Financing Arrangements |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Financing Arrangements |
Financing Arrangements
The following table sets forth the summary of the Company’s outstanding indebtedness (in thousands):
(3) The principal amount outstanding of the Second Lien Notes as set forth in the foregoing table was $178.0 million as of December 31, 2019 and includes approximately $19.6 million of PIK interest converted to principal during the year ended December 31, 2019. The value allocated to the attached penny warrants and market warrants for financial reporting purposes was $14.9 million and $9.3 million, respectively. These qualify for classification in stockholders’ equity and are included in the Consolidated Balance Sheets within “Additional paid-in capital”.
(4) As of December 31, 2019, Other debts primarily consisted of (i) $3.4 million remaining financed amount for transponder purchases (payable in April 2020); and (ii) $19.0 million of finance lease liability relating to an assessed right-of-use over a satellite bandwidth capacity (refer to Note 4. Leases for further details).
Senior Secured Credit Agreement (2017 Credit Agreement)
On January 6, 2017, the Company entered into a senior secured credit agreement (“2017 Credit Agreement”) that provides for aggregate principal borrowings of up to $585 million, consisting of a $500 million term-loan facility (the “2017 Term Loans”) maturing January 6, 2023 and a $85 million revolving credit facility (the “2017 Revolving Loans”) maturing January 6, 2022. The Company used the proceeds of borrowings under the 2017 Credit Agreement to repay the then outstanding balance under a former EMC credit facility assumed in the EMC Acquisition and terminated the former credit facility assumed from EMC. In connection with this January 2017 refinancing, the Company recorded a loss on extinguishment of debt in the amount of $14.4 million during the first quarter of 2017.
The 2017 Term Loans initially bore interest on the outstanding principal amount thereof at a rate per annum equal to (i) the Eurocurrency Rate (as defined in the 2017 Credit Agreement) plus 6.00% or (ii) the Base Rate (as defined in the 2017 Credit Agreement) plus 5.00% or (iii) the Eurocurrency Rate (as defined in the 2017 Credit Agreement) for each Interest Period (as defined in the 2017 Credit Agreement) plus 6.00%. The 2017 Credit Agreement initially required quarterly principal payments equal to 0.25% of the original aggregate principal amount of the 2017 Term Loans, with such payments reduced for prepayments in accordance with the terms of the 2017 Credit Agreement. The 2017 Revolving Loans initially bore interest at a rate per annum equal to (i) the Base Rate plus 5.00% or (ii) the Eurocurrency Rate or EURIBOR (as defined in the 2017 Credit Agreement) plus 6.00% until the delivery of financial statements for the first full fiscal quarter ending after the date of the 2017 Credit Agreement (“Closing Date”). After the delivery of those financial statements, 2017 Revolving Loans bear interest at a rate based on the Base Rate, Eurocurrency Rate or EURIBOR (each as defined in the 2017 Credit Agreement) plus an interest-rate spread thereon that varies based on the Consolidated First Lien Net Leverage Ratio (as defined in the 2017 Credit Agreement). The spread thereon initially ranged from 4.50% to 5.00% for the Base Rate and 5.50% to 6.00% for the Eurocurrency Rate and EURIBOR.
The 2017 Credit Agreement also provides for the issuance of letters of credit in the amount equal to the lesser of $15.0 million and the aggregate amount of the then-remaining revolving loan commitment. As of December 31, 2019, the Company had outstanding letters of credit of $4.3 million under the 2017 Credit Agreement.
Certain of the Company’s subsidiaries are guarantors of its obligations under the 2017 Credit Agreement. In addition, the 2017 Credit Agreement is secured by substantially all of the Company’s tangible and intangible assets, including a pledge of all of the outstanding capital stock of substantially all of the Company’s domestic subsidiaries and 65% of the shares or equity interests of foreign subsidiaries, subject to certain exceptions.
Covenant Compliance Under 2017 Credit Agreement
The 2017 Credit Agreement contains various customary restrictive covenants that limit the Company’s ability to, among other things: create or incur liens on assets; make any investments, loans or advances; incur additional indebtedness, engage in mergers, dissolutions, liquidations or consolidations; engage in transactions with affiliates; make dispositions; and declare or make dividend payments. The 2017 Credit Agreement requires the Company to maintain compliance with a maximum consolidated first lien net leverage ratio, as set forth in the 2017 Credit Agreement. In addition, the 2017 Credit Agreement contains representations and warranties as to whether a material adverse effect on the Company has occurred since January 6, 2017, the closing date of the 2017 Credit Agreement. One of the conditions to drawing on the revolving credit facility is confirmation that the representations and warranties in the 2017 Credit Agreement are true on the date of borrowing, and if the Company is unable to make that confirmation, including that no material adverse effect has occurred, the Company will be unable to draw down further on the revolver.
As of December 31, 2019, we were in compliance with all financial and non-financial covenants under the 2017 Credit Agreement, including the financial reporting and leverage ratio covenants. On April 15, 2020, the Company entered into the Tenth Amendment to the Credit Agreement and obtained a waiver related to obtaining a “going concern” or like qualification or exception opinion for the Company’s the year-end December 31, 2019 financial statements. Given the uncertainty of the COVID-19 impact on the Company’s results of operations and liquidity subsequent to December 31, 2019, we do not expect to remain in compliance with all financial covenants in the second half of 2020. We cannot be assured that we will be able to obtain additional covenant waivers or amendments in the future which may have a material adverse effect on the Company’s results of operations or liquidity.
Amendments and Waivers under the 2017 Credit Agreement
On July 19, 2019, the Company entered into an amendment of its senior secured credit agreement and security agreement, which, among other things, increased the borrowing capacity of the existing senior secured term loan due in 2023 (the “Term Loan”) by $40.0 million, reduced scheduled principal repayments over the next six quarters by an aggregate amount of approximately $25.3 million and provided additional stock pledges (including the remaining 35% of the equity interests of first-tier foreign subsidiaries that was previously not pledged) as collateral. As of December 31, 2019, approximately 75% of our total consolidated assets are subject to lien under this 2017 Credit Agreement Amendment.
In relation to the 2017 Credit Agreement Amendment, we incurred total issuance costs of $3.5 million, of which $1.6 million was assessed to be eligible for capitalization and will be amortized over the remaining term of the 2017 Credit Agreement. The remaining $1.9 million was immediately recognized as expense during the quarter ended September 30, 2019. Net of fees and expenses, the 2017 Credit Agreement Amendment is expected to result in approximately $60 million of incremental liquidity until the end of 2020.
The Company further amended the 2017 Credit Agreement on July 19, 2019 and March 8, 2018 in connection with the Searchlight investment.
2.75% Convertible Senior Notes due 2035
In February 2015, the Company issued an aggregate principal amount of $82.5 million of convertible senior notes due 2035 (the “Convertible Notes”) in a private placement. The Convertible Notes were issued at par, pay interest semi-annually in arrears at an annual rate of 2.75% and mature on February 15, 2035, unless earlier repurchased, redeemed or converted pursuant to the terms of the Convertible Notes. In certain circumstances and subject to certain conditions, the Convertible Notes are convertible at an initial conversion rate of 2.1563 shares of common stock per $1,000 principal amount of notes (which represents an initial conversion price of approximately $463.75 per share), subject to adjustment. Holders of the Convertible Notes may convert their Convertible Notes at their option at any time prior to the close of business on the business day immediately preceding November 15, 2034, only if one or more of the following conditions has been satisfied: (1) during any calendar quarter beginning after March 31, 2015 if the closing price of the Company’s common stock equals or exceeds 130% of the respective conversion price per share during a defined period at the end of the previous quarter, (2) during the five consecutive business day period immediately following any five consecutive trading day period in which the trading price per $1,000 principal amount of Convertible Notes for each trading day was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; (3) if specified corporate transactions occur, or (4) if the Company calls any or all of the Convertible Notes for redemption, at any time prior to the close of business on the second business day immediately preceding the redemption date. On or after November 15, 2034, until the close of business on the second scheduled trading day immediately preceding the maturity date, a holder may convert all or a portion of its Convertible Notes at any time, regardless of the foregoing circumstances.
On February 20, 2022, February 20, 2025 and February 20, 2030 or if the Company undergoes a “fundamental change” (as defined in the indenture governing the Convertible Notes (the “Indenture”)), subject to certain conditions, a holder will have the option to require the Company to repurchase all or a portion of its Convertible Notes for cash at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus any accrued and unpaid interest, if any, to, but excluding, the relevant repurchase date. If the Company’s common stock ceases to be listed or quoted on Nasdaq, this would constitute a “fundamental change,” as defined in the Indenture, and the holders of the Convertible Notes would have the right to require the Company to repurchase all or a portion of its convertible notes at a repurchase price equal to 100% of the principal amount of its convertible notes to be repurchased. In addition, upon the occurrence of a “make-whole fundamental change” (as defined in the Indenture) or if the Company delivers a redemption notice prior to February 20, 2022, the Company will, in certain circumstances, increase the conversion rate for a holder that converts its Convertible Notes in connection with such make-whole fundamental change or redemption notice, as the case may be.
The Company may not redeem the Convertible Notes prior to February 20, 2019. The Company may, at its option, redeem all or part of the Convertible Notes at any time (i) on or after February 20, 2019 if the last reported sale price per share of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides written notice of redemption and (ii) on or after February 20, 2022 regardless of the sale price condition described in clause (i), in each case, at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. Upon conversion of any Convertible Note, the Company shall pay or deliver to the converting noteholder cash, shares of common stock or a combination of cash and shares of its common stock, at the Company’s election.
The Company separated the Convertible Notes into liability and equity components. The carrying amount of the liability component of $69.5 million was calculated by measuring the fair value of similar liabilities that do not have an associated convertible feature. The carrying amount of the equity component was calculated to be $13.0 million and represents the conversion option which was determined by deducting the fair value of the liability component from the principal amount of the notes. This difference represents a debt discount that is amortized to interest expense over the term of the Convertible Notes. The equity component is not remeasured as long as it continues to meet the conditions for equity classification.
In accounting for the direct transaction costs (the “issuance costs”) related to the Convertible Notes, the Company allocated the total amount of issuance costs incurred to the liability and equity components based on their relative values. The Company recorded issuance costs of $1.8 million and $0.3 million to the liability and equity components, respectively. Issuance costs, including fees paid to the initial purchasers who acted as intermediaries in the placement of the Convertible Notes, attributable to the liability component are presented in the Consolidated Balance Sheets as a direct deduction from the carrying amount of the debt instrument and are amortized to interest expense over the term of the Convertible Notes in the Consolidated Statements of Operations. The issuance costs attributable to the equity component are netted with the equity component and included within Additional paid-in capital in the Consolidated Balance Sheets. Interest expense related to the amortization expense of the issuance costs associated with the liability component was not material during the twelve months ended December 31, 2019.
As of December 31, 2019, and 2018, the outstanding principal on the Convertible Notes was $82.5 million, and the outstanding Convertible Notes balance, net of debt issuance costs and discount associated with the equity component, was $71.1 million and $70.4 million, respectively.
Searchlight Investment
Second Lien Notes due June 2023 and Warrants
On March 27, 2018 (the “Closing Date”) the Company issued to Searchlight II TBO, L.P. (“Searchlight”) $150.0 million in aggregate principal amount of its Second Lien Notes, and to Searchlight II TBO-W L.P. warrants to acquire an aggregate of 722,631 shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), at an exercise price of $0.25 per share (the “Penny Warrants”), and warrants to acquire an aggregate of 520,000 shares of Common Stock at an exercise price of $39.25 per share (the “Market Warrants” and, together with the Penny Warrants, the “Warrants”), for an aggregate price of $150.0 million.
The Second Lien Notes mature on June 30, 2023. Interest on the Second Lien Notes will initially be payable in kind (compounded semi-annually) at a rate of 12.0% per annum. Interest will automatically convert to accruing cash pay interest at a rate of 10.0% per annum upon the earlier of (i) March 15, 2021 and (ii) the last day of the most recently ended fiscal quarter of the Company for which financial statements have been delivered for which the Company’s “total net leverage ratio” has decreased to 3.39 to 1.0. The Company’s “total net leverage ratio” is as defined in the purchase agreement relating to the Second Lien Notes (the “Purchase Agreement”), and uses a “Consolidated EBITDA” definition from the Purchase Agreement that is different than the “Adjusted EBITDA” figure that the Company publicly report to its investors.
Each of the Company’s subsidiaries that guarantee the Company’s obligations under its 2017 Credit Agreement also guarantee the Second Lien Notes (the “Guarantors”) pursuant to a guaranty agreement (the “Guaranty”). The Second Lien Notes and the guarantees thereof are subordinated in right of payment to the obligations of the Company and the Guarantors under the 2017 Credit Agreement and are secured by the same assets securing the obligations of the Company and the Guarantors under the 2017 Credit Agreement on a second lien basis, subject to the terms of an intercreditor and subordination agreement (the “Intercreditor Agreement”) among the Company, the Guarantors, the Administrative Agent and the collateral agent.
Prior to the third anniversary of the Closing Date, the Company may redeem the Second Lien Notes at a price equal to 100.0% of the principal amount of the Second Lien Notes to be redeemed, plus a “make-whole” premium and accrued and unpaid interest, if any, to (but excluding) the date of redemption. Thereafter, each Note will be redeemable at 105.0% of the principal amount thereof from the third anniversary of the Closing Date until (and excluding) the fourth anniversary of the Closing Date, at 102.5% of the principal amount thereof from the fourth anniversary of the Closing Date until (and excluding) the fifth anniversary of the Closing Date, and thereafter at 100.0% of the principal amount thereof, plus, in each case, accrued and unpaid interest thereon, if any, to (but excluding) the redemption date. Upon a “change of control” (as defined in the Purchase Agreement), the Company must offer to purchase the Second Lien Notes at a price in cash equal to 101% of the principal amount of such Second Lien Notes, plus accrued and unpaid interest, if any, to (but excluding) the date of purchase.
The Purchase Agreement contains affirmative and negative covenants of the Company and its subsidiaries consistent with those in the 2017 Credit Agreement (including limitations on the amount of first lien indebtedness that may be incurred) and contains customary events of default, upon the occurrence and during the continuance of which the majority holders of the Second Lien Notes may declare all obligations under the Second Lien Notes to become immediately due and payable. There are no financial “maintenance covenants” in the purchase agreement for the Second Lien Notes.
On the Closing Date, the Company and the Guarantors entered into a security agreement with the Collateral Agent (the “Security Agreement”). Under the Security Agreement, each of the Company and the Guarantors granted and pledged to the Collateral Agent, to secure the payment and performance in full of all of the obligations under the Notes, a security interest in substantially all of its respective assets, and all proceeds and products and supporting obligations in respect thereof, subject to customary limitations, exceptions, exclusions and qualifications, and the Security Agreement is subject to the terms of the Intercreditor Agreement.
Searchlight is not permitted to transfer its Second Lien Notes before January 1, 2021, except to its controlled affiliates.
On July 19, 2019, concurrently with entering into the 2017 Credit Agreement Amendment, the Company also entered into a second amendment to the securities purchase agreement and amendment to security agreement (the “Second Lien Amendment”) relating to the Second Lien Notes, which, among other things, removed the ability to make any cash interest payments under the Second Lien Notes so long as such payments are prohibited by the terms of the 2017 Credit Agreement, added collateral for the Second Lien Notes consistent with the additional collateral provided under the 2017 Credit Agreement and modified the prepayment premium schedule to extend through maturity of the Second Lien Notes.
The Warrants
The Warrants vest and are exercisable at any time and from time to time after the Vesting Date (as defined below) until on or prior to the close of business on the tenth anniversary of the Closing Date. The Warrants vest and become exercisable on January 1, 2021 (the “Vesting Date”), if the average of the 45-day volume-weighted average price (“VWAP”) of the Company’s common stock (as reported by Nasdaq) is at or above (i) $100.00, in the case of the Penny Warrants, and (ii) $60.00, in the case of the Market Warrants, in each case for 45 consecutive trading days at any time following the Closing Date. The VWAP condition in respect of the Market Warrants was satisfied in July 2018.
The holders of the Warrants cannot exercise the Warrants if and to the extent, as a result of such exercise, either (i) such holder’s (together with its affiliates) aggregate voting power on any matter that could be voted on by holders of the Common Stock would exceed 19.9% of the maximum voting power outstanding or (ii) such holder (together with its affiliates) would beneficially own more than 19.9% of the Company’s then outstanding common stock, subject to customary exceptions in connection with public sales or the consummation of a specified liquidity event described in the Warrants.
The Warrants also include customary anti-dilution adjustments.
Pursuant to the terms of a Warrant holders Agreement between the Company and Searchlight II TBO-W L.P., entered into on the Closing Date, the Company increased the size of its board of directors (the “Board”) by two members, and appointed each of Eric Zinterhofer and Eric Sondag as Class III directors (as such term is used in the Company’s certificate of incorporation) of the Board, with a term expiring in 2020. For so long as Searchlight and its controlled affiliates beneficially own at least 25% of the number of Penny Warrants issued on the Closing Date (and/or the respective shares of the Company’s common stock issued in connection with the exercise of the Penny Warrants), Searchlight shall have the right to nominate a number (rounded up to the nearest whole number) of individuals for election to its Board equal to the product of the following (such individuals, the “Searchlight Nominees”):
Searchlight will not be entitled to nominate more than one individual to the Board if it beneficially owns less than 50% of the Penny Warrants (or the underlying shares of common stock) issued or issuable on the Closing Date. In no event will Searchlight be entitled to nominate more than two individuals to the Board.
Searchlight’s rights to Board representation terminate if Searchlight and its affiliates have an employee, member or partner (other than a limited partner who is an investor in Searchlight) who is a director or executive officer of a competitor of the Company, or if Searchlight has a portfolio company that is a competitor of the Company.
Stock Buy-back Restriction
Until the earlier of (i) the date on which Searchlight no longer beneficially owns at least 25% of the number of Market Warrants issued on the Closing Date (and/or the respective shares of Common Stock issued in connection with the exercise of the Market Warrants) and (ii) January 1, 2021, without the prior consent of Searchlight, the Company will not directly or indirectly redeem, purchase or otherwise acquire any equity securities of the Company for a consideration per share (plus, in the case of any options, rights, or securities, the additional consideration required to be paid to the Company upon exercise, conversion or exchange) greater than the market price (as defined in the Warrants) per share of common stock immediately prior to the earlier of (x) the announcement of such acquisition or (y) such acquisition.
Warrant Transfer Restrictions
Searchlight is not permitted to transfer its Warrants prior to January 1, 2021, except to its controlled affiliates or in connection with certain tender offers, exchange offers, mergers or similar transactions. The Warrants and the underlying shares of common stock are freely transferable by Searchlight on and after January 1, 2021.
Registration Rights
Searchlight has customary shelf, demand and piggyback registration rights with respect to the common stock (including shares of common stock underlying the Warrants) that it holds, including demand registrations and underwritten “shelf takedowns,” subject to specified restrictions, thresholds and the Company’s eligibility to use a registration statement on Form S-3.
Participation Rights
Until the earlier of (i) the fifth anniversary of the Closing Date and (ii) the date Searchlight no longer holds at least 50% of the Penny Warrants (or the respective shares of common stock underlying such Penny Warrants), Searchlight has participation rights with respect to issuances of common equity securities by the Company, subject to exceptions. These rights entitle Searchlight to opt to participate in future issuances by the Company of common equity or common equity-linked securities, subject to customary exceptions.
Standstill
Until the earlier of (i) the 18-month anniversary of the Closing Date and (ii) the date on which Searchlight owns less than 10% of the outstanding common stock (directly or on an as-exercised basis), neither Searchlight nor its affiliates may (unless invited by the Company’s Board) (a) acquire any voting equity securities or material assets of the Company if Searchlight (together with its affiliates) would beneficially hold in the aggregate more than 9.9% of the Company’s Convertible Notes or 9.9% of the Company’s common stock, (b) acquire all or a material part of the Company or its subsidiaries, (c) make, or in any way participate in any “proxy contest” or other solicitation of proxies, (d) form, join or in any way participate in a “group” (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) with respect to any voting securities of the Company or any of its subsidiaries, (e) seek to influence or control the Company’s management or policies, (f) directly or indirectly enter into any discussions, negotiations, arrangements or understandings with any other person with respect to any of the foregoing activities, (g) advise, assist, encourage, act as a financing source for or otherwise invest in any other person in connection any of the foregoing activities or (h) publicly disclose any intention, plan or arrangement inconsistent with any of the foregoing.
Other Debt
With the acquisition of Travel Entertainment Group Equity Limited and subsidiaries (“IFES”) on October 18, 2013, the Company assumed a $1.1 million mortgage maturing in October 2032 that bears interest at a rate equal to 1.75% per annum. Interest is paid on a monthly basis. There was no accrued interest owing on the mortgage as of December 31, 2019 and 2018. As of December 31, 2019, and 2018, there was $0.6 million and $0.7 million due on the principal amount of the mortgage, respectively.
In connection with the EMC Acquisition, the Company assumed approximately $1.1 million of finance lease obligations. The Company also entered into an additional $1.0 million finance lease obligation during 2016 and $0.5 million during 2019. These leases expire at various dates through 2022. As of December 31, 2019, and 2018, the Company had $0.7 million and $0.9 million of finance lease obligations, respectively, included in Other debt.
The aggregate contractual maturities of all borrowings due subsequent to December 31, 2019, are as follows (in thousands):
Recent Events
On February 28, 2020, as a precautionary measure to ensure financial flexibility and maintain maximum liquidity in response to the COVID-19 pandemic, we further leveraged our balance sheet, and drew down the remaining $41.8 million under our Revolving Credit Facility with a corresponding increase in our cash on hand. Following the Drawdown, we have no remaining borrowing under the Revolving Credit Facility.
Amendments to Credit Agreement
On April 7, 2020, the Company entered into an Eighth Amendment to Senior Secured Credit Agreement among the Company, the guarantors party thereto, the lenders party thereto and Citibank, N.A., as administrative agent, which modified the Senior Secured Credit Agreement with respect to the following terms:
The Eighth Amendment to Senior Secured Credit Agreement is attached to this Annual Report on Form 10-K as Exhibit 10.18.
On April 9, 2020, the Company entered into a Ninth Amendment to Senior Secured Credit Agreement among the Company, the guarantors party thereto, the lenders party thereto and Citibank, N.A., as administrative agent, which modified the Senior secured Credit Agreement with respect to the following terms:
The Ninth Amendment to Senior Secured Credit Agreement is attached to this Annual Report on Form 10-K as Exhibit 10.19.
First Lien Amendment
On April 15, 2020, the Company entered into a Tenth Amendment to Senior Secured Credit Agreement (the “First Lien Amendment”) among the Company, the guarantors party thereto, the lenders party thereto and Citibank, N.A., as administrative agent, which modified the Senior secured Credit Agreement with respect to the following terms:
• The deadline for delivery of audited consolidated annual financial statements of the Company for the fiscal year ended December 31, 2019 has been extended from April 16, 2020 until May 14, 2020 (as such deadline may be extended from time to time by an order of the U.S. Securities Exchange Commission), and such financial statements may be subject to a “going concern” qualification.
• The deadline for delivery of unaudited consolidated quarterly financial statements of the Company for fiscal quarter ended March 31, 2020 has been extended from the date that is 45 days after the end of such fiscal quarter until June 29, 2020 (as such deadline may be extended from time to time by an order of the U.S. Securities Exchange Commission).
• The Company will not be required to comply with the maximum consolidated first lien net leverage ratio for the test period ended on March 31, 2020.
In addition, pursuant to the First Lien Amendment, the Lenders consented to the Second Lien Amendment (described below) and to the transactions contemplated thereby. The First Lien Amendment was conditioned upon the Company being current on all interest on the loans that was due and payable immediately prior to giving effect to the First Lien Amendment, and includes the following additional covenants with respect to the Company:
• The Company has agreed to furnish to advisors of the Lenders (on a “professional eyes only” basis) a rolling thirteen-week budget cash flow forecast on a consolidated basis for the Company and its subsidiaries, and a material variance report for the prior week as compared to the applicable previously furnished forecast, with such forecast to be updated every four weeks and the material variance report to be distributed on a weekly basis.
• The Company has agreed to maintain undrawn revolving commitments plus cash and cash equivalents of the Company and its subsidiaries in an aggregate amount of not less than $17.5 million.
• Senior management and certain advisors of the Company will be available to participate in such conference calls as the advisors of the Lenders may request to discuss the financial results and financial condition of the Company and its subsidiaries, and provide such other information regarding the financial results, financial condition and business affairs of the Company and its subsidiaries as the advisors of the Lenders may reasonably request.
• Within five business days of the effective date of the First Lien Amendment, the Company will establish an independent committee of its board of directors, consisting of at least three members, each of whom is a Qualified Independent Director (as defined below), for the purpose of exploring financing, recapitalization, strategic transactions and other similar opportunities and transactions for the Company and its subsidiaries. Authorization by such independent committee will be required in connection with the Company’s or its applicable subsidiaries’ entering into any such financing, recapitalization, strategic transaction or other similar opportunity or transaction.
The First Lien Amendment to Senior Secured Credit Agreement is attached to this Annual Report on Form 10-K as Exhibit 10.20.
Second Lien Amendment
In addition, on April 15, 2020, the Company entered into a Third Amendment to Securities Purchase Agreement (the “Second Lien Amendment”) among the Company, the guarantors party thereto, and each purchaser party thereto. The Second Lien Amendment amends the Securities Purchase Agreement, dated as of March 8, 2018, by and among the Company, Searchlight II TBO, L.P., Searchlight II TBO-W, L.P., and Cortland Capital Market Services LLC, as collateral agent, and modified this Purchase Agreement, including with respect to the following terms:
• The deadline for delivery of audited consolidated annual financial statements of the Company for the fiscal year ended December 31, 2019 has been extended from the date that is 120 days after the end of such fiscal year until the date that is 30 days after May 14, 2020 (as such deadline may be extended from time to time by an order of the U.S. Securities Exchange Commission), and such financial statements may be subject to a “going concern” qualification.
• The deadline for delivery of unaudited consolidated quarterly financial statements of the Company for fiscal quarter ended March 31, 2020 has been extended from the date that is 60 days after the end of such fiscal quarter until the date that is 15 days after June 29, 2020 (as such deadline may be extended from time to time by an order of the U.S. Securities Exchange Commission).
• The deadline for delivery of a consolidated budget for fiscal year 2020 in respect of such fiscal year has been extended from 120 days after the end of the 2019 fiscal year until June 1, 2020. Pursuant to the Second Lien Amendment, the noteholders consented to the First Lien Amendment and to the transactions contemplated thereby.
The Second Lien Amendment to Senior Secured Credit Agreement is attached to this Annual Report on Form 10-K as Exhibit 10.22.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||