L.O.T.W. #113 - Spectral AI - a deep view into the future of medical diagnostics
Structured credit provided by Avenue Capital
Spectral AI’s $15 million venture loan from Avenue Capital highlights how structured credit is being deployed in the small-cap public market. The deal combines milestone-based tranching, a 12.75% floor rate, and 8.5% warrant coverage, with Tranche 2 conditioned on FDA clearance, a BARDA commitment, and equity capital raised. The structure provides Spectral with non-dilutive runway to support the U.S. commercialization of its DeepView® wound imaging system while aligning repayment risk with regulatory inflection points.
👓At a Glance
Borrower: Spectral AI
Lender: Avenue Capital Group
Deal Size: $15.0 million
Structure: Senior secured term loan with milestone-triggered second tranche and equity-linked enhancements (warrants + conversion rights)
Rate: Variable - greater of Prime + 5.25% or 12.75%
Term: 36 months
Use of Proceeds: Accelerate product commercialization efforts
Source: Press Release
📷Borrower Snapshot
Sector: Health Care
Subsector: Health Care Equipment & Supplies
Ownership: Public
Commercial Stage: Pre-commercial revenue
Business Overview: Spectral AI is a predictive artificial intelligence company focused on improving wound care through advanced imaging and machine learning.
Its DeepView® technology enables real-time, non-invasive assessment of wound healing potential, with initial applications targeting burns and diabetic foot ulcers.
⚙️Structure & Terms
Source: SEC 8-K
Commitment: $15.0 million
Tranche 1: $8.5 million funded at close
Tranche 2: $6.5 million contingent on milestones; available until June 30, 2026
Milestones: Regulatory approval, BARDA commitment, min. net cash proceeds from financing
Interest-only Period: 15 month interest only w/ ability to extend interest only an additional 9 months if Tranche 2 funded
Maturity: March 1, 2028
Rate: Variable - greater of Prime + 5.25% or 12.75%
Commitment Fee: 1% ($150k)
Final Payment Fee: 5% ($750k)
Prepayment Fee: 3%, 2%, 1%
Other:
$1.275 million in warrants (8.5% warrant coverage)
Equity investment right: up to $1.0 million
Optional $2.0 million conversion right at 120% of warrant exercise price
Covenants: No financial performance covenants