11. DEBT

Debt consisted of the following (in thousands):

	March 31, 2017		December 31, 2016
JGB Debt	$	20,922	$	—
East West Bank Loan		—		12,614
Danske Bank Credit Facility		7,434		7,376
FastPartner Subordinated Promissory Notes		1,724		1,692
Al Amoudi Subordinated Promissory Notes		1,187		1,164
SSP Primers Loan		1,119		—
Current portion of long-term debt	$	32,386	$	22,846

SSP Primers Loan	$	—	$	1,098
Long-term debt, net of current portion	$	—	$	1,098

JGB Collateral LLC (“JGB”)

On March 15, 2017, the Company entered into a Securities Purchase Agreement (the “SPA”) with JGB pursuant to which the Company issued Senior Secured Debentures with an aggregate principal amount of $27.8 million (the “Debentures”) and warrants (the “Warrants”) to purchase up to an aggregate of 1,250,000 shares of the Company’s common stock for net proceeds of $24.0 million (the “Financing”). The Company used $11.2 million of the net proceeds from the Financing to repay its existing indebtedness under the Loan Agreement with East West Bank and is required to maintain restricted cash of $9.4 million.

The Debentures mature on February 28, 2020, accrue interest at 9.5% per year and are convertible into an aggregate of approximately 6,092,105 shares of the Company’s common stock at a price of $4.56 per share (the “Conversion Price”), which is subject to adjustment for accrued and interest and upon the occurrence of certain transactions, at the holder’s option. Additionally, after September 1, 2017, upon the satisfaction of certain conditions, including the volume weighted average price of the Company’s common stock exceeding 250% of the Conversion Price for twenty consecutive trading days, the Company can require that the Debentures be converted into shares of the Company’s common stock, subject to certain limitations. Commencing on March 1, 2018, each of the holders of the Debentures shall have the right, at its option, to require the Company to redeem up to $937,500 of the outstanding principal amount of its Debenture per month. The Company will be required to promptly, but in any event no more than one trading day after the holder delivers a redemption notice to the Company, pay the applicable redemption amount in cash or, at the Company’s election and subject to certain conditions, in shares of the Company’s common stock. If the Company elects to pay the redemption amount in shares of the Company’s common stock, then the shares will be delivered based on a price equal to the lowest of (a) 88% of the average of the three lowest volume weighted average prices of the Company’s common stock over the prior 20 trading days, (b) 88% of the prior trading day’s volume weighted average price, or (c) the Conversion Price.

After either a change of control transaction, as defined in the Debentures, or February 28, 2018, subject to the satisfaction of certain conditions, the Company may redeem all of the then outstanding principal amount of the Debentures for cash by paying the outstanding principal balance, accrued and unpaid interest, and a payment premium. The payment premium will be calculated by multiplying the outstanding balance and the following percentage: (i) 15% if the Debentures are prepaid on or prior to March 1, 2018, (ii) 8% if the Debentures are prepaid after March 1, 2018 but prior to March 1, 2019, and (iii) 5% if the Debentures are prepaid on or after March 1, 2019.

The Company’s obligations under the Debentures can be accelerated upon the occurrence of certain events of default as specified in the agreement. In the event of default and acceleration of the Company’s obligations, the Company would be required to pay (i) 115% of all amounts of principal and interest then outstanding under the Debentures in cash if the Debenture is accelerated prior to March 1, 2018, (ii) 108% of all amounts of principal and interest then outstanding under the Debentures in cash if the Debenture is accelerated after March 1, 2018, but prior to March 1, 2019, and (iii) 105% of all amounts of principal and interest then outstanding under the Debentures in cash if the Debenture is accelerated after March 1, 2019. The Company’s obligations under the Debentures are secured under a Security Agreement by a senior lien on all of the Company’s assets, other than its interest in CareDx International AB (formerly known as Allenex AB), which is subject to a negative pledge prohibiting the incurrence of additional or replacement debt.

The Debentures contain customary affirmative and restrictive covenants and representations and warranties, including financial reporting obligations, a restriction on the Company’s ability to pay cash dividends on its common stock and limitations on indebtedness, liens, investments, distributions, transfers, corporate changes, deposit accounts and subsidiaries. The Company must also maintain a minimum cash amount at all times, achieve commercialization of AlloSure by a certain date and achieve certain gross profit targets for sales of its AlloMap product.

In connection with the Financing, on March 15, 2017, the Company and the Purchasers entered into a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which, among other things, the Company agreed to prepare and file one or more registration statements with the Securities and Exchange Commission for the purpose of registering for resale any shares of Common Stock that may be issued by the Company upon the conversion or redemption of the Debentures or the exercise of the Warrants.

The Debentures include certain embedded derivatives that require bifurcation, including settlement and penalty provisions. The compound embedded derivative will be re-measured at each reporting period and the change in fair value will be recognized in the consolidated statement of operations. See also Note 4, “Fair Value Measurements”.

Loan Agreement with East West Bank

On January 30, 2015, the Company entered into the Loan Agreement with East West Bank as the lender (“the Lender”), which provided the Company with a secured term loan facility in an aggregate principal amount of up to $20.0 million. The balance at March 31, 2017 and December 31, 2016 was zero and $12.6 million, respectively. In March 2017, the Company repaid the amounts outstanding under the loan agreement of $11.2 million.

A fully non-refundable commitment fee of $160,000 was paid on January 30, 2015 when Draw A was received. The loan had no prepayment penalty. Commitment fees are included in debt issuance costs which are netted against the debt outstanding and are amortized to interest expense using the effective interest method over the term of the loan. Debt extinguishment charges of $0.2 million for the three-month period ended March 31,2017, were recorded in other expense on the Company’s condensed consolidated statement of operations.

In connection with the Loan Agreement, the Company agreed to issue to the Lender warrants to purchase shares of the Company’s common stock upon the drawdown of each advance in an amount equal to 1.5% of the amount drawn, divided by the exercise price per share for that tranche. The fair value of the warrant is reflected as a discount to the debt. As a result of Draw A, the Company issued to the Lender a warrant to purchase an aggregate of 34,483 shares of the Company’s common stock, at an exercise price of $6.96 per share. The fair value of the warrant was estimated to be $90,000 on January 30, 2015, using the Black-Scholes Model with the following assumptions: expected volatility of 39.83%, a contractual term of 5 years, risk-free interest rate of 1.18%, underlying common stock price of $7.06, and dividend yield of 0%. The warrant is included in stockholders’ equity. The warrant is not subject to remeasurement.

The Loan Agreement required collateral by a security interest in all of the Company’s assets and contained customary affirmative and negative covenants including financial maintenance covenants, and also included standard events of default, including payment defaults. As of December 31, 2016, the Company was in compliance with its debt covenants under the Loan Agreement.

Danske Bank Credit Facility

On June 25, 2013, Allenex entered into the Term Loan Facility with Danske in an aggregate principal amount of up to SEK 71,000,000 (approximately $7.9 million in U.S. dollars). The Term Loan Facility is available for utilization in advances of a minimum of SEK 5,000,000 (approximately $0.6 million in U.S. dollars) and if more, integral multiples of SEK 1,000,000 (approximately $0.1 million in U.S. dollars). The interest rate applicable to each advance shall be the percentage rate per annum calculated as the aggregate of (i) Stockholm Interbank Offered Rate (“STIBOR”) (as defined in the Term Loan Facility) and (ii) the Margin (as described in the Term Loan Facility) at 3% conditional on the fulfillment of certain criteria. In March 2015, Allenex entered into a first amendment to the Term Loan Facility, pursuant to which additional loans were granted. In August 2015, Allenex entered into a second amendment to the Term Loan Facility, pursuant to which the term of the Term Loan Facility was extended. In December 2015, Allenex entered into a waiver and amendment agreement relating to the Term Loan Facility, pursuant to which the change of control provision was waived and amended. In March 2016, Allenex entered into another amendment to the Term Loan Facility, which modified the repayment schedule for advances under the Term Loan Facility. Under this Term Loan Facility, SEK 62,000,000 (approximately $6.9 million in U.S. dollars) was outstanding as of March 31, 2017, and this will be paid through quarterly payments of SEK 3,000,000, or $0.3 million in September and December of 2017 and March and June of 2018. The remaining balance of SEK 50,000,000, or approximately $5.6 million in U.S. dollars) is due in June 2018.

On June 18, 2015, Allenex also entered into a short term credit facility with Danske with total available credit of SEK 8,000,000 (approximately $0.9 million in U.S. dollars). As of August 4, 2016, the available credit under the short term credit facility with Danske was increased to SEK 10,000,000 (approximately $1.1 million in U.S. dollars). As of March 31, 2017, the total outstanding balance due to Danske under the short term credit facility was SEK 4,400,000 (approximately $0.5 million in U.S. dollars), and pursuant to a quarterly roll-over provision is due on June 30, 2017.

A quarterly debt covenant in the Term Loan Facility relating to maintaining an adequate leverage ratio was violated in June 30, 2016 and September 30, 2016. The Company obtained waivers from Danske for the violations of the debt covenant at June 30, 2016 and September 30, 2016. The debt covenant leverage ratio for December 31, 2016, and future periods, was amended on March 27, 2017. The Company was in compliance with the amended debt covenants at December 31, 2016. The Company was not in compliance with the amended debt covenant leverage ratio at March 31, 2017 and for this reason, and the continuing liquidity matters, the long-term debt due to Danske is classified as a current liability in the condensed consolidated balance sheets as of March 31, 2017 and December 31, 2016. Additionally, if the loan was no longer available or Danske demanded repayment of the debt, the Company may not have sufficient capital to operate.

FastPartner Subordinated Promissory Notes

On June 28, 2013, Allenex issued a SEK 9,400,000 (approximately $1.1 million in U.S. dollars) subordinated promissory note to FastPartner AB (“FastPartner”), which provides for an annual interest rate of 10.00%. Principal payments of SEK 1,000,000 (approximately $0.1 million in U.S. dollars) and accrued interest are payable quarterly at September 30, December 31, March 31 and June 30 and subject to working capital requirements that had not been met in fiscal years 2016 and 2015. The full amount of the promissory note was outstanding as of March 31, 2017 and December 31, 2016 and is due July 1, 2017. However, pursuant to an intercreditor agreement among Allenex, Danske, FastPartner, Mohammed Al Amoudi and Olerup SSP AB, dated June 25, 2013 (the “Intercreditor Agreement”), until the Term Loan Facility with Danske is repaid, FastPartner may not demand or receive payment of its subordinated promissory note, or foreclose on any collateral securing Allenex’s obligations under the subordinated promissory note, without Danske’s prior written consent. Allenex’s obligations under the promissory note are secured by a pledge of Allenex shares to FastPartner.

On December 29, 2015, Allenex issued a SEK 2,000,000 (approximately $0.2 million in U.S. dollars) subordinated promissory note to FastPartner, a related party, which had an initial maturity date of December 31, 2016 and has an annual interest rate of 10.00%. Principal and accrued interest are payable on the maturity date and subject to working capital requirements that had not been met in fiscal years 2016 and 2015. However, pursuant to the Intercreditor Agreement, until the Term Loan Facility with Danske is repaid, FastPartner may not demand or receive payment of its subordinated promissory note, or foreclose on any collateral securing Allenex’s obligations under the subordinated promissory note, without Danske’s prior written consent. Allenex’s obligations under the promissory note are secured by a pledge of Allenex shares to FastPartner. The full amount of subordinated promissory note was outstanding as of March 31, 2017 and December 31, 2016 and is due July 1, 2017.

On March 7, 2016, Allenex issued a SEK 4,000,000 (approximately $0.4 million in U.S. dollars) subordinated promissory note to FastPartner, a related party, which had an initial maturity date of December 31, 2016 and has an annual interest rate of 10.00%. Principal and accrued interest are payable on the maturity date and subject to working capital requirements that had not been met during the year ended December 31, 2016. However, pursuant to the Intercreditor Agreement, until the Term Loan Facility with Danske is repaid, FastPartner may not demand or receive payment of its subordinated promissory note, or foreclose on any collateral securing Allenex’s obligations under the subordinated promissory note, without Danske’s prior written consent. Allenex’s obligations under the promissory note are secured by a pledge of Allenex shares to FastPartner. The full amount of the subordinated promissory note was outstanding as of March 31, 2017 and December 31, 2016 and is due July 1, 2017.

FastPartner is also a shareholder of the Company and is considered a related party (See Note 17).

Mohammed Al Amoudi Subordinated Promissory Note

On June 28, 2013, Allenex issued a SEK 10,600,000 (approximately $1.2 million in U.S. dollars) subordinated promissory note to Mohammed Al Amoudi, which provides for an annual interest rate of 10.00%. Principal payments of SEK 1,000,000 (approximately $0.1 million in U.S. dollars) and accrued interest are payable quarterly at September 30, December 31, March 31 and June 30, subject to meeting certain requirements for working capital. The promissory note had an initial maturity date of June 28, 2016. On December 31, 2016, the maturity date was extended until July 1, 2017. However, pursuant to the Intercreditor Agreement, until the Term Loan Facility with Danske is repaid, Mohammed Al Amoudi may not demand or receive payment of his subordinated promissory note, or foreclose on any collateral securing Allenex’s obligations under the subordinated promissory note, without Danske’s prior written consent. The full amount of the promissory note was outstanding as of March 31, 2017 and December 31, 2016. Allenex’s obligations under the promissory note are secured by a pledge of Allenex shares to Mohammed Al Amoudi. Mohammed Al Amoudi is also a shareholder of the Company and is considered a related party (See Note 17).

Loan Agreement with SSP Primers Aktieboulag

On February 25, 2015, Allenex entered into a SEK 14,000,000 (approximately $1.6 million in U.S. dollars) loan agreement with SSP Primers Aktieboulag, pursuant to which SEK 4,000,000 (approximately $0.4 million in U.S. dollars) was paid on March 7, 2016 and SEK 10,000,000 (approximately $1.1 million in U.S. dollars) is payable on February 28, 2018. The loan amount outstanding as of March 31, 2017 and December 31, 2016 is SEK 10,000,000 (approximately $1.1 million in U.S. dollars) and has an annual interest rate of 3% payable in conjunction with each principal payment.

Total interest accrual on debt as of each of March 31, 2017 and December 31, 2016 was $0.8 million, respectively.

As of March 31, 2017, future debt maturities were as follows (in thousands):

Years Ending December 31,	Amount
Remainder of 2017	$	4,076
2018		16,763
2019		11,250
2020		7,155
Total debt maturities		39,244
Less: debt discount and issuance costs		(6,858	)
Total debt maturities, net of debt discount and issuance costs		32,386
Less: current portion of long-term debt		(32,386	)
Long-term debt, net carrying value	$	—