On April 26, 2021 MannKind Corporation (Nasdaq: MNKD) reported that on April 22, 2021 it and MidCap Financial Trust, as agent, entered into an amendment of the credit and security agreement dated August 6, 2019 (the "MidCap Credit Facility") (Press release, Mannkind, APR 26, 2021, View Source [SID1234578480]). In addition, MannKind and Mann Group, LLC entered into an amendment of the terms of the Mann Group convertible note and repaid in full outstanding amounts under the Mann Group non-convertible note on April 22, 2021. In connection with these transactions, MannKind reduced its outstanding amount of indebtedness, yet retained flexibility to borrow additional amounts under tranche 3 of the MidCap Credit Facility, which is available to borrow until June 30, 2022, subject to the satisfaction of certain milestone conditions associated with Tyvaso DPI.
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The MidCap Credit Facility was amended to modify several terms, including: (i) increasing the funds available in tranche 3, if drawn by the Company, from $25.0 million to $60.0 million; (ii) revising the conditions to drawing tranche 3, including milestone conditions associated with Tyvaso DPI; (iii) providing for an exit fee of $1.0 million in connection with the prepayment described below in lieu of the existing prepayment penalty and exit fees; (iv) removing the requirement to issue a warrant to purchase shares of MannKind’s common stock upon the drawdown of tranche 3; (v) decreasing the interest rate on the remaining outstanding debt; (vi) extending the interest-only period and maturity of term loans under the MidCap Credit Facility; (vii) reducing the minimum cash covenant from $30.0 million to $10.0 million, effective immediately, and eliminating such covenant in the event that Tyvaso DPI is approved by the FDA; (viii) eliminating the requirement to test compliance with the minimum Afrezza net revenue covenant so long as the Company has $90.0 million or more of unrestricted cash; (ix) permitting the Company to make certain acquisitions subject to certain conditions; and (x) permitting the Company to make investments of up to an additional $9.0 million so long as the Company has $90.0 million or more of unrestricted cash following such investment. In connection with the amendment of the MidCap Credit Facility, MannKind prepaid $10.0 million in cash to reduce the principal balance under the MidCap Credit Facility from $50.0 million to $40.0 million.
The Mann Group convertible note was amended to lower the interest rate to 2.5% (from 7.0%), effective April 22, 2021, and to extend the maturity to December 2025 (from November 2024). In addition, MannKind repaid the entire principal amount of $35.1 million outstanding, together with accrued and unpaid interest thereon, under the Mann Group non-convertible note and paid all accrued and unpaid interest outstanding under the Mann Group convertible note.
MannKind also announced that it is evaluating the considerations underlying a potential sale-leaseback of its manufacturing facility in Connecticut, which is being negotiated under a previously announced letter of intent. The Company will update investors regarding its plans for the facility at a future date.
MannKind’s Chief Financial Officer, Steven B. Binder commented, "Starting with the convertible debt offering in March and ending with these debt reductions and restructurings, we have positioned the Company with ample cash and a manageable debt load to fund our near-term priorities, enabling us to focus on the development of our product pipeline, investing behind growing Afrezza and supporting our collaborations."
Further details about both transactions will be provided in a Current Report on Form 8-K filed with the Security and Exchange Commission.
TYVASO DPI is a trademark of United Therapeutics Corporation.