Juul Explores Alternative Financing Options Amid Lawsuits and Regulatory Threats

According to reports, Juul Labs is exploring alternative financing options as the company deals with lawsuits and regulatory threats to halt its e-cigarette sales in the United States.

According to Bloomberg News, Juul is reportedly issuing a $400 million first-lien term loan that may be due in August 2023, with the help of bankers from Centerview Partners, to investors.

The report added that these profits will help with refinancing existing term loans, which have approximately $394 million in outstanding loans and are due on the same day.

The company is reportedly considering another option, which is a new $150 million loan that may mature in August 2024. The proceeds from this loan are expected to help repay a portion of the first priority loans and increase liquidity. The financing proposals for both loans will expire on July 21st.

Juul is facing hundreds of millions of dollars in losses as it is being sued for allegedly targeting minors and is undergoing increasing regulatory scrutiny, which could potentially wipe out a significant portion of its business.

On June 23, the FDA prohibited Juul's products from being sold due to a lack of evidence showing their overall safety. The agency also noted that Juul played a disproportionate role in the rise of youth e-cigarette use. Last week, the FDA temporarily lifted the ban, awaiting further scientific review.

According to Bloomberg Intelligence analysts Holly Froum and Kenneth Shea, if the FDA's ban is upheld, Juul may lose 30% of its market share in the US. Bloomberg reports that the company has been considering options including bankruptcy, and Kirkland & Ellis and Alvarez & Marsal have been providing litigation and restructuring advice to Juul.

Juul is exploring other options, including strategic partnerships or larger funding agreements before the end of the year.

A spokesperson for Juul has stated that the company is currently exploring a range of options, including potential financing alternatives, to protect their business and address the impact of the FDA's hold on orders as they continue to operate in the market and go through the FDA approval process. They wish to continue providing their products to adult consumers who have already or wish to quit traditional cigarettes.

A representative from Centerview declined to comment.

According to sources, over 90% of Juul's revenue of $1.3 billion last year came from the U.S. market. They also stated that after deducting $221 million in litigation expenses, the company incurred a loss of $22 million in 2021.

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