Business Context and Reporting Period
Company: Alphatec Holdings, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: September 1, 2016
Event: Closing of the sale of the Company's international distribution operations and agreements (the "Globus Transaction") to Globus Medical Ireland, Ltd., a subsidiary of Globus Medical, Inc.
Key Financial Metrics and Transaction Details
- Cash Proceeds: Approximately $80 million received from the sale of international operations.
- Debt Repayment: Approximately $65.9 million of proceeds used to repay the Deerfield Facility Agreement in full and reduce indebtedness under the MidCap Facility Agreement.
- Deerfield Repayment Details: Total payment of $33.5 million, comprising $27.9 million in principal and accrued interest, a $5.6 million prepayment premium, and other fees.
- New Financing (Globus Facility): Entered into a credit agreement for up to $30 million. An initial draw of $25 million was made at closing. Remaining funds available in draws of at least $2 million prior to December 31, 2017.
- Existing Financing (MidCap Facility): Revolving credit commitment reduced to $22.5 million; term loan commitment reduced to $5 million. Commitment expiry extended to December 31, 2019. A prepayment fee of $615,000 was incurred.
- Supply Agreement Credit: Buyer to receive up to a $3.9 million credit against future product purchases over a six-month period.
Material Changes Versus Prior Period
- Asset Disposition: Sold wholly-owned subsidiaries in Japan, Brazil, Australia, and Singapore, and substantially all assets of sales operations in the United Kingdom and Italy.
- Debt Structure: Terminated the Deerfield Facility Agreement entirely. Restructured the MidCap Facility Agreement with reduced commitments and extended maturity. Added a new $30 million facility with Globus secured by a first lien on substantially all assets (excluding accounts receivable).
- Personnel: Mitsuo Asai, President of Alphatec Pacific, Inc., terminated employment with Alphatec and became an employee of the Buyer.
Outlook, Risks, and Management Commentary
- Future Revenue Stream: The Company will continue to supply implants and instruments to the Buyer under a new Product Manufacture and Supply Agreement.
- Liquidity: The transaction significantly improved liquidity through the $80 million cash inflow and the establishment of a new $30 million credit facility.
- Collateral Priorities: An Intercreditor Agreement was executed to define lien priorities between the new Globus Facility (first lien on most assets) and the existing MidCap Facility (second lien on most assets, first lien on accounts receivable).
- Financial Reporting: Unaudited pro forma financial statements reflecting the transaction are filed as Exhibit 99.2.
Investor Verification Checklist
- Verify the exact terms of the $30 million Globus Facility Agreement, including interest rates and covenants, in the full agreement text.
- Review the Unaudited Pro Forma Financial Statements (Exhibit 99.2) to understand the impact of the transaction on the balance sheet and operations.
- Confirm the specific products covered under the new Supply Agreement and the pricing mechanism.
- Assess the impact of the $5.6 million prepayment premium and $615,000 fee on the Company's immediate cash position.
- Monitor the Company's ability to utilize the remaining $5 million of the Globus Facility and the reduced MidCap commitments for future operations.