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In a recent development, the California Department of Financial Protection and Innovation has closed Silicon Valley Bank, which could potentially affect several medtech companies associated with the bank. This closure has raised concerns about the exposure of these companies through loan agreements, revolving credit facilities, and other transactions. While the list of affected companies is based on their most recent filings and may not provide the complete picture, it is important to understand the potential ramifications for these medtech firms. In this article, we will delve into the details of the closure and its impact on some of the key players in the industry.
The Closure of Silicon Valley Bank and the FDIC's Role
The FDIC has been appointed as the receiver in the closing of Silicon Valley Bank. To protect insured depositors, the FDIC has created the Deposit Insurance National Bank of Santa Clara (DINB), to which all insured deposits of Silicon Valley Bank have been transferred. This ensures that insured depositors have uninterrupted access to their funds. However, uninsured depositors may also receive dividends as the FDIC sells Silicon Valley Bank's assets.
Silicon Valley Bank, with approximately $209 billion in total assets and $175.4 billion in total deposits as of December 31, 2022, had a significant presence in California and Massachusetts with 17 branches. The bank's main office and all branches are set to reopen on Monday, March 13, and DINB will continue to operate during Silicon Valley Bank's normal business hours.
MedTech Companies Potentially Affected by the Closure
Several medtech companies have been identified as potentially exposed to Silicon Valley Bank's closure. These companies have varying degrees of involvement with the bank through loan agreements, revolving credit facilities, and other financial transactions. Let's take a closer look at some of the key players and their dealings with Silicon Valley Bank.
1. iRhythm Technologies
iRhythm Technologies has a five-year loan agreement expiring in March 2027, including a term loan of up to $75 million and revolving credit of up to $25 million. As of December 31, 2022, iRhythm had $35 million in outstanding debt under the term loan. However, there was no outstanding debt under the revolving credit facility.
2. AtriCure
AtriCure has a five-year loan agreement expiring in November 2026, which includes a term loan of $60 million with an option for an additional $30 million in term loan borrowings. It also has a $30 million revolving line of credit. As of December 31, 2022, AtriCure had $60 million in outstanding debt under the term loan and had unused borrowing capacity of approximately $29 million under the revolving credit line.
3. ViewRay
ViewRay has a five-year loan facility agreement with MidCap and Silicon Valley Bank expiring in November 2027. The agreement includes a term loan of up to $100 million and a revolving credit facility of up to $25 million. As of December 31, 2022, ViewRay had $80 million in outstanding debt, with $75 million from the term loan and $5 million from the revolving credit line.
4. Treace Medical Concepts
Treace Medical Concepts borrowed $50 million under a term loan with MidCap and $4 million under a revolving loan facility with MidCap in April 2022. The term loan proceeds were used to repay a term loan obligation with CRG and an early termination fee to Silicon Valley Bank, totaling $34 million. Following the repayment, Treace has no outstanding debt with Silicon Valley Bank but has an additional $900,000 in cash pledged as collateral for its corporate credit card.
5. Vericel Corporation
Vericel Corporation entered into an agreement with SVB Leerink to sell $200 million in common stock in an ATM offering in August 2021. As of December 31, 2022, Vericel had not sold any shares in relation to this agreement.
6. Organogenesis
Organogenesis has a term loan facility with Silicon Valley Bank and other lenders totaling up to $75 million. Additionally, it has a revolving credit facility of up to $125 million, with an agreement finalized in August 2021. Currently, the company has $71.25 million in outstanding term loans, which are required to be paid in installments over the next few years.
7. Humacyte
Humacyte entered into a $50 million term loan agreement with Silicon Valley Bank in March 2021. As of February 28, 2022, the company had borrowed $30 million of principal from the loan agreement. Humacyte has also issued Silicon Valley Bank warrants to purchase common stock as collateral for the loan. The repayment schedule for the $30 million debt includes payments over the next few years.
8. Lensar
SVB Leerink acted as a sales agent for Lensar's $35 million common stock issuance in an ATM offering on April 8, 2021.
Analyzing the Potential Impact on MedTech Companies
While the closure of Silicon Valley Bank may raise concerns for the medtech companies listed above, it is important to note that the full extent of their exposure is not yet clear. The information available is based on the companies' most recent filings and may not provide a comprehensive overview of their financial relationships with the bank. It is also worth considering that some companies may hold cash or investments with Silicon Valley Bank, which is not reflected in the filings.
The BTIG analysts who compiled this list have reached out to the companies to gain a better understanding of their exposure. This additional detail will help provide a more accurate assessment of the potential impact on these medtech firms. It is crucial for the companies and their stakeholders to closely monitor the situation and work towards mitigating any potential risks.
Conclusion
The closure of Silicon Valley Bank has raised concerns about the potential impact on medtech companies associated with the bank. While the list of affected companies is based on their most recent filings, it may not provide the complete picture of their exposure. It is important for these companies to assess their financial relationships with the bank and work towards mitigating any potential risks. As the situation unfolds, close monitoring and proactive measures will be essential for the affected medtech firms and their stakeholders.
Disclaimer: The information provided in this article is based on the most recent filings and may not capture the complete financial relationships between the medtech companies and Silicon Valley Bank. It is advisable to consult official sources and seek professional advice for a comprehensive understanding of the situation.
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