Debt

12 Months Ended

Dec. 31, 2020

As of December 31, 2020 and 2019, the Company’s indebtedness was comprised as follows:


	December 31, 2020		December 31, 2019
Revolving credit agreement	$	—	$	—
Senior Notes	870,256		900,000
Debt issuance costs	(27,072)		(12,370)
	$	843,184	$	887,630

Interest expense related to long-term debt for the years ended December 31, 2020, 2019, and 2018 was $59,147, $62,210 and $64,420, respectively.

The amortization of debt issuance costs included in interest expense for the years ended December 31, 2020, 2019 and 2018 was $3,529, $3,346 and 3,193, respectively.

The revolving credit agreement is a variable rate debt, the carrying value of which approximates fair value. The Company’s Senior Notes are a fixed rate debt instrument recorded at carrying value.

Senior Notes

On March 23, 2016, MDC entered into an indenture (the “Indenture”) among MDC, its existing and future restricted subsidiaries that guarantee, are co-borrowers under, or grant liens to secure, the Credit Agreement (as defined below), as guarantors (the “Guarantors”) and The Bank of New York Mellon, as trustee, relating to the issuance by MDC of $900,000 aggregate principal amount of the senior notes due 2024 (the “Senior Notes”). The Senior Notes were sold in a private placement in reliance on exceptions from registration under the Securities Act of 1933. The Senior Notes bear interest, payable semiannually in arrears on May 1 and November 1, at a rate of 7.50% per annum. The Senior Notes mature on May 1, 2024, unless earlier redeemed or repurchased.

In April 2020, the Company repurchased $29,744 of the Senior Notes, at a weighted average price equal to 73.9% of the principal amount totaling $21,999, and accrued interest of $946. As a result of the repurchase, we recognized an extinguishment gain of $7,388.

In connection with the Consent and Support Agreements, beginning December 21, 2020, the Company began to accrue interest at a rate of 7.50% and accrued $17.4 million for the 2% consent fees. The consent fees were capitalized as an offset to the carrying value of the Senior Notes and will be recognized through interest expense over the remaining maturity term of the Senior Notes.

The Senior Notes are guaranteed on a senior unsecured basis by all of MDC’s existing and future restricted subsidiaries that guarantee, are co-borrowers under, or grant liens to secure, the Credit Agreement. The Senior Notes are unsecured and unsubordinated obligations of MDC and rank (i) equally in right of payment with all of MDC’s or any Guarantor’s existing and future senior indebtedness, (ii) senior in right of payment to MDC’s or any Guarantor’s existing and future subordinated indebtedness, (iii) effectively subordinated to all of MDC’s or any Guarantor’s existing and future secured indebtedness to the

extent of the collateral securing such indebtedness, including the Credit Agreement, and (iv) structurally subordinated to all existing and future liabilities of MDC’s subsidiaries that are not Guarantors.

MDC may, at its option, redeem the Senior Notes in whole at any time or in part from time to time, at varying prices based on the timing of the redemption.

If MDC experiences certain kinds of changes of control (as defined in the Indenture), holders of the Senior Notes may require MDC to repurchase any Senior Notes held by them at a price equal to 101% of the principal amount of the Senior Notes plus accrued and unpaid interest. In addition, if MDC sells assets under certain circumstances, it must apply the proceeds from such sale and offer to repurchase the Senior Notes at a price equal to 100% of the principal amount plus accrued and unpaid interest.

The Indenture includes covenants that, among other things, restrict MDC’s ability and the ability of its restricted subsidiaries (as defined in the Indenture) to incur or guarantee additional indebtedness; pay dividends on or redeem or repurchase the capital stock of MDC; make certain types of investments; create restrictions on the payment of dividends or other amounts from MDC’s restricted subsidiaries; sell assets; enter into transactions with affiliates; create liens; enter into sale and leaseback transactions; and consolidate or merge with or into, or sell substantially all of MDC’s assets to, another person. These covenants are subject to a number of important limitations and exceptions. The Senior Notes are also subject to customary events of default, including a cross-payment default and cross-acceleration provision. The Company was in compliance with all covenants at December 31, 2020.

Revolving Credit Agreement

The Company is party to a $211,500 secured revolving credit facility due February 3, 2022. The Company had no amounts outstanding under the revolving credit facility as of December 31, 2020 and December 31, 2019.

On May 29, 2020, the Company, Maxxcom Inc., a subsidiary of the Company (“Maxxcom”), and each of their subsidiaries party thereto entered into an amendment (the “Second Amendment”) to the existing senior secured revolving credit facility, dated as of May 3, 2016 (as amended, the “Credit Agreement”), among the Company, Maxxcom, each of their subsidiaries party thereto, Wells Fargo Capital Finance, LLC, as agent (“Wells Fargo”), and the lenders from time to time party thereto. Advances under the Credit Agreement are to be used for working capital and general corporate purposes, in each case pursuant to the terms of the Credit Agreement.

The Second Amendment reduced the aggregate maximum amount of revolving commitments provided by the lenders to $211,500 from $250,000, extended the maturity date of the Credit Agreement from May 3, 2021 to February 3, 2022, and expanded the eligibility criteria for certain of the Company’s receivables to be included in the borrowing base.

Advances under the Credit Agreement, as amended by the Second Amendment, will bear interest as follows: (i) Non-Prime Rate Loans bear interest at the Non-Prime Rate plus the Non-Prime Rate Margin and (ii) all other Obligations bear interest at the Prime Rate, plus the Prime Rate Margin. The Non-Prime Rate Margin and Prime Rate Margin will range from 2.50% to 3.00% for Non-Prime Rate Loans and from 1.75% to 2.25% for Prime Rate Loans. In addition to paying interest on outstanding principal under the Credit Agreement, MDC is required to pay an unused revolver fee to lenders under the Credit Agreement in respect of unused commitments thereunder.

The Second Amendment increased the required minimum earnings before interest, taxes and depreciation and amortization from $105,000 to $120,000 measured on a trailing 12-month basis. The total leverage ratio applicable on each testing date through the period ending December 31, 2020 remained at 6.25:1.0. The total leverage ratio applicable on each testing date after December 31, 2020 will be 5.5:1.0.

The Credit Agreement, which includes financial and non-financial covenants, is guaranteed by substantially all of MDC’s present and future subsidiaries, other than immaterial subsidiaries and subject to customary exceptions, and collateralized by a portion of MDC’s outstanding receivable balance. The Company was in compliance with all of the terms and conditions of its Credit Agreement as of December 31, 2020.

At December 31, 2020 and December 31, 2019, the Company had issued undrawn outstanding letters of credit of $18,651 and $4,836, respectively.

Future Principal Repayments

Future principal repayments on the Senior Notes in the aggregate principal amount of $870,256 are due in 2024.