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DEBT OBLIGATIONS
 12 Months Ended
Dec. 31, 2022
Debt Disclosure [Abstract]  
DEBT OBLIGATIONS DEBT OBLIGATIONS
The Company’s current and non-current portions of long-term debt were as follows:
December 31,
(in thousands)20222021
Long-term debt
Convertible Notes due 2026$690,000 $690,000 
Less: Unamortized debt issuance costs(11,556)(15,073)
Long-term debt, net of current portion$678,444 $674,927 
Long-term debt to related party
Offtake Advances$— $16,599 
Less: Unamortized debt discount— (517)
Net carrying amount— 16,082 
Less: Current installments of long-term debt to related party— (16,082)
Long-term debt to related party, net of current portion$— $— 
Convertible Notes
On March 26, 2021, the Company issued $690.0 million aggregate principal amount of 0.25% unsecured green convertible senior notes that mature, unless earlier converted, redeemed or repurchased, on April 1, 2026 (the “Convertible Notes”), at a price of par. Interest on the Convertible Notes is payable on April 1st and October 1st of each year, beginning on October 1, 2021. The Convertible Notes may, at the Company’s election, be settled in cash, shares of the Company’s Common Stock, or a combination thereof. The Company has the option to redeem the Convertible Notes, in whole or in part, beginning on April 5, 2024. The Company received net proceeds of $672.3 million from the issuance of the Convertible Notes.
The Convertible Notes are convertible into shares of the Company’s Common Stock at an initial conversion price of $44.28 per share, or 22.5861 shares, per $1,000 principal amount of notes, subject to adjustment upon the occurrence of certain corporate events. However, in no event will the conversion price exceed 28.5714 shares of Common Stock per $1,000 principal amount of notes. As of December 31, 2022, based on the initial conversion price, the maximum number of shares that could be issued to satisfy the conversion feature of the Convertible Notes was 19,714,266. The Convertible Notes’ if-converted value did not exceed its principal amount as of December 31, 2022.
Prior to January 1, 2026, at their election, holders of the Convertible Notes may convert their outstanding notes under the following circumstances: (i) during any calendar quarter commencing with the third quarter of 2021 if the last reported sale price of the Company’s Common Stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (ii) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price (as defined in the indenture governing the Convertible Notes) per $1,000 principal amount of Convertible Notes for each trading day of the measurement period 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; (iii) if the Company calls any or all of the Convertible Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or (iv) upon the occurrence of specified corporate events set forth in the indenture governing the Convertible Notes. On or after January 1, 2026, and prior to the maturity date of the Convertible Notes, holders may convert their outstanding notes at any time, regardless of the foregoing circumstances.
If the Company undergoes a fundamental change (as defined in the indenture governing the Convertible Notes), holders may require it to repurchase for cash all or any portion of their outstanding notes at a price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In addition, following certain corporate events that occur prior to the maturity date of the Convertible Notes or if the Company delivers a notice of redemption, it will, in certain circumstances, increase the conversion rate for holders who elect to convert their outstanding notes in connection with such corporate event or notice of redemption, as the case may be.
Interest expense related to the Convertible Notes was as follows:
For the year ended December 31,
(in thousands)202220212020
Coupon interest$1,725 $1,318 $— 
Amortization of debt issuance costs3,517 2,675 — 
Convertible Notes interest expense$5,242 $3,993 $— 
The debt issuance costs are being amortized to interest expense over the term of the Convertible Notes at an effective interest rate of 0.51%. The remaining term of the Convertible Notes was 3.3 years as of December 31, 2022.
Offtake Advances
In connection with the June 2020 Modification, which is discussed in Note 3, “Relationship and Agreements with Shenghe,” Shenghe agreed to fund an additional $35.5 million advance to the Company (previously defined as the “Second Additional Advance”) and the Company issued the Shenghe Warrant. For accounting purposes, the June 2020 Modification effectively replaced the deferred revenue arrangement relating to the Original Offtake Agreement with a debt obligation relating to the A&R Offtake Agreement and the issuance of the Shenghe Warrant.
Under the A&R Offtake Agreement, a portion of the sales prices of products sold to Shenghe was paid in the form of debt reduction, rather than cash. In addition, the Company was required to pay the following amounts to Shenghe in cash to reduce the debt obligation until repaid in full: (i) an agreed-upon percentage of sales of products to parties other than Shenghe; (ii) 100% of net profits from asset sales; and (iii) 100% of net income determined under GAAP, less the tax-effected amount of total non-cash recoupment from sales of products to Shenghe. For the years ended December 31, 2022, 2021 and 2020, $14.2 million, $52.8 million and $12.0 million, respectively, of the sales prices of products sold to Shenghe was paid in the form of debt reduction (see Note 19, “Supplemental Cash Flow Information”). During both the years ended December 31, 2022 and 2021, the Company made a payment to Shenghe of $0.2 million based on sales to other parties. No amounts were required to be paid based on asset sales.
The A&R Offtake Agreement did not have a stated rate (and was non-interest-bearing), and repayment was contingent on a number of factors, including market prices realized by Shenghe, the Company’s sales to other parties, asset sales, and the Company’s annual net income. The imputed interest rate was a function of this discount taken together with the Company’s expectations about the timing of the anticipated reductions of the debt obligation. The Company had determined that it would recognize adjustments from these estimates following a prospective method where the Company updated its estimate of the effective interest rate in future periods based on revised estimates of the timing of remaining principal reductions at that time. The effective rate applicable from the June 5, 2020, inception to full repayment, was between 4.41% and 24.75%.
As discussed in Note 4, “Revenue Recognition,” in January 2021 and August 2020, the Company was informed of tariff rebates of $2.2 million and $9.7 million, respectively, that Shenghe received, which increased the gross profit earned by Shenghe on certain sales. In addition, during the year ended December 31, 2020, after the June 2020 Modification, but relating to sales made prior the June 2020 Modification, Shenghe realized higher gross profit than estimated by the Company in the amount of $0.4 million due to higher market prices. As a result of these events, for the years ended December 31, 2021 and 2020, the Company recorded reductions in the principal amount of the debt obligation of $2.2 million and $10.1 million, respectively, and the corresponding debt discount of $0.2 million and $0.8 million, respectively.
As discussed in Note 3, “Relationship and Agreements with Shenghe,” the Company made a $2.9 million payment to Shenghe in March 2022 pursuant to item (iii) above. Upon payment by the Company, the Prepaid Balance was repaid in full, and the A&R Offtake Agreement was terminated.
Equipment Notes
The Company has entered into several financing agreements for the purchase of equipment, including trucks, tractors, loaders, graders, and various other machinery. The Company’s equipment notes, which are secured by the purchased equipment, have terms of between 4 to 5 years and interest rates of between 0.0% and 6.5% per annum. See also Note 19, “Supplemental Cash Flow Information.”
The current and non-current portions of the equipment notes, which are included within the Consolidated Balance Sheets in “Other current liabilities” and “Other non-current liabilities,” respectively, were as follows:
December 31,
(in thousands)20222021
Equipment notes
Current$2,392 $2,566 
Non-current4,743 7,095 
$7,135 $9,661 
Paycheck Protection Loan
In April 2020, the Company obtained a loan of $3.4 million pursuant to the Paycheck Protection Program under the CARES Act (the “Paycheck Protection Loan”). In June 2021, the Company received notification from the Small Business Administration that the Paycheck Protection Loan and related accrued interest was forgiven. Consequently, for the year ended December 31, 2021, the Company recorded a gain on forgiveness of the Paycheck Protection Loan in the amount of $3.4 million, which is included in “Other income, net” within the Company’s Consolidated Statements of Operations.
Interest expense, net
Interest expense, net, was as follows:
For the year ended December 31,
(in thousands)202220212020
Interest expense$6,146 $9,168 $5,171 
Interest capitalized to property, plant and equipment, net(360)(264)(162)
Interest expense, net$5,786 $8,904 $5,009 
Debt Maturities
The following is a schedule of debt repayments as of December 31, 2022:
(in thousands)Convertible NotesEquipment Notes
Year ending December 31,
2023$— $2,392 
2024— 2,106 
2025— 2,098 
2026690,000 539 
2027— — 
Thereafter— — 
Total minimum payments$690,000 $7,135 
As of December 31, 2022, none of the agreements governing the Company’s indebtedness contain financial covenants.