8. Debt

Term Loans

On October 4, 2017, the Company entered into a $200.0 million term loan with the lenders. The term loan was issued at $197.6 million, or 98.8% of its par value, resulting in a discount of $2.4 million, or 1.2%, which represented loan origination fees paid at the closing. On November 15, 2018, the Company entered into an incremental Amendment (the “Amendment”) to the existing credit agreement. Under the Amendment, the Company obtained an incremental term loan in an aggregate principal amount of $350.0 million. The proceeds of the incremental loan were used to finance a portion of the purchase price for the Company’s acquisition of GENEWIZ. The term loan was issued at $340.5 million, or 97.3% of its par value, resulting in a discount of $9.5 million, or 2.7%, which represented financing cost of the loan. Except as provided in the Amendment, the incremental loan is subject to the same terms and conditions as set forth in the existing credit agreement. The loan principal amount may be increased by an aggregate amount equal to $75.0 million plus any voluntary repayments of the term loans plus any additional amount such that the secured leverage ratio of the Company is less than 3.00 to 1.00.

On February 15, 2019, the Company syndicated the incremental term loan to a group of new lenders which met the criteria of a debt extinguishment. The Company wrote off the carrying value of the incremental term loan of $340.1 million as of February 15, 2019 and recorded the syndicated incremental term loan at its present value for $349.1 million and a loss on debt extinguishment for $9.1 million. The syndicated loan was issued at $345.2 million, or 98.9% of its par value resulting in a discount of $4.0 million which represented financing costs which are presented as a reduction of the term loan principal balance in the accompanying unaudited Consolidated Balance Sheets and will be accreted over the life of the loan. Except as provided in the Amendment for increase of interest rates, the new loan is subject to the same terms and conditions as set forth in the incremental term loan.

Under the terms of the Amendment, the Company may elect that the borrowings comprising the incremental loan bear interest at a rate per annum equal to (a) the Alternate Base Rate (the “ABR”) plus 1.50%; or (b) the Adjusted LIBOR plus 2.50%. ABR is equal to the highest of (a) the federal funds effective rate plus 0.50%, (b) the prime rate, or (c) one-month LIBOR rate plus 1.00%. The LIBOR is equal to the rate for eurodollar deposits in the London interbank market for a period of one, two, three or six months, in each case selected by the Company. “Adjusted LIBOR” is the LIBOR as adjusted for statutory reserve requirements for eurodollar liabilities. On February 15, 2019, in connection with the syndication of the incremental term loan, the Company entered into a second Amendment (the “Second Amendment”) to the existing credit agreement. Under the Second Amendment, interest rate increased 0.5%. The Company may elect that the borrowings comprising the incremental loan bear interest at a rate per annum equal to (a) the Alternate Base Rate (the “ABR”) plus 2.00%; or (b) the Adjusted LIBOR plus 3.00%.

The Company’s obligations under the term loan are also guaranteed by BioStorage Technologies, Inc. as the guarantor, subject to the terms and conditions of the term loan agreement. The Company and the guarantor granted the lenders a perfected first priority security interest in substantially all of the assets of the Company and the guarantor to secure the repayment of the term loan.

The term loan matures and becomes fully payable on October 4, 2024. The principal is payable in installments equal to 0.25% of the initial principal amount of the term loans on March 31st, June 30th, September 30th and December 31st of each year, commencing on March 31, 2018, with any remaining amount of principal becoming due and payable on the maturity date. All accrued and unpaid interest on Borrowings shall be due on the last day of each interest period elected by the Company for such Borrowings, except for interest periods of more than three months in which case all accrued and unpaid interest shall be due and payable every three months.

Subject to certain conditions stated in the term loan agreement, the Company may redeem the term loan at any time at its option without a significant premium or penalty, except for a repricing transaction, as defined in the term loan agreement. The Company would be required to redeem the term loan at the principal amount then outstanding upon occurrence of certain events, including (i) net proceeds received from the sale or other disposition of the Company’s or guarantor’ assets, subject to certain limitations, (ii) casualty and condemnation proceeds received by the Company or the guarantor, subject to certain exceptions, (iii) net proceeds received by the Company or the guarantor from the issuance of debt or disqualified capital stock after October 4, 2017. Commencing on December 31, 2018, the Company will be required to make principal payments equal to the excess cash flow amount, as defined in the term loan agreement. Such prepayments are equal to 50% of the preceding year excess cash flow amount reduced by voluntary prepayments of the term loan, subject to certain limitations.

The Deferred financing costs are accreted over the term of the loan using the effective interest rate method and are included in “Interest expense” in the accompanying unaudited Consolidated Statements of Operations. At March 31, 2019, deferred financing costs were $6.1 million.

The term loan agreement contains certain customary representations and warranties, covenants and events of default. If any of the events of default occur and are not waived or cured within applicable grace periods, any unpaid amounts under the term loan agreement will bear an annual interest rate at 2.00% above the rate otherwise applicable under the terms and conditions of such agreement. The term loan agreement does not contain financial maintenance covenants. As of March 31, 2019, the Company was in compliance with all covenants and conditions under the term loan agreement.

In connection with the GENEWIZ acquisition, we assumed three five-year term loans for a total of $3.3 million and two one-year short term loans for a total of RMB 22 million or $3.2 million. The three five-year term loans were initiated during 2016 and mature in 2021. The principal payments are payable in eight installments equal to 12.5% of the initial principal amount of the term loans on December 14th and June 14th of each year, commencing in 2017. The three five-year term loans were secured to fund equipment payments and the interest rates were equal to the LIBOR plus 3.1%. The two one-year term loans were borrowed to fund operations. Both of the one-year term loans were initiated in 2018 and mature in 2019. The principal payments are due at the maturity date. The interest rates of these two loans were 4.56% and 4.35%. There is no deferred financing costs related to either the five-year term loans or the one-year term loans. At March 31, 2019, we had an aggregate outstanding principal balance of $2.1 million and $1.8 million for the three five-year term loans and two one-year short term loans, respectively.

During the six months ended March 31, 2019, the weighted average stated interest rate paid on all outstanding debt was 5.2%. During the six months ended March 31, 2019, the Company incurred aggregate interest expense of $13.3 million in connection with the borrowings, including $0.9 million of deferred financing costs amortization.

As of March 31, 2019, the estimated fair value of the outstanding principal balance of the debt no our balance sheet approximates its carrying value. The fair value was determined based on observable market inputs and classified within Level 2 of the fair value hierarchy due to a lack of an active market for this term loan or a similar loan instrument.

The following are the future minimum principal payment obligations under all of the Company’s outstanding debt as of March 31, 2019 (in thousands):


	Amount
Fiscal year ended September 30,
2019	$	4,951
2020		6,327
2021		6,327
2022		5,500
2023		5,500
Thereafter		521,000
Total outstanding principal balance		549,605
Unamortized deferred financing costs		(6,107)
		543,498
Current portion of long-term debt		8,114
Non-current portion of long-term debt	$	535,384

Capital Lease Obligations

In connection with the GENEWIZ acquisition, the Company assumed five capital lease obligations related to leases of equipment. Three of the capital leases were initiated in 2016 and mature in 2021 and two of them were initiated in 2017 and mature in 2022. The outstanding principal balance of these obligations is included within “Other long-term liabilities” on the Company’s Consolidated Balance Sheets. See below for the future minimum principal payment obligations under the capital lease obligations as of March 31, 2019 (in thousands):


	Amount
Fiscal year ended September 30,
2019	$	639
2020		1,176
2021		1,126
2022		358
Total outstanding principal balance	$	3,299