Business Context and Reporting Period
This Form 8-K is filed by Alphatec Holdings, Inc. for the reporting period ending May 31, 2016. The filing addresses a triggering event related to the company's compliance with financial covenants under its credit facilities.
Key Financial Metrics
The filing does not provide specific numerical values for revenue, profit, cash flow, margins, or total debt. The document focuses exclusively on covenant compliance metrics, specifically:
- Minimum fixed charge coverage ratio
- Total leverage ratio
- Minimum percentage of total cash held in U.S. accounts
The company reported non-compliance with these metrics for the month of April 2016.
Material Changes and Events
On May 31, 2016, the Company determined it was out of compliance with financial covenants for April 2016 under two primary facilities:
- MidCap Facility: An agreement with MidCap Funding IV Trust. The non-compliance constituted an event of default.
- Deerfield Facility: An agreement with Deerfield Private Design Fund II, L.P. and related entities. The MidCap default triggered a cross-default under this facility.
Both MidCap and Deerfield provided waivers of the event of default for April 2016.
Outlook, Risks, and Management Commentary
Management explicitly states there is no assurance that the Company will be in compliance with the covenants for May 2016 or any future period. The filing highlights a significant liquidity and solvency risk:
- If the Company defaults in May 2016 or thereafter and fails to obtain future waivers, both MidCap and Deerfield have the right to declare their respective debts due immediately.
Investor Verification Checklist
- Verify the Company's compliance status with financial covenants for May 2016 and subsequent months.
- Confirm whether additional waivers have been secured from MidCap and Deerfield beyond the April 2016 waiver.
- Assess the Company's current cash position and ability to meet the minimum U.S. cash holding requirement.
- Review the terms of the MidCap and Deerfield facilities to understand the specific thresholds for the fixed charge coverage and leverage ratios.