Lifecore Biomedical refinances with term loan, reduces revolver

By Mary-Katherine Stinson

Lexington, Ky., May 23 – Lifecore Biomedical, Inc., Curation Foods, Inc. and Lifecore Biomedical Operating Company, Inc. as borrowers and certain other subsidiaries as guarantors entered a credit and guaranty agreement on May 22, providing a secured facility of up to $140 million in term loans, according to an 8-K filing with the Securities and Exchange Commission.

Alcon Research, LLC is the administrative agent, collateral agent and lender.

The loans under the agreement have a fixed interest rate equal to 10% annually. Interest is payable-in-kind until the third anniversary of closing and following that date is payable at a rate equal to 3% annually in cash with the remainder payable in kind, unless the borrowers elect to pay a greater proportion in cash.

The agreement matures on May 22, 2029.

The company is required to maintain a minimum of $4 million of consolidated liquidity at the end of each fiscal quarter.

Upon a change of control, the company may elect or Alcon may require a full repayment of outstanding amounts under the term loan agreement plus 15% of all borrowings or $20 million, whichever is greater.

The term loan agreement refinanced in full and terminated the company’s prior agreement from Dec. 31, 2020 with Goldman Sachs Specialty Lending Group, LP as administrative agent, collateral agent and a lender.

Revolver

Also on May 22, the borrowers and certain subsidiaries as guarantors entered into a limited waiver, consent and fifth amendment to the revolving credit agreement from Dec. 31, 2020.

BMO Harris Bank, NA is the administrative agent and lender.

The revolving loan amendment provides for a waiver of all known existing defaults as of the date of the amendment and the reduction of the maximum amount available to up to the lesser of $40 million (less a reserve for certain secured credit products, if any) and the borrowing base, modified to include a further reduction by an additional $4 million.

The agreement also modifies the springing minimum fixed charge coverage ratio of 1x, not tested until on or about Feb. 28, 2024, and on or after upon the earlier of the occurrence of a default event or availability being less than the greater of 10% of the maximum borrowing amount and $3.5 million.

Finally, the agreement also provides for cash dominion at all times the revolving agreement remains outstanding and certain other revisions to align with the terms of the term loan agreement and other matters related to the company’s commercial relationships with Alcon.

The company also agreed to pay to BMO an amendment fee of $1.2 million, $800,000 of which is paid concurrently with the company’s entry into the revolving amendment. The remaining $400,000 is payable upon repayment and termination of the revolving agreement and the occurrence of a change of control, whichever occurs first.

BMO and Alcon also entered into an intercreditor agreement regarding their relative rights as lenders.

Lifecore develops biomaterials and medical devices for use in various surgical markets through its dental division and hyaluronan division. The company is based in Chaska, Minn.

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