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10-Q - FORM 10-Q - Xstelos Holdings, Inc.v326124_10q.htm
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v2.4.0.6
Long Term Debt
9 Months Ended
Sep. 30, 2012
Debt Disclosure [Abstract]  
Debt Disclosure [Text Block]

7. Long Term Debt

 

As further discussed in Note 1 - CPEX Pharmaceuticals, Inc. Acquisition, on April 5, 2011, in connection with the CPEX Transaction, the Borrower borrowed approximately $64 million under the Term Loan Agreement by and among Borrower, The Bank of New York Mellon, as Agent, and certain Lenders from time to time party thereto, in the form of a secured term loan to Borrower. The term loan under the Term Loan Agreement bears interest at “LIBOR” plus 16% per annum, with a minimum LIBOR rate of 1%, and matures on the earlier of January 3, 2026 or the date any of CPEX’s patents that are associated with Testim®, a topical testosterone gel, expire, and contains customary events of default for loans of such nature.

 

The balance of the loan at September 30, 2012 and December 31, 2011 was approximately $52.4 million and $61.6 million, respectively, with an original issue discount (“OID”) balance of approximately $1.2 million and $1.4 million, respectively. Interest totaling approximately $2.5 million and $2.8 million was expensed in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income for the three months ended September 30, 2012 and October 1, 2011, respectively. Interest totaling approximately $7.7 million and $5.4 million was expensed in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income for the nine months ended September 30, 2012 and October 1, 2011, respectively. The rate applicable to this loan was 17.0% at September 30, 2012 and December 31, 2011. Current maturities of long term debt represent amounts expected to be payable in the next twelve months subsequent to September 30, 2012 in accordance with the repayment waterfall arrangement based on management’s forecast. Future maturities are subject to change based on future cash flows and the terms of the loan agreement.

 

The $64 million loan was issued at a discount of 2.34%, for total net proceeds of $62.5 million, with an effective interest rate of 18%.  The OID was $1.5 million.  The OID is equal to the difference between the stated face amount of the loan and actual cash received.  This OID is being amortized over the estimated life of the loan, approximately 6 years, using the effective interest rate method, and is recorded as a component within non-cash interest expense.  Amortization of approximately $81,000 and $37,000 was expensed for the three months ended September 30, 2012 and October 1, 2011, respectively, and amortization of approximately $164,000 and $73,000 was expensed for the nine months ended September 30, 2012 and October 2, 2011, respectively, leaving an OID balance of approximately $1.2 million as of September 30, 2012.

 

The $64 million loan is collateralized by patents and a license agreement associated with Testim®, that were acquired in the CPEX transaction. The loan agreement requires certain financial reporting and non financial covenants. The Company was in compliance with these covenants as of September 30, 2012.