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Item 3 — Quantitative and Qualitative Disclosures About Market Risk
Mannkind Corporation · 10-Q · Q2 FY2026 · Period ended Jun 30, 2026
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Interest Rate Risk
Interest on borrowings under the Blackstone Credit Facility accrues at a rate per annum equal to (i) in the case of a Base Rate Loan, the greatest of (a) the prime rate in effect on such day, (b) the federal funds rate in effect on such day plus 0.5%, (c) Adjusted Term SOFR for a one-month’s tenor in effect on such day plus 1%, and (d) 3.0% plus a margin of 3.75%, or (ii) in the case of a SOFR Loan, one, three or six month Adjusted Term SOFR (at our election), subject to a 2% floor, plus a margin of 4.75%. The interest rate margin increases to 4.00% in the case of a Base Rate Loan and 5.00% in the case of a SOFR Loan at any time the Company’s ratio of indebtedness to adjusted EBITDA (measured on a trailing four quarter basis) is greater than or equal to 5.00:1.00 as of the most recent fiscal quarter for which the Company has delivered financial statements. Accordingly, our interest expense under the Blackstone Credit Facility is subject to changes in the various market interest rates. If a hypothetical 10% change in the SOFR interest rates on June 30, 2026 were to have occurred, this change would not have had a material effect on our annual interest payment obligation on the borrowings under the Blackstone Credit Facility, which as of June 30, 2026, are SOFR Loans with an effective interest rate of 9.12% per annum. See Note 9 – Borrowings for information about the principal amount of outstanding debt.
Foreign Currency Exchange Risk
We incur and will continue to incur significant expenditures for insulin supply obligations under our Insulin Supply Agreement. Such obligations are denominated in Euros. At the end of each reporting period, the recognized gain or loss on purchase commitment is converted to U.S. dollars at the then-applicable foreign exchange rate. As a result, our business is affected by fluctuations in exchange rates between the U.S. dollar and the Euro. For the six months ended June 30, 2026, we realized a $1.8 million currency gain, which was reflected as gain on foreign currency transaction in the accompanying condensed consolidated statements of operations.
Exchange rate fluctuations may adversely affect our expenses, results of operations, financial position and cash flows. If a change in the U.S. dollar to Euro exchange rate equal to 10% of the U.S. dollar to Euro exchange rate on June 30, 2026 were to have occurred, this change would have resulted in a foreign currency impact to our pre-tax income of approximately $6.4 million.