Definium Therapeutics, Inc. Debt Disclosure
On August 11, 2023 (the “Closing Date”), the Company and certain of its subsidiaries party thereto, as co-borrowers (together with the Company, the “Borrowers”) entered into a Loan and Security Agreement (the “Loan Agreement”) with K2 HealthVentures LLC (“K2HV”), as administrative agent and Canadian collateral agent for lenders thereunder (K2HV, together with any other lender from time to time, the "Lenders"), and Ankura Trust Company, LLC, as collateral trustee for the Lenders. The Loan Agreement provides for up to an aggregate principal amount of $50.0 million in term loans (the “Term Loan”) consisting of a first tranche term loan of $15.0
million funded on the Closing Date, subsequent tranches of term loans totaling $20.0 million to be funded upon the achievement of certain time-based, clinical and regulatory milestones, and an additional tranche term loan of up to $15.0 million upon the Company’s request, subject to review by the Lenders of certain information from the Company and discretionary approval by the Lenders. On the Closing Date, the Company paid a facility fee of $0.3 million to K2HV. The second milestone-based tranche of $10.0 million was funded in the second quarter of 2024.
The Term Loan matures on August 1, 2027, and the obligations of the Borrowers under the Loan Agreement are secured by substantially all of the assets of the Borrowers, excluding intellectual property.
The Term Loan bears a variable interest rate equal to the greater of (i) 10.95% and (ii) the sum of (a) the as reported in The Wall Street Journal plus (b) 2.95%. The Company may prepay, at its option, all, but not less than all, of the outstanding principal balance and all accrued and unpaid interest with respect to the principal balance being prepaid of the Term Loan, subject to certain prepayment notice requirements; provided that such prepayment notice may be conditioned upon the effectiveness of a refinancing or any other transaction, in which case such prepayment notice may be revoked by the Company. Principal payments were postponed from March 2025 to March 2026 as the interest only extension event per the Loan Agreement was met. Additionally, the Term Loan contains a final payment fee of 6.95% of the original principal amount borrowed due upon the final maturity date or upon prepayment of the Term Loan. As of December 31, 2024, the Company has accrued $0.5 million in relation to this final payment fee.
The Lenders may elect at any time following the Closing Date and prior to the full repayment of the Term Loan to convert any portion of the principal amount of the term loans then outstanding, up to an aggregate principal amount of $4.0 million, into the Company’s Common Shares (the “Conversion Shares”), at a conversion price equal to $4.01 per Conversion Share, subject to certain limitations. The embedded conversion option qualifies for a scope exception from derivative accounting because it is both indexed to the Company’s own Common Shares and meets the conditions for equity classification. On November 11, 2024, $3.0 million of principal was converted into 748,129 of the Company's Common Shares. As of December 31, 2024, the Company estimated the fair value of the remaining Conversion Shares to be $1.2 million using the Black-Scholes option pricing model.
The Loan Agreement contains customary representations and warranties and affirmative and negative covenants, including covenants that limit or restrict the Company's ability to, among other things: dispose of assets; make changes to the Company's business, management, ownership or business locations; merge or consolidate; incur additional indebtedness, encumbrances or liens; pay dividends or other distributions or repurchase equity; make investments; and enter into certain transactions with affiliates, in each case subject to certain exceptions. The Company is in compliance with the Loan Agreement as of December 31, 2024.
The Company recorded $2.3 million and $0.7 million in interest expense for the years ended December 31, 2024 and 2023, respectively.
Future expected repayments of principal amount due on the credit facility as of December 31, 2024 are as follows (in thousands):
2025 |
|
|
- |
|
2026 |
|
|
12,999 |
|
2027 |
|
|
9,001 |
|
Total principal repayments |
|
$ |
22,000 |
|
Unamortized debt issuance costs |
|
|
(628 |
) |
Accrued final payment fee |
|
|
482 |
|
Total credit facility, non-current, net |
|
$ |
21,854 |
|
As of December 31, 2024, the Company estimated the fair value of the credit facility to be $22.2 million, assuming the full remaining $1.0 million of principal is converted into Conversion Shares.
About Debt Disclosures
Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.
Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.