Oak Street Health gets up to $300 million term loan in five tranches

By Wendy Van Sickle

Columbus, Ohio, Oct. 3 – Oak Street Health, Inc. and some subsidiaries entered into a loan and security agreement on Sept. 30 with Hercules Capital, Inc. as administrative and collateral agent to provide for a secured term loan facility of up to $300 million to be funded in five committed tranches, according to an 8-K filing with the Securities and Exchange Commission.

A $100 million tranche A became available at closing and will remain available until March 31, 2023; a $50 million tranche B is available from closing until Dec. 15, 2023; a $50 million tranche C is available between Jan. 1, 2024 and June 30, 2024; a $75 million tranche D is available from the earlier of the date on which the tranche C term loan has been fully drawn, and July 1, 2024, through Dec. 15, 2024; and a $25 million tranche E is available between closing and June 1, 2025.

If the company does not elect to draw the entire principal amount available under the tranche B, C or D loans during the applicable drawdown period, then any such undrawn portion will be added to the principal amount available under tranche E.

The loans bear interest at a rate equal to the greater of 7.95% and the same of the cash prime rate plus 2.45%. In additional the loans will bear payment-in-kind interest at the rate of 1%, which will be added to the outstanding principal balance of the term loans and increase the outstanding principal balance of the term loans on each payment date.

The term loan is scheduled to mature on Oct. 1, 2027, subject to a springing maturity date of Sept. 1, 2025 if, prior to June 1, 2025, the company’s convertible senior notes have not been converted into equity interests of the company, amended such that the scheduled maturity date is at least 180 days after the initial maturity date of the loans then in effect, or fully redeemed and extinguished.

Term loan borrowings may be voluntarily prepaid in minimum increments of $25 million, subject to a fee equal to 2% of the amount prepaid, if the prepayment occurs during the first year following the closing; 1% of the amount prepaid, if the prepayment occurs during the second year following the closing; and 0.5% of the amount prepaid, if the prepayment occurs during the third year following the closing. There is no prepayment fee on or after the fourth year following the closing.

Term loans may be used for working capital and general corporate purposes.

Based in Chicago, Oak Street Health is a network of primary care centers for older adults on Medicare.

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