ADC Therapeutics SA — Form 6-K Summary
Business context and reporting period
This Form 6-K, filed August 15, 2022, reports financing and capital-structure transactions by ADC Therapeutics SA, a Swiss biopharmaceutical company. It does not provide operating results or financial statements for a reporting period.
Key financial and capital markets metrics
| Item | Terms and amount |
|---|---|
| Existing convertible notes exchanged | $115.0 million aggregate principal amount, representing all senior secured convertible notes outstanding under the prior Facility Agreement. |
| Consideration to Deerfield | $117.3 million cash, 2,390,297 common shares and warrants to purchase 4,412,840 common shares. |
| Deerfield warrant exercise prices | 2,631,578 shares at $24.70 per share and 1,781,262 shares at $28.07 per share; exercisable through May 19, 2025. |
| Prior facility status | All obligations were deemed paid and performed; related guarantees, security interests and liens were released. |
| New secured term loan | $120.0 million drawn on August 15, 2022, within a total borrowing capacity of up to $175.0 million. |
| Additional borrowing capacity | Up to two additional tranches of $27.5 million each, drawable within 18 months, subject to conditions. |
| Loan maturity | August 15, 2029. |
| Loan interest | For the first five years, SOFR plus 7.50% or base rate plus 6.50%, subject to a 1.00% SOFR floor; rates increase after five years to SOFR plus 9.25% or base rate plus 8.25%. |
| Payment-in-kind interest | For the first three years, the Company may elect to pay interest corresponding to up to 2.50% of the applicable interest rate in kind. |
| Minimum qualified cash covenant | At least $60.0 million, plus certain accounts payable outstanding more than 90 days. |
| Lender warrants | Warrants based on $4.375 million divided by the applicable 20-day VWAP, with an exercise price equal to that VWAP; exercisable through August 15, 2032. |
| Share purchase agreement | 733,568 common shares at $8.52 per share, for gross proceeds of approximately $6.25 million, subject to completion of the authorized share capital increase. |
Material changes versus the prior comparable period
- The Company replaced its prior $115.0 million senior secured convertible-note obligations with cash, common shares and Deerfield warrants.
- The prior Facility Agreement was fully discharged, and associated liens and guarantees were released.
- The Company established new secured financing with an initial $120.0 million draw and potential total term-loan capacity of $175.0 million.
- The new financing introduces substantial interest expense, potential payment-in-kind interest, exit fees, prepayment premiums and restrictive covenants.
- The transactions create potential dilution from Deerfield warrants, lender warrants and the planned issuance of 733,568 common shares.
Guidance, outlook, risks and unusual items
- The filing provides no revenue, profit, cash-flow, margin or operating guidance.
- The new debt is secured by substantially all assets of the Company and certain subsidiaries and is initially guaranteed by U.S. and U.K. subsidiaries.
- Mandatory prepayments may be required from certain asset sales, casualty proceeds and new debt issuances; prepayment premiums may apply through the fourth anniversary.
- Events of default include payment failures, covenant breaches, bankruptcy or insolvency, certain cross-defaults, judgments and changes in control, which could accelerate repayment.
- The lenders received warrants and registration rights, while Deerfield also received registration rights for warrant shares.
- The share purchase transaction had not yet closed as of the filing date and depended on registration of an authorized share capital increase. The agreement could terminate under specified conditions, including failure to complete registration within 21 days.
- The filing does not state the Company’s cash balance after the transactions or whether the qualified-cash covenant was satisfied.
Investor verification points
- Confirm the closing of the 733,568-share issuance and the resulting share count and dilution.
- Verify the number of lender warrants issued, which depends on the defined 20-day VWAP.
- Review the full Loan Agreement for financial covenants, mandatory prepayments, exit fees, collateral and events of default.
- Assess the Company’s post-transaction liquidity against the $60.0 million qualified-cash requirement and future operating cash needs.
- Evaluate the cash cost and potential capitalization of interest, as well as the loan’s high variable interest rates and step-up after five years.
- Review the Deerfield and lender warrant terms, including anti-dilution provisions, change-of-control repurchase rights and potential future dilution.