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Long Term Debt
 12 Months Ended
Dec. 31, 2022
Debt Disclosure [Abstract]  
Long Term Debt Long Term Debt
Hayfin Loan Agreement
On June 30, 2020, the Company entered into a Loan Agreement with, among others, Hayfin Services, LLP, (“Hayfin”) an affiliate of Hayfin Capital Management LLP (the “Hayfin Loan Agreement”), which was funded on July 2, 2020 and provided the Company with a senior secured term loan in an aggregate amount of $50.0 million (the “Term Loan”). The Term Loan matures on June 30, 2025 (the “Maturity Date”). Interest is payable quarterly on the Term Loan for the principal balance outstanding through the Maturity Date. No principal payments are due and payable until the Maturity Date.
The Hayfin Loan Agreement also provided the Company with an option to draw on an additional delayed draw term loan (the “DD TL”, collectively with the Term Loan, the “Credit Facilities”) in the form of a committed but undrawn $25.0 million facility until June 30, 2021. The Company did not exercise the option.
On February 28, 2022, the Company executed an Amendment to the Hayfin Loan Agreement (as amended, the “Amended Hayfin Loan Agreement”). The amendment was accounted for as a modification. No gain or loss was recognized nor was there a change to the carrying amount of the debt as a result of the amendment.
Interest on any borrowings under the Amended Hayfin Loan Agreement is equal to the London Interbank Offered Rate (“LIBOR”) (subject to a floor of 1.5%) plus a margin of 6.75% per annum. If LIBOR is unavailable, the Term Loan will carry interest at the 6.75% margin plus the greatest of the Prime Rate, the Federal Funds Rate plus 0.5% per annum, and 2.5%.
An additional 3.0% margin is applied to the interest rate in the event of default as defined by the Amended Hayfin Loan Agreement. The Term Loan carried an interest rate of 8.3% at issuance and 11.5% as of December 31, 2022.
The Amended Hayfin Loan Agreement contains financial covenants requiring the Company, on a consolidated basis, to maintain the following:
•Minimum Consolidated Total Net Sales (as defined in the Amended Hayfin Loan Agreement) of varying amounts, required to be calculated on a quarterly basis, and
•Minimum Liquidity (as defined in the Amended Hayfin Loan Agreement) of $20 million, an at-all-times financial covenant tested monthly.
As of December 31, 2022, the Company is in compliance with all applicable financial covenants under the Amended Hayfin Loan Agreement.
The Amended Hayfin Loan Agreement also includes certain negative covenants and events of default customary for facilities of this type, and upon the occurrence of such events of default, subject to customary cure rights, the Term Loan may be accelerated or the lenders’ commitments terminated. Mandatory prepayments are also required in the event of a change in control, incurring other indebtedness, certain proceeds from disposal of assets and insured casualty event (as defined in the Amended Hayfin Loan Agreement). Annually, beginning with the fiscal year ended December 31, 2021, the Company is required to prepay the outstanding loans based on a percentage of Excess Cash Flow (as defined in the Amended Hayfin Loan Agreement), if such is generated. No such prepayments have been required as of December 31, 2022.
The Amended Hayfin Loan Agreement, as amended, also specifies that any prepayment of the loan, voluntary or mandatory, will subject the Company to a prepayment premium applicable as of the date of the prepayment:
•On or before July 2, 2023: 2% of the principal balance repaid.
•After July 2, 2023, but on or before July 2, 2024: 1% of the principal balance repaid.
•After July 2, 2024: no premium.
Hayfin maintains a first-priority security interest in substantially all of the Company’s assets.
A breach of a financial covenant in the Amended Hayfin Loan Agreement, if uncured or unable to be cured, would likely result in an event of default that could trigger the lender’s remedies, including acceleration of the entire principal balance of the loan as well as any applicable prepayment premiums. Future compliance with the financial covenants, as amended, requires continuing growth in net sales consistent with the Company’s business strategy and plans. The Company is subject to inherent uncertainties that could impact the Company’s net sales growth, including, but not limited to, the regulatory pathway of the Company’s EPICORD® and AMNIOCORD®. If the FDA were to determine that these products do not meet the requirements for regulation solely under Section 361, the Company would be required to obtain the appropriate FDA clearance or approval to continue marketing these products. The loss of the Company’s ability to market and sell its umbilical cord-derived products would have an adverse effect on the Company’s revenue, business, financial condition, and results of operations, including its ability to comply with the financial covenants set forth pursuant to the Amended Hayfin Loan Agreement. Refer to Note 12, Revenue, for net sales derived from the Company’s cord products.
Original issue discount and deferred financing costs were allocated between the sale of the Series B Preferred Stock (which occurred simultaneously with the funding of the Hayfin Loan Agreement, collectively the “Financing Transactions”) and the Term Loan on the basis of the relative fair values of the transactions. The costs allocated to the Hayfin Loan Agreement were further allocated between the Term Loan and the DD TL on the basis of the maximum potential principal outstanding between the Credit Facilities. The allocation of the deferred financing costs and original issue discount between Term Loan and the DD TL on July 2, 2020 was as follows (amounts in thousands):
July 2, 2020
Term LoanDD TLTotal
Original issue discount$333 $167 $500 
Deferred financing costs2,169 1,084 3,253 
Deferred financing costs and original issue discount allocated to the Term Loan are amortized using the effective interest method through the Maturity Date. The amortization of such amounts is presented as part of interest expense, net on the consolidated statement of operations for the years ended December 31, 2022, 2021, and 2020.
Deferred financing costs and original issue discount associated with the DD TL were amortized using the straight-line method through the expiration of the DD TL commitment term on June 30, 2021. Amortization of these amounts are presented as part of interest expense, net on the consolidated statements of operations for the years ended December 31, 2021 and 2020.
The balances of the Term Loan as of December 31, 2022 and 2021 were as follows (amounts in thousands):
December 31,
20222021
Outstanding principal$50,000 $50,000 
Deferred financing costs(1,219)(1,624)
Original issue discount(187)(249)
Long term debt, net$48,594 $48,127 
Interest expense related to the Term Loan, included in interest expense, net in the consolidated statements of operations, was as follows (amounts in thousands):
Year Ended December 31,
202220212020
Stated interest$4,559 $4,182 $2,085 
Amortization of deferred financing costs405 372 173 
Accretion of original issue discount62 58 26 
Interest expense$5,026 $4,612 $2,284 
Interest expense related to the DD TL, included in interest expense, net in the consolidated statements of operations, was as follows (amounts in thousands):
Year Ended December 31,
202220212020
Commitment fee$— $126 $128 
Amortization of deferred financing costs— 542 542 
Accretion of original issue discount— 83 83 
Interest expense$— $751 $753 
Scheduled principal payments on the Term Loan as of December 31, 2022 are as follows:
Year ending December 31,Principal
2023$— 
2024— 
202550,000 
2026— 
2027— 
Thereafter— 
Outstanding principal$50,000 
As of December 31, 2022, the fair value of the Term Loan was $46.7 million. This valuation was calculated based on a series of Level 2 and Level 3 inputs, including a discount rate based on the credit risk spread of debt instruments of similar risk character in reference to U.S. Treasury instruments with similar maturities, with an incremental risk premium for risk factors specific to the Company. The remaining cash flows associated with the Term Loan were discounted to December 31, 2022 using this discount rate to derive the fair value.
BT Term Loan
On June 10, 2019, the Company entered into a loan agreement (the “BT Loan Agreement”) with Blue Torch Finance LLC (“Blue Torch”), as administrative agent and collateral agent, to borrow funds with a face value of $75.0 million (the “BT Term Loan”), of which the full amount was borrowed and funded. The proceeds from the BT Term Loan were used (i) for working capital and general corporate purposes and (ii) to pay transaction fees, costs and expenses incurred in connection with the BT Term Loan and the related transactions. The BT Term Loan would have matured on June 20, 2022 and was repayable in quarterly installments of $0.9 million, with the balance due on June 20, 2022. Blue Torch maintained a first-priority security interest in substantially all the Company’s assets. The BT Term Loan was issued net of the original issue discount of $2.3 million. The Company incurred $6.7 million of deferred financing costs.
On April 22, 2020, the Company amended the BT Loan Agreement with Blue Torch. The amendment provided for an increase in the maximum Total Leverage Ratio, which was a quarterly test, for the remainder of 2020, and also provided for a reduction in the minimum Liquidity requirement from April 2020 through November 2020. In connection with the amendment, the Company agreed to pay a one-time fee of approximately $0.7 million, added to the principal balance, and a 1 percentage point increase in the interest rate to LIBOR plus 9%.
On July 2, 2020, a portion of the proceeds from the Financing Transactions was used to repay the outstanding balance of principal, accrued but unpaid interest, and prepayment premium under the BT Loan Agreement. In connection with the repayment of the BT Term Loan, the Company terminated the BT Loan Agreement. The Company has no continuing obligations related to the BT Term Loan as of December 31, 2021.
The Company recorded a loss on extinguishment of debt of $8.2 million during the year ended December 31, 2020. The composition of the loss on extinguishment of debt was as follows (amounts in thousands):
July 2, 2020
Unamortized deferred financing costs$4,528 
Unamortized original issue discount1,538 
Unamortized amendment fee671 
Prepayment premium1,439 
Other fees25 
Loss on extinguishment of debt$8,201 
Interest expense related to the BT Term Loan, included in interest expense, net in the consolidated statements of operations was as follows (amounts in thousands):
Year ended December 31, 2020
Interest on principal balance$3,773 
Accretion of original issue discount354 
Accretion of amendment fee53 
Amortization of deferred financing costs1,051 
Total BT Term Loan interest expense$5,231 
Paycheck Protection Program Loan
The Company applied for and, on April 24, 2020, received proceeds of $10.0 million in the form of a loan under the Paycheck Protection Program (the “PPP Loan”). On May 11, 2020, the Company repaid the PPP Loan in full. There are no continuing obligations under the PPP Loan as of December 31, 2022.