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Item 1.01 | Entry into a Material Definitive Agreement. |
On March 2, 2023, NantHealth, Inc. (the “Company”) and certain of the Company’s subsidiaries as guarantors (the “Subsidiary Guarantors,” and together with the Company, the “Obligors”), entered into a credit agreement (the “Credit Agreement”) with Nant Capital, LLC (“Nant Capital”), an affiliate of Dr. Patrick Soon-Shiong, the Company’s CEO, and Highbridge Tactical Credit Master Fund, L.P. and Highbridge Convertible Dislocation Fund, L.P. (collectively, “Highbridge”), as the lenders, GLAS USA, LLC, as administrative agent, and GLAS Americas, LLC, as collateral agent (collectively, “Agent”). The Credit Agreement provides for a senior secured term loan facility in an aggregate principal amount of $22.5 million in a single drawdown made by the Company at closing (the “Term Loan Facility”).
The maturity date of the Term Loan Facility is December 15, 2023 (the “Maturity Date”) and accrues interest at an annual rate of 13% per annum with a 1% original issue discount. The Company’s obligations under the Credit Agreement are guaranteed by the Subsidiary Guarantors and are secured by a security interest in, and lien on, substantially all property (subject to certain exceptions) of the Obligors. The Company will have the right to prepay the Term Loan Facility at any time or from time to time on or after the Existing Convertible Senior Notes Security Date (as defined in the Credit Agreement), subject to a prepayment premium consisting of (i) the excess (if any) of (A) the present value as of such date of all interest that would have accrued on such amount of the Term Loan Facility being prepaid or repaid from such date through the Maturity Date, plus the present value as of such date of the principal amount of such Term Loan Facility being prepaid or repaid, assuming a prepayment or repayment date of the Maturity Date, in each case computed using a discount rate equal to the Treasury Rate (as defined in the Credit Agreement) plus 50 basis points over (B) the principal amount of such Term Loan Facility being prepaid or repaid and (ii) a prepayment fee in an amount equal to 1.0% of the principal balance of the Term Loan Facility being repaid or prepaid.
The Credit Agreement includes conditions precedent, representations and warranties, affirmative and negative covenants and post-closing conditions customary for financings of this type and size, such as, among other things, limitations on indebtedness, a minimum liquidity requirement of cash and cash equivalents of not less than $5 million at any time, liens, fundamental changes, asset sales, investments and other matters customarily restricted in such agreements. The Credit Agreement also contains customary events of default, after which the Term Loan Facility may be due and payable immediately, including, without limitation, payment defaults, material inaccuracy of representations and warranties, covenant defaults, bankruptcy and insolvency proceedings, cross-defaults to certain other agreements, judgments against the Company and its subsidiaries, change in control and lien priority. In addition, the Credit Agreement contains certain post-closing conditions requiring, among other things, that the Company use its commercially reasonable efforts to sell certain businesses of the Company.
Concurrently with the execution of, and pursuant to, the Credit Agreement, the Company also entered into (1) a subordination agreement (the “Subordination Agreement”) with Nant Capital and Airstrip Technologies, Inc. (collectively, the “Affiliated Lenders”), who are holders of certain affiliated debt of the Company, and (2) a letter agreement (the “Letter Agreement”) with certain entities affiliated with Highbridge and Nant Capital, who are holders of the Company’s 4.50% Convertible Senior Notes due 2026 (the “2026 Notes”) issued pursuant to the Indenture, dated as of April 27, 2021, by and among the Company, NaviNet, Inc. and U.S. Bank Trust Company, National Association (as successor in interest to U.S. Bank National Association) (the “Indenture”). The Subordination Agreement provides, among other things, that any payment of principal of, premium, if any, or interest on certain subordinated debt held by the Affiliated Lenders shall be subordinated and subject in right of payment to the prior payment of the full Term Loan Facility, whether outstanding as of the date hereof or thereafter incurred. The Letter Agreement provides that, among other things, (1) the holders of the 2026 Notes shall waive compliance with certain provisions of the Indenture, including, but not limited to, restrictions on borrowings from an affiliate lender of the Company and any current or future Default or Event of Default (as each term is defined in the Indenture) pursuant to any breach of Section 4.10 of the Indenture arising from any borrowing made by the affiliated lender to the Company, each such waiver is solely in connection with the Term Loan Facility, (2) prohibit the holders of the 2026 Notes from exercising any right to require the Company to repurchase any or all of the 2026 Notes upon the occurrence of a Fundamental Change (as defined in the Indenture) solely in connection with the Company’s common stock being delisted from the Nasdaq Global Select Market or similar securities exchange for a period beginning on the Closing Date (as defined in the Credit Agreement) and ending on the date that is five (5) months after the Closing Date, and (3) restricting the holders of the 2026 Notes from disposing of or otherwise transferring the 2026 Notes to any person other than an affiliate of such holder, until the approval of the Indenture Consent (as defined in the Letter Agreement).
The proceeds from the Term Loan Facility will be used by the Company to fund working capital needs, expenditures and general corporate purposes of the Company, in all cases subject to the terms of the Credit Agreement.
A Special Committee of the Company’s Board of Directors, consisting of disinterested independent directors, undertook a thorough review of the Credit Agreement, Term Loan Facility and related agreements arising from the transaction, and unanimously recommended that the Company proceed with the transaction.
The descriptions of the Credit Agreement, the Subordination Agreement and the Letter Agreement are not complete and are qualified in their entirety by reference to the Credit Agreement, Subordination Agreement and Letter Agreement, respectively, which will be filed as exhibits in a subsequent periodic report of the Company to be filed under the Securities Exchange Act of 1934, as amended.