Revolving Line of Credit and Long-term Debt
|9 Months Ended|
Sep. 30, 2021
|Debt Disclosure [Abstract]|
|Revolving Line of Credit and Long-term Debt||
REVOLVING LINE OF CREDIT AND LONG-TERM DEBT
First and Second Lien Term Loans
On March 28, 2018, Invictus U.S., LLC and SK Invictus Intermediate II, S.à r.l., two wholly owned subsidiaries of Invictus, entered into credit agreements providing for committed credit facilities of $815,000, a substantial portion of which was used to fund the initial acquisition of the Company.
The First Lien Credit Facility (the First Lien) consists of a $545,000 U.S. dollar term loan, a multicurrency revolving credit facility (the Revolver), and a $16,000 extension on the original term loan. The First Lien was issued with an original issue discount (OID) of 0.30%, to which net of amortization was $1,000 as of December 31, 2020. Principal and interest payments are due on
a monthly basis. The First Lien matures on March 28, 2025, and any outstanding borrowings can be repaid without penalty. The First Lien is secured by substantially all of the assets to the Company. Interest is based on a floating rate indexed to either LIBOR plus an applicable margin, federal funds rate plus an applicable margin, or the prime rate plus an applicable margin. The average effective interest rate during the three and nine months ended September 30, 2021 was 3.14% and 3.15%, respectively, compared to 3.74% and 4.49% for the three and nine months ended September 30, 2020, respectively. The First Lien contains a series of restrictive financial and nonfinancial covenants which, among other things, limit the ability of the Company to: i) incur additional indebtedness, ii) create liens, iii) make investments or make other restricted payments, iv) sell assets, v) substantially change the nature of the Company, and vi) enter into certain transactions with affiliates.
On November 23, 2018, the Company executed the First Amendment to the First Lien (the Amendment) for an incremental term loan in the amount of $16,000. The liability was recorded when cash was received on February 13, 2019. Significant terms of this amendment (including maturity, principal payment frequency, interest rate, and covenants) are identical to the First Lien.
The Second Lien Credit Facility (the Second Lien) consists of a $155,000 U.S. dollar term loan with a maturity of March 28, 2026. There are no required principal payments on the Second Lien until maturity with interest payments due quarterly. The Second Lien is secured by substantially all of the assets of the Company and can be repaid without penalty. The Company made a principal payment of $15,000 during 2020. Interest is based on a floating rate indexed to either LIBOR plus an applicable margin, federal funds rate plus an applicable margin, or the prime rate plus an applicable margin. The average effective interest rate during the three and nine months ended September 30, 2021 was 6.95% and 6.96%, respectively, compared to 7.54% and 8.29%, for the three and nine months ended September 30, 2020, respectively. The Second Lien contains a series of similar restrictive financial and nonfinancial covenants as the First Lien.
Revolving Credit Facility
The Revolver provides for maximum borrowings of $100,000. Interest is based on the same terms as the First Lien. The Company had no balance outstanding on the Revolver at September 30, 2021 or December 31, 2020. Available borrowings under the Revolver were $100,000 at both September 30, 2021 and December 31, 2020. The Revolver matures on March 28, 2023 and has a 0.5% unused commitment fee. The Revolver also contains a $10,000 standby letter of credit sub-facility and a $10,000 swing line sub-facility. At both September 30, 2021 and December 31, 2020, no letters of credit were outstanding, and no balance was outstanding on the swing line. The Revolver contains a series of restrictive financial and nonfinancial covenants similar to those of the First Lien plus a debt to EBITDA leverage ratio that is only applicable when the aggregate outstanding amount of the Revolver, any swing line loans, and letters of credit is greater than 35.0%, as of the last day of the fiscal quarter, of the commitment under the Revolver.
As of September 30, 2021, the Company was in compliance with all covenants.
The Company’s long-term debt was as follows as of September 30, 2021 and December 31, 2020 (in thousands):
In accordance with the provisions of the First Lien, Second Lien, and the Revolver, the Company is required to make an annual mandatory principal prepayment on the term loans to the extent the Company realizes consolidated excess cash flow, as defined, in a given fiscal year. This requirement commenced in 2020 and an excess cash payment of $932 was made on May 7, 2021.
As of September 30, 2021, the scheduled maturities, without consideration of potential mandatory prepayments, of the long-term debt were as follows (in thousands):
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef