LCI Lannett Company Inc

2026 Notes Interest Payment

On April 17, 2023, the Company elected to defer an interest payment due on such date in respect of its 7.750% senior secured notes due 2026 (the “2026 Notes”) and enter a 30-day grace period. The Company’s election to not make such interest payment was not driven by liquidity constraints as the Company had approximately $47 million in unrestricted cash as of March 31, 2023.

If the Company does not make this interest payment within the 30-day grace period, it will constitute an event of default under the indenture, dated April 22, 2021 (the “Base Indenture”), as supplemented by the first supplemental indenture, dated April 22, 2021 (the “First Supplemental Indenture” and, together with the Base Indenture, the “2026 Notes Indenture”), among, the Company, the subsidiary guarantors party thereto and Wilmington Trust, National Association, as trustee and note collateral agent. If an event of default occurs, the trustee or the holders of not less than 30% in aggregate principal amount of the outstanding 2026 Notes may declare 100% of the principal of, and accrued and unpaid interest on, the 2026 Notes to be due and payable immediately. If the Company fails to pay interest on the 2026 Notes by the end of the grace period or if the 2026 Notes are accelerated, it will also constitute an event of default under the indenture governing the Company’s 4.50% unsecured convertible notes (the “Convertible Notes”), and the trustee or the holders of at least 25% in aggregate principal amount of the outstanding Convertible Notes may declare 100% of the principal of, and accrued and unpaid interest on, all the Convertible Notes to be due and payable immediately. If the Company fails to pay the interest on the 2026 Notes by the end of the grace period or if the 2026 Notes are accelerated, it will also constitute an event of default under the Company’s 2L Credit Agreement (as defined below), and the administrative agent, itself or at the request of requisite lenders, may declare the second lien term loans and interest thereon due and payable and exercise all rights and remedies under the 2L Credit Agreement and related agreements. If the Company fails to pay the interest on the 2026 Notes by the end of the grace period or if the trustee or holders of the 2026 Notes are entitled to accelerate the 2026 Notes, it will also constitute an event of default under the Company’s asset-backed revolving credit agreement, and the administrative agent, itself or at the request of requisite lenders, may declare the revolving loans and interest thereon due and payable, terminate commitments and exercise all rights and remedies under the asset-based revolving credit agreement and related agreements.

2L Credit Facility Interest Payment

The Company has also determined that it will not make the interest payment due on April 24, 2023 in respect of its second lien credit and guaranty agreement (the “2L Credit Agreement”) among the Company, the other credit parties party thereto, the lenders party thereto and Alter Domus (US) LLC, as administrative agent and collateral agent, pursuant to which lenders party thereto made available to the Company a second lien term loan credit facility (the “2L Credit Facility”). The Company’s election to not make such interest payment is not driven by liquidity constraints as the Company had approximately $47 million in unrestricted cash as of March 31, 2023.

If the Company does not make this interest payment within the five-business day grace period, it will constitute an event of default under the 2L Credit Agreement. If an event of default occurs, the administrative agent, itself or at the request of requisite lenders, may declare the second lien term loans and interest thereon due and payable and exercise all rights and remedies under the 2L Credit Agreement and related agreements. If the Company fails to pay the interest on the 2L Credit Agreement by the end of the grace period, it will also constitute an event of default under the base indenture governing the 2026 Notes, and the trustee or the holders of not less than 30% in aggregate principal amount of the outstanding 2026 Notes may declare 100% of the principal of, and accrued and unpaid interest on, the 2026 Notes to be due and payable immediately. If the Company fails to pay the interest on the 2L Credit Agreement by the end of the grace period, it will also constitute an event of default under the indenture governing the Convertible Notes. If an event of default occurs, the trustee or the holders of at least 25% in aggregate principal amount of the outstanding Convertible Notes may declare 100% of the principal of, and accrued and unpaid interest on, all the Convertible Notes to be due and payable immediately. If the Company fails to pay the interest on the 2L Credit Agreement by the end of the grace period, it will also constitute an event of default under the Company’s asset-backed revolving credit agreement and the administrative agent, itself or at the request of requisite lenders, may declare the revolving loans and interest thereon due and payable, terminate commitments and exercise all rights and remedies under the asset-based revolving credit agreement and related agreements.

Impact of Delisting on Convertible Notes

Upon delisting of the Common Stock from the NYSE, a fundamental change will have occurred under the Convertible Notes. As such, upon delisting, the holders of the Convertible Notes will have the option to require the Company to repurchase for cash all of such holder’s notes at 100% of the principal amount, plus accrued and unpaid interest, in accordance with the procedures set forth in the indenture governing the Convertible Notes.

Forward-Looking Statements

This Current Report on Form 8-K contains certain “forward-looking statements.” Forward-looking statements are not promises or guarantees and investors are cautioned that all forward-looking statements involve risks and uncertainties, including but not limited to the impact of competitive products and pricing, product demand and market acceptance, new product development, acquisition-related challenges, the regulatory environment, interest rate fluctuations, reliance on key strategic alliances, availability of raw materials, fluctuations in operating results, the impact of the delisting from the NYSE, including under our debt documents, the impact of failure to pay interest when due on our debt, the ability to implement a recapitalization, restructuring or similar transaction and the terms of such a transaction, the impact if any recapitalization, restructuring or similar transaction is implemented under applicable bankruptcy laws, including Chapter 11 of the U.S. Bankruptcy Code, and other risks detailed from time to time in our filings with the SEC. These statements are based on management’s current expectations and are naturally subject to uncertainty and changes in circumstances. We caution you not to place undue reliance upon any such forward-looking statements which speak only as of the date made. The Company is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events or otherwise and other events or factors, many of which are beyond our control, including those resulting from such events, or the prospect of such events, such as public health issues including health epidemics or pandemics, such as the outbreak of the novel coronavirus, whether occurring in the United States or elsewhere, which could disrupt our operations, disrupt the operations of our suppliers and business development and other strategic partners, disrupt the global financial markets or result in political or economic instability. The information in this Form 8-K should be read in conjunction with information in the Company’s filings with the SEC, including its most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, including the consolidated financial statements and the Management’s Discussion and Analysis of Financial Condition and Results of Operations included therein.