Business Context and Reporting Period
AtriCure, Inc. filed this Form 8-K on July 2, 2008, reporting the entry into a new material definitive credit agreement and the termination of a prior material agreement. The company is incorporated in Delaware and headquartered in West Chester, Ohio.
Key Financial Metrics and Agreements
- New Credit Facility: A two-year facility maturing July 1, 2010, with National City Bank as agent.
- Revolving Credit: Up to $10,000,000, subject to availability tied to restricted cash balances and eligible assets.
- Letter of Credit: Up to $1,500,000 or the remaining availability under the revolving facility.
- Collateral: Secured by all of AtriCure's tangible and intangible assets.
- Restricted Cash: Required deposit of at least $2,000,000 in a restricted securities account.
- Interest Rates: LIBOR + 2.25% for revolving loans; 1.50% fee for letters of credit. Rates increase by 2% during events of default.
- Financial Covenant: EBITDA loss must not exceed $15,000,000.
- Debt Repayment: Paid $713,031.73 to Lighthouse Capital Partners V, L.P., covering principal, accrued interest, and a 15% final payment fee.
Material Changes
The company replaced its indebtedness to Lighthouse Capital Partners V, L.P. with a new institutional credit facility. This transition required the full payoff of the prior loan, including a significant maturity fee, and the establishment of a restricted cash account to secure the new borrowing capacity.
Outlook, Risks, and Covenants
- Covenants: The agreement includes negative covenants limiting liens, investments, and additional indebtedness, as well as affirmative covenants regarding financial reporting and FDA inspections.
- Default Risks: Events of default include cross-defaults on indebtedness exceeding $250,000. Default triggers a 2% interest rate penalty.
- Liquidity Constraints: Access to the full $10,000,000 revolving line is contingent on maintaining a cash equivalent to borrowing ratio of 1.25 to 1.0 for amounts above $6,000,000 and adequate levels of eligible receivables and inventory.
Investor Verification Checklist
- Verify the current balance in the restricted securities account to determine actual available borrowing capacity.
- Confirm the company's current EBITDA loss position relative to the $15,000,000 covenant limit.
- Review the full text of the Credit Agreement (Exhibit 10.1) for specific definitions of "eligible accounts receivables" and "inventory."
- Assess the impact of the 15% maturity fee paid to the previous lender on the company's cash reserves.