LINE OF CREDIT |
9 Months Ended |
|---|---|
Sep. 30, 2024 | |
| Line of Credit Facility [Abstract] | |
| LINE OF CREDIT | LINE OF CREDIT On June 3, 2022, the Operating Company entered into a credit agreement (the “Credit Agreement”) with CIBC, Inc. (“CIBC”) and Zions Bancorporation, N.A. d/b/a Zions First National Bank (“Zions”) as Joint Lead Arrangers, which allows for revolving commitments (the “Credit Facility”).
On January 31, 2023, the Operating Company entered into an amendment to the Credit Agreement pursuant to which (i) the Operating Company exercised its option to increase the total revolving commitments under the Credit Facility to $225.0 million, (ii) the variable interest rates under the applicable pricing grid were each increased by 15 basis points and (iii) the quarterly unused commitment fee was increased to 0.25%.
On February 28, 2024, the Operating Company entered into an amendment to the Credit Agreement with CIBC, Zions and Manufacturers and Traders Trust Company, as Joint Lead Arrangers, which included a reduction in the total aggregate commitments under the Credit Facility from $225 million to $150 million, with the ability to increase aggregate commitments up to an additional $75 million, and extended the maturity date from June 3, 2024 to June 3, 2026.
Borrowings under the Credit Facility bear interest based on a pricing grid with a range of a 2.65% to 3.15% over Term SOFR as determined by the Operating Company’s leverage ratio, or upon achievement of an investment grade rating, interest is then based on a range of 1.90% to 2.40% over Term SOFR. The Credit Facility is also subject to a quarterly unused commitment fee of up to 0.25%, which is based on the daily unused portion of the Credit Facility. Borrowings under the Credit Facility may be repaid at any time during the term of the Credit Agreement, but the Credit Facility requires paydown at least once annually or if the aggregate commitment exceed certain thresholds for an extended period of time.
Under the terms of the Credit Agreement, certain of the Operating Company’s assets serve as pledged collateral. In addition, the Credit Agreement contains covenants that, among other things, limit the Operating Company’s ability to: incur indebtedness; create, incur or allow liens; merge with other companies; pay dividends or make distributions; engage in new or different lines of business; and engage in transactions with affiliates. The Credit Agreement also contains financial covenants requiring the Operating Company to maintain (1) a debt to Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”) ratio of no more than 3.75x, (2) minimum liquidity of $15.0 million and (3) minimum quarterly EBITDA of $15 million and minimum EBITDA for the trailing four fiscal quarters of $80.0 million.
The carrying value of the Credit Facility approximates fair value, as the loan is subject to variable interest rates that adjust with changes in market rates and market conditions and the current interest rate approximates that which would be available under similar financial arrangements.
As of September 30, 2024, the outstanding balance on the Credit Facility was $11.7 million with an interest rate in effect of approximately 7.40%. During the three and nine months ended September 30, 2024, the Operating Company incurred interest expense of approximately $0.4 million and $2.2 million and unused commitments fees of $0.1 million and $0.2 million, respectively. During the three and nine months ended September 30, 2023, the Operating Company incurred interest expense of approximately $1.2 million and $4.2 million and unused commitments fees of $0.1 million and $0.2 million, respectively.
Debt issuance costs related to the Credit Facility are included in other assets in the condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023, respectively. As of September 30, 2024, the Operating Company was in full compliance with all debt covenants.
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