the three and six months ended November 30, 2022, the interest rates ranged from 4.80% to 6.08%

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.

In addition, 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 accordance with the prepayment feature, the Company paid $60 million of the term loan facility’s principal in September 2022 prior to the first scheduled quarterly repayment.

The Company can, at its sole discretion, draw any amount under the revolving facility, with the amount to be repaid on the termination date of the revolving commitments. Debt issuance costs of $2.4 million

were incurred related to the revolving facility. These costs are being amortized as interest expense in the consolidated statements of income (loss) 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 $122,000 for

the three and six month periods ended November 30, 2022. Debt issuance costs of $489,000 were recorded in Prepaid expenses and other current assets and $1.8 million were recorded in Other non-current assets on the consolidated balance sheet at November 30, 2022. 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 November 30, 2022, the commitment fee was

0.35

% and $

225,000

was recorded as interest expense in the

consolidated statements of income (loss) for the

three and six months ended November 30, 2022.

Total accrued interest on the term loan was $

3.0

million as of November 30, 2022 based on the term SOFR interest rate of

6.08

% and included in current liabilities on the consolidated balance sheets. The Company incurred $10.2

million in total debt issuance costs 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 $

529,000

and interest expense of $

8.5

million was

included in the consolidated statements of income (loss) for the

three and six months ended November 30, 2022.

Financial covenants include maintaining specified levels of funded debt to EBITDA, and debt service coverage. At November 30, 2022, the Company was in compliance with its covenants.

Senior Notes

On July 20, 2022, Garden SpinCo closed on an offering of $350 million aggregate principal amount of 8.625% senior notes due 2030

(the “Notes”) in a private placement at par. The Notes were initially issued by Garden SpinCo 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 3M Food Safety 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 $11.0 million as of November 30, 2022 based on the stated interest rate of 8.625% and included in current liabilities on the consolidated balance sheets. The Company incurred total debt issuance costs of $6.7 million 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. For the three and six months ended November 30, 2022, the Company recorded $11.0 million of interest expense in the

consolidated statements of income (loss), of

which $348,000 related to the amortization of deferred debt issuance costs.

The expected maturities associated with the Company’s outstanding debt as of November 30, 2022, were as follows:


(in thousands)	Amount
Fiscal Year
Remainder of 2023	$	—
2024		—
2025		—
2026		29,375
2027		44,688
Thereafter		865,937

Total	$	940,000