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OAK STREET HEALTH, INC.

(OSH)
  Report
Delayed Nyse  -  04:00 2022-12-02 pm EST
22.14 USD   +1.75%
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OAK STREET HEALTH, INC. : Entry into a Material Definitive Agreement, Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant, Financial Statements and Exhibits (form 8-K)

10/03/2022 | 05:26pm EST

Item 1.01 Entry into a Material Definitive Agreement

On September 30, 2022 (the "Effective Date"), Oak Street Health, Inc. (the "Company") and certain of its subsidiaries entered into a loan and security agreement (the "Loan Agreement") with Hercules Capital, Inc., as administrative and collateral agent and lender (the "Agent"), and Silicon Valley Bank and the other lenders from time to time parties thereto (collectively with the Agent in its capacity as a lender, the "Lenders"). The Loan Agreement provides the Company with a secured term loan facility of up to $300.0 million (the "Term Loan Facility") to be funded in five committed tranches, with each tranche of term loans (collectively, the "Term Loans") available to be drawn during the specified time period at the Company's option: (i) Tranche A, in an aggregate principal amount of $100.0 million ("Tranche A"), which became available at the time the Loan Agreement was entered into and will remain available until March 31, 2023; (ii) Tranche B, in an aggregate principal amount of up to $50.0 million ("Tranche B"), which is available between the closing date of the Loan Agreement (the "Closing") and December 15, 2023; (iii) Tranche C, in an aggregate principal amount of up to $50.0 million ("Tranche C"), which is available between January 1, 2024 and June 30, 2024; (iv) Tranche D, in an aggregate principal amount of up to $75.0 million ("Tranche D"), which is available from the earlier of the date on which the Tranche C Term Loan has been fully drawn, and July 1, 2024, through December 15, 2024; and (v) Tranche E, in an aggregate principal amount of $25.0 million ("Tranche E") which is available between Closing and June 1, 2025, subject in each case to certain conditions. If the Company does not elect to draw the entire principal amount available under the Tranche B, C or D Loans during the applicable drawdown period, then any such undrawn portion will be added to the aggregate principal amount available under Tranche E.

The Term Loans bear interest at a rate equal to the greater of (i) 7.95% and (ii) the sum of the Cash Prime Rate (which is defined as the lesser of (x) the prime rate as reported in The Wall Street Journal and (y) 7.00%) and 2.45%. In addition, the principal balance of the Term Loans will bear "payment-in-kind" interest at the rate of 1.00% ("PIK Interest"), which PIK Interest will be added to the outstanding principal balance of the Term Loans and increase the outstanding principal balance of the Term Loans on each payment date. In addition, an end-of-term charge equal to 4.95% of the aggregate original principal amount of the Term Loans, due on the earlier of the maturity date of the Term Loans or the repayment of the Term Loans, is payable by the Company. At the Closing, the Company paid to the Lenders a facility charge of $1.8 million, which is equal to 0.50% of the aggregate total amount of Tranche A, Tranche B, Tranche C and Tranche D. In addition, the Company will pay the Lenders a facility charge equal to 0.50% of the principal amount of any subsequent borrowings under the Term Loan Facility at the time of borrowing, (other than any amounts drawn at the time of the Closing).

The Term Loan Facility is scheduled to mature on October 1, 2027, subject to a springing maturity date of September 1, 2025 if, prior to June 1, 2025, the Company's convertible senior notes (the "Senior Notes") issued under the indenture dated as of March 16, 2021, between Oak Street Health, LLC and U.S. Bank National Association have not been (i) converted into equity interests of the Company, (ii) amended such that the scheduled maturity date of the Senior Notes is at least 180 days after the initial maturity date of the Term Loans then in effect, or (iii) fully redeemed and extinguished. Borrowings under the Term Loan Facility may be voluntarily prepaid in minimum increments of $25.0 million, subject to a prepayment fee equal to (i) 2.00% of the amount prepaid, if the prepayment occurs during the first year following the Closing, (ii) 1.00% of the amount prepaid, if the prepayment occurs during the second year following the Closing, and (iii) 0.50% of the amount prepaid, if the prepayment occurs during the third year following the Closing. There is no prepayment fee, penalty or premium applicable to voluntary prepayments made by the Company on or after the fourth year following the Closing.

The Loan Agreement contains customary affirmative and negative covenants. In addition, beginning on the earlier of (i) the reporting deadline of the Company's fourth quarter 2023 financial statements under the Loan Agreement and (ii) the date at which more than $100.0 million in aggregate principal (excluding any paid-in-kind interest) is outstanding under the Term Loan Facility, the Company is required to maintain a specified trailing twelve-month Platform Contribution (as defined in the Loan Agreement), with the applicable Platform Contribution increasing over time and as the Company's borrowings under the Term Loan Facility increase.

The obligations under the Term Loan Facility are secured by a perfected security interest in substantially all of the assets of the Company, subject to certain limitations and exceptions. The Loan Agreement also includes customary events of default, including, among other things, the Company's failure to pay any amounts due under the Loan Agreement or any of the other loan documents, a breach of the covenants, insolvency, a material adverse effect occurring, the occurrence of certain defaults under certain other indebtedness or certain final judgments against the Company. Following the occurrence and continuation of an event of default, the Lenders may accelerate the maturity of the borrowings under the Term Loan Facility, subject to grace periods in certain circumstances and any applicable prepayment charge, as described above, will become immediately due and payable. An event of default will also provide the Agent with the right to exercise remedies against the Company and the collateral securing any outstanding Term Loans.

                                       2

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As required under the Loan Agreement, at the Closing, the Company borrowed $75.0 million under Tranche A of the Term Loan Facility. The Company intends to use the proceeds from the initial borrowing of the Term Loans for related fees and expenses in connection with the Loan Agreement and for working capital and general corporate purposes.

The foregoing description of the Loan Agreement is not complete and is qualified in its entirety by reference to the full text of the Loan Agreement, which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of the Registrant

The information set forth in Item 1.01 of this report is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits

(d) Exhibits

Exhibit            Description
                     Security and Loan Agreement, dated as of September 30, 2022, by and among the
                   Company and certain of its subsidiaries named thereto, as borrowers    , Hercules
                   Capital, Inc. as agent and lender, Silicon Valley Bank and     the several banks
                   and other financial institutions or entities from time to time parties thereto as
10.1               lenders    .*
104                Cover Page Interactive Data File (embedded within the Inline XBRL document)
                   Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The
*                  Company hereby undertakes to furnish supplementally copies of any of the omitted
                   schedules upon request by the SEC.


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