Seres borrows from Oaktree with loan linked to drug sales targets

Chicago, April 27 – Seres Therapeutics, Inc. entered into a credit agreement and guaranty on April 27 with Oaktree Fund Administration, LLC as administrative agent, according to an 8-K filing with the Securities and Exchange Commission.

The $250 million term loan consists of four tranches, with only a $110 million tranche A loan funded on the closing date.

The $45 million tranche B and $45 million tranche C will be funded subject to certain conditions. And, the $50 million tranche D will be funded at Oaktree’s sole discretion.

The conditions on the second two tranches are linked to the achievement of certain sales targets for Vowst.

The term loan matures April 27, 2029.

A $53 million portion of the proceeds of the first tranche will be used to repay an existing credit facility with Hercules Capital, Inc.

Interest will be at SOFR plus 787.5 basis points, with a 2.5% floor and a 5% SOFR cap. There is a 37.5 bps step-down to 750 bps if certain net sales targets are met.

The loan is interest-only for the first three years. Starting June 30, 2026, the company will need to make quarterly amortization payments of 7.5% of the outstanding principal amount of the loan until the maturity date. However, again subject to certain net sales targets, the interest-only period may be extended.

There is an exit fee of 150 bps, due at maturity, at acceleration of the term loan or if the loan is prepaid.

Any prepayment will be with a make-whole premium and also at 104 for the first two years. Between years two and three, prepayment would be at 104. The next year, prepayment would be at 102 and then 101 for the year after. Prepayment would be at par starting after the fifth anniversary.

Seres must maintain cash of at least $30 million initially, or $25 million after the company borrows any tranche B loan.

There is a customary 200 bps default rate.

Oaktree also received warrants in the agreement for 647,589 shares at an exercise price of $6.69 per share. Additional warrants will be issued upon funding of the tranche B loan and the tranche C loan for another 264,922 shares at the 30-day volume weighted average price prior to the funding date for each tranche. The warrants are immediately exercisable with an expiration seven years from the date of issuance.

Vowst is expected to be available in June.

Seres has a joint commercialization agreement with Nestle that includes a $125 million milestone payment that has not yet been received, but is expected, to be paid by Nestle.

Vowst is an orally administered microbiota-based therapeutic to prevent recurrence of C. difficile Infection.

Seres is a late-clinical-stage biotechnology company based in Cambridge, Mass.

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