Why so high an interest rate?
That's just stupid.
Creation of a Direct Financial Obligation or an Obligation under an
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
As previously filed on Form 8-K, on March 31, 2006, Alnylam Pharmaceuticals, Inc. ("Alnylam") entered into a Master Security Agreement ("Security Agreement") with Oxford Finance Corporation ("Oxford"), pursuant to which Alnylam may borrow money from Oxford from time to time, and Alnylam granted to Oxford a security interest in all property financed by Oxford, as set forth in the Security Agreement. Alnylam is using the Security Agreement to partially fund its planned expansion into additional office and laboratory space in its Cambridge, MA facility, as well as the purchase of additional computer and laboratory equipment to accommodate the expansion.
On June 20, 2006, Alnylam borrowed an aggregate of approximately $2.3 million from Oxford pursuant to the Security Agreement. Of such amount, approximately $2.1 million bears interest at a fixed rate of 10.37% and is required to be repaid in 48 monthly installments of principal and interest beginning on June 20, 2006. The remainder of such amount, approximately $0.2 million, bears interest at a fixed rate of 10.35% and is required to be repaid in 36 monthly installments of principal and interest beginning on June 20, 2006.
10% is a fairly decent rate for what essentially is a balloon 4-year loan secured by the crappy collateral (lab equipment). Alternatives are paying cash outright (and turning precious cash into a rapidly depreciating capital outlay is not the preferred path for the company and its shareholders) or vendor financing (which makes bid solicitation more difficult and creates multiple small loans; also, rate won't necessarily be better than 10%).
try this on for size: The company's cost of capital is much more expensive.
If you can't grasp this, go take a finance course because it isn't the responsibility of this company or any other for that matter to educate you.
Companies are not required by law to disclose all the information about everything to its share holders. Many of the transactions encountered in day to day operation are confidential in nature and are never disclosed to the share holders. Companies are requred to disclose the information to share holders only if it materially impacts the operation of the business.
Even the details of a major deal with Novartis are not fully disclosed to the share holders. For example no one knows what percentage of the revenue ALNY will get if Influenza drug is successfully developed and marketed by the ALNY/NVS partnership. A lot more is at stake in this deal than the money involved in 10% borrowing of a small amount.
That may be so. I want the details.
It just looks bad. I'm afraid it will hurt our stock price.
Even long-term investors, such as myself, care about the price my shares are trading at.
Why would they want this money when they have enough cash? tells me they have no plans to sell more shares, possible reason: insider selling in the (near) future. Or maybe they need a lot more cash in the next years.