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Lifecore Biomedical Enters into $150 Million New Financing Deal
May 25, 2023
By Contract Pharma
New $150 million credit arrangements include six-year credit agreement, equipment sale and leaseback to replace existing term loan.
Lifecore Biomedical, Inc., a fully integrated contract development and manufacturing organization (CDMO), has entered into a broad set of agreements with its long-term customer, Alcon, which provides for the repayment of the company’s existing credit agreement with its current lenders and substantially increases the amount of hyaluronic acid (HA) that Lifecore is expected to supply for use in Alcon’s commercial products.
Under the terms of the lending and equipment sale and leaseback arrangements, Alcon has provided total commitments of $150.0 million, which includes a six-year senior secured term facility and a sale leaseback of certain HA fermentation equipment. The term facility bears interest at the rate of 10%, which is payable in kind (PIK) for the first three years, and payable 3% in cash interest and 7% PIK interest thereafter until maturity. Alcon and the Company also entered into an equipment sale and leaseback transaction related to certain HA fermentation assets, with a lease term of ten years, subject to certain repurchase rights.
Concurrently with this arrangement, the company and BMO, the company’s current lender under its existing ABL revolving credit facility, which will remain outstanding, entered into an amendment to the ABL revolving credit facility, which, among other things, contains waivers for all current defaults under our ABL credit facility.
The amended and restated supply agreement with Alcon extends the term through December 31, 2033, and increases the amount of expected HA product to be delivered by Lifecore to Alcon at Lifecore’s existing facilities. The equipment sale and leaseback documents also contemplate that Lifecore intends to work closely with Alcon to develop a plan to build out additional capacity.
“These agreements validate the value Lifecore delivers, both to our customers and to the patients who benefit from treatments that Lifecore helps produce,” said James Hall, President, and CEO of Lifecore.
“We appreciate the trust that has been demonstrated through a deepened partnership with this strategic, global customer. The closing of the new credit arrangement and equipment sale and leaseback provides for the repayment of our current term loan agreement with more favorable terms and greater flexibility. In addition, the 10-year expansion of the HA fermentation supply agreement represents a significant enhancement to one of our strongest customer relationships and a meaningful solidification of our HA pipeline. Combined, we believe these arrangements greatly improve the opportunities for the company in its continued evaluation of potential strategic alternatives to maximize value for stockholders.”
Hall added: “These agreements demonstrate our focus on finding an optimal path forward for the business, while not losing sight of our continuous efforts to advance our project portfolio. We believe these agreements also improve the potential outcome from our strategic review process and open the door to greater flexibility for the Company going forward.”
Lifecore Biomedical, Inc., a fully integrated contract development and manufacturing organization (CDMO), has entered into a broad set of agreements with its long-term customer, Alcon, which provides for the repayment of the company’s existing credit agreement with its current lenders and substantially increases the amount of hyaluronic acid (HA) that Lifecore is expected to supply for use in Alcon’s commercial products.
Under the terms of the lending and equipment sale and leaseback arrangements, Alcon has provided total commitments of $150.0 million, which includes a six-year senior secured term facility and a sale leaseback of certain HA fermentation equipment. The term facility bears interest at the rate of 10%, which is payable in kind (PIK) for the first three years, and payable 3% in cash interest and 7% PIK interest thereafter until maturity. Alcon and the Company also entered into an equipment sale and leaseback transaction related to certain HA fermentation assets, with a lease term of ten years, subject to certain repurchase rights.
Concurrently with this arrangement, the company and BMO, the company’s current lender under its existing ABL revolving credit facility, which will remain outstanding, entered into an amendment to the ABL revolving credit facility, which, among other things, contains waivers for all current defaults under our ABL credit facility.
The amended and restated supply agreement with Alcon extends the term through December 31, 2033, and increases the amount of expected HA product to be delivered by Lifecore to Alcon at Lifecore’s existing facilities. The equipment sale and leaseback documents also contemplate that Lifecore intends to work closely with Alcon to develop a plan to build out additional capacity.
“These agreements validate the value Lifecore delivers, both to our customers and to the patients who benefit from treatments that Lifecore helps produce,” said James Hall, President, and CEO of Lifecore.
“We appreciate the trust that has been demonstrated through a deepened partnership with this strategic, global customer. The closing of the new credit arrangement and equipment sale and leaseback provides for the repayment of our current term loan agreement with more favorable terms and greater flexibility. In addition, the 10-year expansion of the HA fermentation supply agreement represents a significant enhancement to one of our strongest customer relationships and a meaningful solidification of our HA pipeline. Combined, we believe these arrangements greatly improve the opportunities for the company in its continued evaluation of potential strategic alternatives to maximize value for stockholders.”
Hall added: “These agreements demonstrate our focus on finding an optimal path forward for the business, while not losing sight of our continuous efforts to advance our project portfolio. We believe these agreements also improve the potential outcome from our strategic review process and open the door to greater flexibility for the Company going forward.”
