Debt

9 Months Ended

Sep. 30, 2020

Credit Agreement

On June 7, 2018, we entered into an Amended and Restated Credit Agreement (the Credit Agreement), with Bank of America, N.A. as Administrative Agent. The Credit Agreement amended and restated our credit agreement dated as of June 22, 2015 (the Prior Credit Agreement).

The Credit Agreement provides for a $1,000.0 revolving credit facility and a $2,612.5 term loan facility. The revolving credit facility and the term loan facility mature on June 7, 2023. Beginning with the quarter ending June 30, 2019, we are required to make payments of 5.00% of the original principal amount of the term loan facility annually, payable in equal quarterly installments.

In connection with entering into the Credit Agreement and the Prior Credit Agreement, we paid an aggregate of $53.1 in financing costs in 2018. Financing costs are amortized as interest expense over the life of the debt. Amortization expense associated with deferred financing costs for the three months ended September 30, 2020 and 2019 was $1.2 and $1.3, respectively. Amortization expense associated with deferred financing costs for the nine months ended September 30, 2020 and 2019 was $3.6 and $3.8, respectively. Remaining unamortized deferred financing costs as of September 30, 2020 and December 31, 2019 were $12.2 and $15.8, respectively.

We made principal payments of $32.6 and $97.9 on the term loan during the three and nine months ended September 30, 2020, respectively, and as of September 30, 2020, we had $2,416.6 outstanding on the term loan. We had no outstanding borrowings under the revolving credit facility as of September 30, 2020. As of September 30, 2020, we had open letters of credit of $1.0 that offset our availability in the revolving credit facility.

The amount outstanding under the term loan of $2,416.6 as of September 30, 2020 is subject to variable interest rates, which are based on current market rates, and as such, the Company believes the carrying amount of the obligation approximates fair value.

We were in compliance with all applicable covenants under the Credit Agreement as of September 30, 2020.

Royalty-based Financing

In connection with our acquisition of Portola during the third quarter 2020, we assumed royalty-based debt relating to a royalty sales agreement Portola had entered into with HealthCare Royalty Partners (HCR) whereby HCR acquired a tiered royalty interest in future worldwide net sales of ANDEXXA. Portola received $50.0 upon closing of the agreement in February 2017 and an additional $100.0 following the U.S. regulatory approval of ANDEXXA in May 2018. Tiered royalties ranging from 4.2% to 8.5% are required to be paid to HCR based on net worldwide sales of ANDEXXA. The applicable rate decreases as worldwide net annual sales levels increase above defined thresholds. Total potential royalty payments are capped at 195% of the funding received less certain transaction expenses, or $290.6. As of the date of acquisition, the remaining due to HCR was $276.9 in royalty-based payments.

We recorded the HCR debt at its fair value of $182.0 upon closing of the acquisition, representing an initial debt discount of $94.9. We have also recognized a deferred tax asset of $42.4 related to the royalty-based debt as of the acquisition date. For additional information on our acquisition of Portola, please see Note 3, Acquisitions. Interest expense is recognized using the effective interest rate method over the estimated period the related debt will be paid. This requires estimation of the timing and amount of future royalty payments to be generated from future sales of ANDEXXA. We reassess the expected royalty payments each reporting period and account for any changes through an adjustment to the effective interest rate on a prospective basis. The assumptions used in determining the expected repayment term of the debt require that we make estimates that could impact the short and long term classification of the debt carrying values.

Each period, we amortize the initial debt discount using the effective interest rate implied from the projected timing of royalty payments to HCR. The effective interest rate for the HCR royalty-based debt as of September 30, 2020 was 11.4%. During the three and nine months ended September 30, 2020, we recognized interest expense

associated with the amortization of the debt discount of $4.9. We made royalty-based debt payments of $1.7 during the three and nine months ended September 30, 2020. As of September 30, 2020, the carrying value of the royalty-based debt includes approximately $3.0 of royalty payments on third quarter sales of ANDEXXA which will be paid during the fourth quarter 2020.

As of September 30, 2020, the carrying value of the HCR royalty-based debt was $185.2, of which $11.7 was recorded within current portion of long-term debt and $173.5 was recorded within long-term debt, less current portion on our condensed consolidated balance sheet. Our payment obligations for HCR royalty-based debt are as follows:


	Nine Months Ended September 30, 2020
Total repayment obligation as of the acquisition date	$	276.9
Less: interest to be accreted in future periods	(90.0)
Less: payments made	(1.7)
Carrying value as of September 30, 2020	$	185.2

The carrying value of the royalty based debt as of September 30, 2020 approximates fair value due to the proximity to the acquisition date.