ATAI signs multi-tranche term loan facility up to $175 million

By Mary-Katherine Stinson

Lexington, Ky., Aug. 15 – ATAI Life Sciences NV and ATAI Life Sciences AG closed on a loan and security agreement with Hercules Capital, Inc. on Aug. 9 providing for term loans of up to $175 million in multiple tranches, according to an 8-K filing with the Securities and Exchange Commission.

The term loan facility consists of three tranches, available as follows:

• A term loan advance in the amount of $15 million on closing (the tranche 1A advance);

• Term loan advances in an aggregate principal amount of up to $20 million (the tranche 1B advances) at any time after the closing date but on or prior to March 15, 2023 (the tranche 1B expiration date);

• Term loan advances in an aggregate principal amount of up to $25 million at any time beginning upon the earlier of March 15, 2023 and the date on which all amounts available to be drawn under the tranche 1B advances have been drawn and on or prior to Dec. 15, 2023 (the tranche 1C expiration date);

• Term loan advances in an aggregate principal amount of $15 million (the tranche 2 advances) subject to the company achieving certain performance milestones and, beginning upon the earlier of the date on which all amounts available to be drawn under the tranche 1C advances have been drawn and Dec. 15, 2023, on or prior to June 30, 2024; and

• Term loan advances in an aggregate principal amount of up to $100 million (the tranche 3 advances) subject to approval by the lenders’ respective investment committees in its discretion, on or prior to March 31, 2025.

With the exception of the tranche 1A advance available on closing, each of the tranches may be drawn down in $5 million increments at the company’s election.

The facility matures Aug. 1, 2026 which may be extended until Feb. 1, 2027 if the company achieves certain performance milestones, raises at least $175 million in unrestricted new net cash proceeds from permitted sources after the closing date and prior to June 30, 2024 and satisfies other specified conditions.

The outstanding principal of the facility bears interest at 8.55%.

Accrued interest is payable monthly following the funding of each term loan advance.

The company may make interest-only payments for 30 months following closing. The interest-only period may be extended to 36 months and 42 months, respectively, upon the achievement of certain additional performance milestones.

Financial covenants require the company to maintain certain levels of cash in accounts subject to a control agreement in favor of the agent at all times from closing, which includes a cap on the amount of cash that can be held by, among others, certain of the company’s foreign subsidiaries in Australia and the United Kingdom.

In addition, the financial covenants require that beginning on the later of July 1, 2023 and the date on which the total outstanding borrowing under the facility is equal to or greater than $40 million, the company shall maintain qualified cash in an amount no less than the sum of 33% of the outstanding amount, and the amount of the borrowers’ and subsidiary guarantors’ accounts payable unpaid within 180 days from the invoice date, subject to certain exceptions. The financial covenant shall not apply on any day that the company’s market capitalization is at least $600 million measured on a consecutive 10-business day period immediately prior to such date of measurement and tested on a daily basis.

ATAI may prepay the facility in full or in part. However, there are prepayment penalties of 2% of the prepaid principal if prepaid on or prior to the first anniversary of Aug. 9, 2023, 1% of the principal amount prepaid if the prepayment occurs after the first anniversary and on or prior to the second anniversary of Aug. 9, 2024, and 0.5% of the principal amount prepaid if the prepayment occurs after the second anniversary and prior to maturity.

In addition, the company is required to make a final payment fee of 6.95% of the aggregate original principal amount of the term loans repaid or prepaid under the loan agreement either at maturity or on the date that the company prepays, in full or in part, the principal balance, whichever is earlier.

The company has agreed to use the proceeds for working capital and general business purposes.

Hercules Capital, Inc. is the administrative agent and collateral agent.

Joining Hercules Capital as a lender is Hercules Private Global Venture Growth Fund I LP.

Berlin-based ATAI is a clinical-stage biopharmaceutical company focused on the treatment of mental health disorders.

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