THERAVANCE BIOPHARMA,INC. (NASDAQ:TBPH) Files An 8-K Entry into a Material Definitive AgreementItem 1.01 Entry into a Material Definitive Agreement.
On November30, 2018, Theravance Biopharma R&D,Inc., a Cayman Islands exempted company (“Theravance R&D”), a wholly-owned subsidiary of Theravance Biopharma,Inc. (the “Company”), and Triple Royalty Sub LLC, a Delaware limited liability company (the “Issuer”) and wholly-owned subsidiary of Theravance Biopharma R&D, entered into certain note purchase agreements (each, a “Note Purchase Agreement” and collectively, the “Note Purchase Agreements”), with the note purchaser or note purchasers referenced therein (each, a “Note Purchaser” and collectively, the “Note Purchasers”), relating to the private placement by the Issuer to the Note Purchasers of $250,000,000 aggregate principal amount of the Issuer’s non-recourse Triple PhaRMASM9.0% Fixed Rate Term Notes due on or before 2033 (the “Notes”) issued under the Indenture, dated as November30, 2018 (the “Indenture”), by and between the Issuer and U.S. Bank National Association, a national banking association, as initial trustee (in such capacity, the “Trustee”). 95% of the Notes were sold to the Note Purchasers to the Note Purchase Agreements. The remaining 5% of the Notes (the “Retained Notes”) were retained by Theravance Biopharma R&D to the Sale and Contribution Agreement (as defined below) in order to comply with Regulation RR — Credit Risk Retention (17 C.F.R. Part246).
The Notes are secured by all of the Issuer’s right, title and interest as a holder of certain membership interests (the “Issuer ClassC Units”) in Theravance Respiratory Company, LLC, a Delaware limited liability company (“TRC LLC”). The primary source of funds to make payments on the Notes will be the 63.75% economic interest of the Issuer (evidenced by the Issuer ClassC Units) in any future payments made by Glaxo Group Limited (“GSK”) under the Collaboration Agreement, dated as of November14, 2002, by and between Innoviva,Inc. and GSK, as amended from time to time (net of the amount of cash, if any, expected to be used in TRC LLC to the TRC LLC Agreement over the next four fiscal quarters) relating to the Trelegy Ellipta program.
Simultaneously with the Note Purchase Agreements, the Company entered into a series of related agreements to support and effectuate the issuance and sale of the Notes.
to the Sale and Contribution Agreement, dated as of November30, 2018, (the “Sale and Contribution Agreement”), among Theravance Biopharma R&D, as the transferor, the Issuer, as the transferee, and solely with respect to certain provisions, the Company, (i)Theravance Biopharma R&D sold and contributed to the Issuer all of its right, title and interest as a holder of the Issuer ClassC Units; provided, however, that the distribution of net cash payments to the Issuer from TRC LLC will commence with the payment related to the payment of royalties by GSK to TRC LLC in the first fiscal quarter of 2019 and (ii) the Retained Notes were retained by Theravance Biopharma R&D.
to the Pledge and Security Agreement, dated as of November30, 2018 (the “Pledge and Security Agreement”), Theravance Biopharma R&D pledged its equity ownership interests in the Issuer to the Trustee.
to the Servicing Agreement, dated as of November30, 2018 (the “Servicing Agreement”), between the Issuer and Theravance Biopharma R&D, in its capacity as the servicer (the “Servicer”), the Servicer has agreed to monitor, manage and administer the Issuer’s rights and obligations under the TRC LLC Agreement.
to the Account Control Agreement, dated as of November30, 2018 (the “Account Control Agreement”) among the Issuer, as grantor, Theravance Biopharma R&D, the Trustee, as the secured party, and the U.S. Bank National Association, as financial institution, the security interest of the Trustee in the Issuer’s rights in the Collection Account was perfected.
to the terms of the Indenture, the Notes are not convertible into Company equity and have no security interest in nor rights under any agreement with GSK. The Notes may be redeemed at any time prior to maturity, in whole or in part, at specified redemption premiums. The Notes bear an annual interest rate of 9%, with interest and principal paid quarterly beginning April15, 2019. Prior to October15, 2020, in the event that the distributions received by the Issuer from TRC LLC in a quarter is less than the interest accrued for the quarter, the principal amount of the Notes will increase by the interest shortfall amount for that period. Since the principal and interest payments on the Notes are ultimately based on royalties from product sales, which will vary from quarter to quarter,
