SoundHound signs for secured term loan facility up to $100 million

By Mary-Katherine Stinson

Lexington, Ky., April 17 – SoundHound AI, Inc. on April 14 signed a senior secured term loan agreement with Atlas Credit Partners’ ACP Post Oak Credit II LLC providing for a term loan facility in an aggregate principal amount of up to $100 million, according to an 8-K filing with the Securities and Exchange Commission.

The agreement also allows the company to request an additional total of up to $25 million in commitments at the sole discretion of the lenders under the same terms as the original loan.

The outstanding principal balance of the term loan bears interest at SOFR plus 15 basis points plus an 850 bps margin.

The term loan matures April 14, 2027. There is no scheduled amortization.

The term loan is guaranteed by the company’s subsidiaries other than excluded subsidiaries.

The entirety was funded on the closing date and the company will use the proceeds to repay approximately $30 million under the company’s existing loan facilities, to fund an escrow account equaling the first four interest payments, to pay certain fees and expenses related to the credit agreement and to fund the cash premium, together with related taxes, with the remaining proceeds to be used to fund growth investments and for general corporate purposes.

Concurrently with the company’s entry into the agreement, the company used a portion of the proceeds to prepay in full and terminate its loan and security agreement, dated as of June 14, 2021, by and among Ocean II PLO LLC, Structural Capital Investments III, LP and SoundHound AI’ s subsidiary SoundHound, Inc. and its loan and security agreement, dated as of March 31, 2021, by and among SoundHound, Inc., Silicon Valley Bank and SVB Innovation Credit Fund VIII, LP.

In connection with the Structural Capital facility prepayment, the company paid a total of approximately $11.7 million, which consisted of the remaining principal amount outstanding of approximately $11 million, a prepayment premium of approximately $200,000, a final payment fee of approximately $500,000 and the remainder for transaction expenses. In connection with the SVB facility prepayment, the company paid a total of approximately $18.5 million, which consisted of the remaining principal amount outstanding of $17 million, a prepayment premium of $300,000, a final payment fee of approximately $1.1 million, approximately $100,000 of accrued and unpaid interest and the remainder for transaction expenses.

In connection with the credit agreement, on closing the company also issued a warrant to purchase up to 3,301,536 shares of the company’s class A common stock at a per share exercise price of $2.59. The warrant may be exercised, including on a cashless basis, by the holder at any time prior to the 10-year anniversary of the issue date.

Union Square Advisors LLC and Cantor Fitzgerald & Co acted as financial advisers to SoundHound AI in connection with this credit facility.

Santa Clara, Calif-based SoundHound is an audio and speech recognition company.

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