Business Context and Reporting Period
This Form 8-K was filed by Alphatec Holdings, Inc. on March 15, 2016, reporting events occurring between January 31, 2016, and March 11, 2016. The filing addresses material amendments to credit facilities and covenant compliance issues.
Key Financial Metrics and Agreements
- Debt Facility Amendment: The Company entered into a Third Amendment to its MidCap Facility on March 11, 2016.
- Maturity Extension: The maturity date of the MidCap Facility was extended from August 31, 2016, to December 31, 2016.
- Amendment Fee: A fee of $500,000 was incurred, payable upon repayment or maturity of the facility.
- Covenant Waivers: The amendment waived defaults related to the fixed-charge coverage covenant for December 2015 and January 2016 and removed the obligation to calculate this covenant for February 2016.
Material Changes and Covenant Defaults
The Company determined it was out of compliance with the minimum fixed-charge coverage ratio covenant under the MidCap Facility for December 2015 and January 2016. This non-compliance constituted an event of default under the MidCap Facility and triggered a cross-default under the Deerfield Facility.
- Waivers Obtained: MidCap Funding IV Trust provided waivers for the defaults in December 2015 and January 2016. Deerfield Private Design Fund II, L.P. and related entities also provided a waiver for the January 2016 cross-default.
- Financial Results: The Company announced results for the quarter and year ended December 31, 2015, via a press release on March 15, 2016. Specific revenue, profit, or cash flow figures are not detailed in this filing text.
Outlook, Risks, and Contingencies
Management explicitly stated there is no assurance that the Company will be in compliance with the fixed-charge coverage covenant or other financial covenants for February 2016 or thereafter.
- Acceleration Risk: If the Company defaults in February 2016 or later and fails to obtain future waivers from MidCap and Deerfield, both lenders have the right to declare their respective debts due immediately.
- Future Filings: The full text of the Third Amendment is intended to be filed in the Quarterly Report on Form 10-Q for the period ending March 31, 2016.
Investor Verification Checklist
- Verify the Company's compliance status with the fixed-charge coverage covenant for February 2016 and subsequent months.
- Confirm whether additional waivers have been obtained from MidCap and Deerfield for any future covenant breaches.
- Review the full text of the Third Amendment and Waiver in the upcoming Form 10-Q for detailed terms.
- Examine the March 15, 2016 press release (Exhibit 99.1) for specific revenue and earnings figures for the year ended December 31, 2015.