Very high interest rate - 12.5% or so plus 200K in advance and $1.1M at maturity of loan. Not very favorable terms, in my opinion. The company is betting the farm on SFP's success. I hope and pray they are right. We will know soon.
The loan will mature and become due on December 1, 2016, subject to adjustment as provided below, and will bear interest at the greater of (i) 12.50% plus the prime rate as reported in The Wall Street Journal minus 3.25%, or (ii) 12.50%. The Borrower will be required to make only monthly interest payments through May 31, 2014 (or August 31, 2014 if Borrower meets primary end points for both Phase 3 trials for its SFP
drug prior to December 15, 2013). If the interest only period is extended, the maturity date for the loan will be extended to March 1, 2017. Monthly principal and interest payments will be due on the loan following the interest only period through the maturity date. The loan may be prepaid at any time after June 14, 2014 without penalty. The Company paid a fee of $0.2 million at closing and is required to pay a fee of $1.1
million upon any prepayment or at maturity. The loan will also mature and become due upon a change in control of the Company.
If I was loaning anyone 20 million I would want them to have some serious skin in the game. The key here is that they got the loan. The lender must be pretty confident of SFP success. If it is successful paying this loan back will be a short walk in the park!!
Just a few more weeks and we will have our answer on SFP. I would not be surprised if we had the results sooner than expected. The good thing here is no negative news or safety concerns to date -- this is huge.