Juul Labs Inc. is seeking new financing to help it navigate uncertainty as the embattled company navigates lawsuits and a potential US Food and Drug Administration ban.
The embattled e-cigarette maker’s bankers at Centerview Partners are sounding out investors for a possible $400 million first-lien term loan due August 2023, according to people with knowledge of the matter, who asked not to be identified because the discussions are private. Proceeds would help refinance an existing term loan, which has around $394 million outstanding and matures on the same date, the people said.
Another option the company is weighing is a new $150 million second-lien term loan, which may have an August 2024 maturity. Proceeds from that loan would help pay down some of the first-lien term loan and to increase liquidity, according to the people. Financing proposals for either loan are due July 21, the people said.
Juul is facing hundreds of millions of dollars in damages from lawsuits alleging the company targeted minors, and is under increased regulatory scrutiny that could wipe out a substantial portion of its business.
The FDA banned Juul’s products on US shelves on June 23, citing a lack of evidence demonstrating the overall safety of the company’s products. The agency also noted Juul’s “disproportionate role in the rise in youth vaping.” The FDA suspended its ban last week, pending further scientific review.
Juul could lose its 30% market share in the US if the FDA’s ban is upheld, according to Bloomberg Intelligence analysts Holly Froum and Kenneth Shea. The company has been considering options including bankruptcy to address its woes, and Kirkland & Ellis and Alvarez & Marsal have been providing litigation and restructuring advice to Juul, Bloomberg reported.
Juul is exploring other options, including strategic partners or a bigger financing deal by year-end.
“As we continue to operate in the market and go through the FDA’s review process, we are in the early stages of exploring a variety of options including various potential financing alternatives to protect our business and to address the impact of the FDA’s now stayed order so we can continue offering our products to adult consumers who have or are looking to transition away from traditional cigarettes,” a spokesperson for Juul said in a statement when asked for comment.
A representative for Centerview also declined to comment.
More than 90% of Juul’s $1.3 billion in revenue last year came from the US market, the people said. The company posted a loss of $22 million in 2021, after accounting for $221 million in litigation expenses, they said.
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