On March 29, 2005, deCODE genetics, Inc. (with its subsidiaries, "deCODE") entered into agreements with Festing ehf., an Icelandic real estate company, regarding the sale and leaseback of its headquarters facility at Sturlugata 8, Reykjavik, Iceland. The sale price for the property is 3,400,000,000 Icelandic kronas (approximately $55,000,000 as of March 29, 2005). deCODE will lease the property back under a 15 year non-cancellable lease agreement at a rent of 21,420,000 Icelandic kronas (approximately $350,000 as of March 29, 2005) per month, subject to changes based on the Icelandic consumer price index. Under the terms of the lease deCODE will continue to pay property taxes and insurance and will be responsible for the property's maintenance. The monthly rent will be revised as of July 1, 2010 to reflect changes in capital markets as well as deCODE's credit quality. Under the terms of the lease, deCODE has a right of first refusal on any sale of the property and a priority right to extend the term of the lease at its expiration. The lease provides deCODE with the option to redenominate the rent in other currencies than Icelandic kronas at a predetermined rate as of July 1, 2007. The sale and leaseback transactions were consummated on March 31, 2005.
deCODE will use the proceeds from the sale of the facility to prepay approximately $36,000,000 of long-term debt that was secured by mortgages on the property, (its Tier A bonds, Tier B loan and March 2004 loan) and a $4,500,000 short term borrowing, all inclusive of accrued interest and prepayment fees where applicable. deCODE expects to write off capitalized borrowing costs of $1,200,000 as a result of the prepayment. The remainder of the proceeds (approximately $14,500,000) will be used to advance deCODE's proprietary drug development programs. |
