Warsaw, Indiana-based OrthoPediatrics Corp. has entered into a private financing agreement with Stamford, Connecticut-based investment firm Braidwell LP.
The financing is expected to fund August 2024. Through the financing arrangement, Braidwell LP will provide up to $100 million of capital. This includes a term loan and convertible notes.
OrthoPediatrics is dedicated solely to the advancement of pediatric orthopedics. Last year the company launched a new division focused on non-surgical intervention for pediatric orthopedics. The new division is called the OrthoPediatrics Specialty Bracing division (OPSB). The funding will help the company expand its OPSB clinics.
OrthoPediatrics COO and CFO Fred Hite commented, “This financing strengthens our balance sheet at a more attractive cost of capital. This capital also provides additional flexibility to execute our strategic growth initiatives where one of our top priorities is to be aggressive with OPSB clinic expansion at the remaining children’s hospitals across the country.”
Hite continued, “We expect our current liquidity position will enable us to achieve cashflow breakeven and we appreciate Braidwell who is a great strategic partner that is invested in our future and growth strategy.”
The financing terms include a $50 million term loan. According to the press release, the term loan consists of “an initial term loan of $25 million and access to a delayed draw term loan facility for an additional $25 million, subject to certain terms and conditions.” Additionally, the interest rate on the term loan is “SOFR + 6.50% with the company having the option to make a payment-in-kind interest payment equal to 1.00% per annum of the rate.” The loan matures in August 2029 and until that time the payments will be interest only.
The financing terms also include $50 million of convertible notes that “will accrue interest at a rate of 4.75% per annum.” The maturity date for the convertible notes is February 2030 and payments will consist of interest only until that time. Per the press release, the notes are “convertible into common stock of the Company at an initial conversion price of $40.98, which represents a 30% premium to the Company’s volume weighted average common stock price for the thirty trading days ended August 2, 2024.”
In conjunction with the financing, the OrthoPediatrics Board of Directors also approved a stock repurchase program of up to $5 million in value of its outstanding common stock. According to the press release, “using the closing price on August 2, 2024, of $29.56, the amount of common stock subject to the repurchase program represents approximately 169,000 shares or 0.7% of the Company’s outstanding common stock.”
In addition to enabling OrthoPediatrics to pursue its growth initiatives, the funding will also go towards repayment of its outstanding debt of $10 million, transaction fees associated with the financing, stock repurchases (potentially), and other needs.
