|6 Months Ended
Jun. 30, 2019
|Debt Disclosure [Abstract]
On April 27, 2018, the Company’s subsidiaries, Iterum Therapeutics International Limited, Iterum Therapeutics US Holding Limited and Iterum Therapeutics US Limited (Borrowers) entered into a loan and security agreement with SVB pursuant to which SVB agreed to lend the Borrowers up to $30.0 million in two term loans. $15 million of the secured credit facility was funded on closing and the other $15 million is available at the Company’s option upon the satisfaction of either of the following conditions which are referred to as the Second Draw Conditions: (i) the achievement of both non-inferiority and superiority primary endpoints from the Company’s Phase 3 uUTI clinical trial and reporting satisfactory safety data; or (ii) the achievement of non-inferiority primary endpoints from both of the Company’s Phase 3 uUTI and cUTI clinical trials as well as reporting satisfactory safety data, in each case as determined by SVB at its sole discretion. The Company’s option to draw the second term loan will terminate upon the earliest to occur of October 31, 2019, the thirtieth day following the occurrence of either of the Second Draw Conditions, or the occurrence of an event of default. A non-utilization fee of 1.50% of the aggregate undrawn principal amount shall apply if the Company satisfies the Second Draw Conditions but chooses not to draw down the second term loan. The principal borrowed under the secured credit facility bears interest at a floating per annum rate equal to the greater of (i) 8.31%; or (ii) 3.89% above the Wall Street Journal prime rate, which interest is payable monthly in arrears.
The initial draw requires monthly amortization payments commencing on November 1, 2019; which will be extended to April 1, 2020 if the second draw is made. All outstanding principal, plus a 4.2% final interest payment fee, will be due and payable on the earliest to occur of March 1, 2022 (Maturity Date), the acceleration of either term loan or the prepayment of either term loan. The final payment fee of $0.6 million, which represents 4.2% of the funded loan, is accreted using the effective interest method over the life of the loan as interest expense.
The secured credit facility draws are subject to prepayment fees of 3.00% in the first year, 2.00% in the second year and 1.00% thereafter in the event of prepayment at any time prior to the Maturity Date.
In connection with the initial $15.0 million draw, the Company issued to SVB and Life Sciences Fund II LLC (LSF) warrants to purchase an aggregate of 19,890 Series B-2 preferred shares (which converted to ordinary shares upon the Company’s IPO) at an exercise price of $18.85 per share. If the Company draws down the second term loan, each of SVB and LSF will be entitled, pursuant to additional share warrants issued to each of them at closing, to purchase such number of additional ordinary shares in an aggregate amount equal to 2.5% of the funded amount, divided by the applicable exercise price. Obligations under the secured credit facility are secured by substantially all of the Company’s existing and future assets and the existing and future assets of the Company’s subsidiaries, including intellectual property.
The loan proceeds were allocated based on the relative fair values of the debt instrument and the warrant instrument. The fair value of the warrants and the closing costs were recorded as debt discounts and are being amortized using the effective interest rate method over the term of the loan. The effective annual interest rate of the outstanding debt is approximately 11%. For the six months ended June 30, 2019, the Company recognized $710 of interest expense related to the loan agreement, including $170 related to the accretion of the debt discounts and deferred financing costs.
Scheduled principal payments on outstanding debt, as of June 30, 2019, are as follows: