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Long-Term Debt | 3 Months Ended
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Mar. 31, 2024
Long-Term Debt |
Long-Term Debt | 8. Long-Term Debt On December 15, 2023, XOMA transferred to XRL, a newly formed wholly owned subsidiary, all its rights, title and interest in the commercial payments from Roche’s VABYSMO under the Affitech CPPA and related assets (the “Commercial Payments”). The VABYSMO-related assets and rights transferred to XRL are referred to herein as the “Transferred Assets.” Simultaneously, XRL entered into the Blue Owl Loan Agreement with Blue Owl and lenders, pursuant to which XRL was extended certain senior secured credit facilities in an aggregate principal amount of up to $140.0 million. The principal and interest of the loan are to be paid from the Commercial Payments. XRL is obligated to make semi-annual interest payments, starting in March 2024, at a fixed rate of 9.875% per annum until the commercial payment-backed loan is repaid, at which time the Commercial Payments will revert back to XOMA. On each interest payment date, any shortfall in interest payment will be paid from the interest reserve, any uncured shortfall in interest payment that exceeds the interest reserve will increase the outstanding principal amount of the loan, and any Commercial Payment in excess of accrued interest on the loan will be used to repay the principal of the loan until the balance is fully repaid. The loan matures on December 15, 2038, provided that XRL may repay it in full at any time prior to December 15, 2038, subject to the terms of the Blue Owl Loan Agreement. The Blue Owl Loan includes (i) an initial term loan in an aggregate principal amount equal to $130.0 million and (ii) a delayed draw term loan in an aggregate principal amount of $10.0 million to be funded at the option of the XRL upon receipt by the lenders of payments of principal and interest from the proceeds of Commercial Payments in excess of an agreed upon amount on or prior to March 15, 2026. The payment obligations under the Blue Owl Loan Agreement are limited to XRL, and Blue Owl has no recourse under the Blue Owl Loan Agreement against XOMA or any assets other than the Transferred Assets and XOMA’s equity interest in XRL. In connection with the Blue Owl Loan Agreement, (i) XRL granted Blue Owl a first-priority perfected lien on, and security interest in, (a) the Commercial Payments and the proceeds thereof, in each case under the Affitech CPPA and (b) all other assets of XRL and (ii) XOMA granted Blue Owl a first-priority perfected lien on, and security interest in 100% of the equity of XRL. The Blue Owl Loan Agreement contains other customary terms and conditions, including representations and warranties, as well as indemnification obligations in favor of Blue Owl. On December 15, 2023, the Company borrowed the initial term loan of $130.0 million and received $119.6 million, net of $4.1 million in fees and lender expenses and $6.3 million that was deposited into reserve accounts to pay interest, administrative fees and XRL’s operating expenses (see Note 2). The Company also incurred $0.6 million of direct issuance costs related to the Blue Owl Loan Agreement. In connection with the Blue Owl Loan Agreement, XOMA issued to Blue Owl and certain funds affiliated with Blue Owl warrants to purchase: (i) up to 40,000 shares of XOMA’s common stock at an exercise price of $35.00 per share; (ii) up to 40,000 shares of XOMA’s common stock at an exercise price of $42.50 per share; and (iii) up to 40,000 shares of XOMA’s common stock at an exercise price of $50.00 per share (collectively, the “Blue Owl Warrants”). The fair value of the Blue Owl Warrants was determined using the Black-Scholes Model (see Note 2) and was estimated to be $1.5 million. As of March 31, 2024, all Blue Owl Warrants were outstanding. The initial term loan of $130.0 million is carried at amortized cost. Amortization of the initial term loan is applied under the expected-effective-yield approach using the retrospective interest method. As of December 31, 2023, the effective interest rate was determined to be 11.01%. The Company recorded a debt discount of $5.3 million, which included $3.8 million in allocated fees and lender expenses and $1.5 million for the fair value of the Blue Owl Warrants. The Company also recorded $0.6 million in direct debt issuance costs allocated to the initial term loan. The Company will accrete both the debt discount of $5.3 million and $0.6 million of direct debt issuance costs over the expected term of the initial term loan. As of the closing date of December 15, 2023, the Company recorded the $0.3 million allocated costs for the delayed draw term loan commitment as a non-current asset in other assets - long term in the consolidated balance sheet and will reclassify the amount as a debt discount when the delayed draw term loan is drawn. As of March 31, 2024, no amount had been drawn from the delayed draw term loan. The carrying value of the short and long-term portion of the initial term loan was $5.5 million and $118.5 million, respectively, as of December 31, 2023. The Company recorded $0.6 million in interest expense during the year ended December 31, 2023. In March 2024, XRL made a semi-annual payment of $7.4 million which included an interest payment of $3.8 million and principal repayment of $3.6 million. The carrying value of the short and long-term portion of the initial term loan was $6.1 million and $114.5 million, respectively, as of March 31, 2024. As of March 31, 2024, the effective interest rate was determined to be 11.05%. The Company recorded $3.6 million in interest expense during the three months ended March 31, 2024. As of March 31, 2024, the Company had an unaccreted debt discount of $5.1 million and unaccreted direct issuance costs of $0.6 million to be accreted over the expected remaining term of the initial term loan. The following table summarizes the impact of the initial term loan on the Company’s condensed consolidated balance sheet as of March 31, 2024 (in thousands):
​ | ​ | ​ | ​
​ |  | March 31, 2024
Gross principal | ​ | $ | 130,000
Principal repayments | ​ | ​ | (3,616)
Unaccreted debt discount and debt issuance costs | ​ | ​ | (5,712)
Total carrying value net of principal repayments, unaccreted debt discount and debt issuance costs | ​ | ​ | 120,672
Less: current portion of long-term debt | ​ | ​ | (6,144)
Long-term debt | ​ | $ | 114,528
​ Long-term debt on the Company’s condensed consolidated balance sheet as of March 31, 2024 and consolidated balance sheet as of December 31, 2023 includes only the carrying value of the Blue Owl Loan. The carrying value of the Blue Owl Loan as of December 31, 2023 was $124.0 million. Aggregate projected future principal payments of the initial term loan as of March 31, 2024, are as follows (in thousands):
​ | ​ | ​ | ​
Year Ending December 31, | ​ | Payments
2024 (excluding the three months ended March 31, 2024) |  | $ | 3,588
2025 |  | ​ | 10,246
2026 |  | ​ | 15,404
2027 | ​ | ​ | 19,609
2028 | ​ | ​ | 23,585
Thereafter |  | ​ | 53,952
Total payments | ​ | $ | 126,384
​ Accretion of debt discounts and issuance costs are included in interest expense. Interest expense in the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2024 relates to the initial term loan (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended
​ | ​ | March 31,
​ |  | 2024 |  | 2023
Accrued interest expense | ​ | $ | 3,245 | ​ | $ | —
Accretion of debt discount and debt issuance costs | ​ |  | 306 | ​ |  | —
Total interest expense | ​ | $ | 3,551 | ​ | $ | —
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