Long-Term Debt

12 Months Ended

Dec. 31, 2020

CREDIT FACILITY AND ACQUISITION DEBT

On December 19, 2019, we entered into a third amendment and commitment increase to our $150.0 million senior secured revolving credit facility (“Credit Facility”) with the financial institutions party thereto, as lenders, and Bank of America, N.A., as administrative agent (in such capacity, the “Administrative Agent”) to increase our commitment to $190.0 million and incurred $0.9 million in transactions costs, which were capitalized and will be amortized over the remaining term of the related debt using the straight-line method.

At December 31, 2020, our Credit Facility was comprised of: (i) a $190.0 million revolving credit facility, including a $15.0 million subfacility for letters of credit and a $10.0 million swingline, and (ii) an accordion or incremental option allowing for future increases in the facility size by an additional amount of up to $75.0 million in the form of increased revolving commitments or incremental term loans. The final maturity of the Credit Facility will occur on May 31, 2023.

The Company’s obligations under the Credit Facility are unconditionally guaranteed on a joint and several basis by the same subsidiaries which guarantee the Senior Notes (as defined in Note 14) and certain of the Company’s Credit Facility Guarantors.

The Credit Facility is secured by a first-priority perfected security interest in and lien on substantially all of the Company’s personal property assets and those of the Credit Facility Guarantors (as defined below). In the event the Company’s actual Total Leverage Ratio is not at least 0.25 less than the required Total Leverage Ratio covenant level, at the discretion of the Administrative Agent, the Administrative Agent may unilaterally compel the Company and the Credit Facility Guarantors to grant and perfect first-priority mortgage liens on fee-owned real property assets which account for no less than 50% of funeral operations EBITDA.

The Credit Facility contains customary affirmative covenants, including, but not limited to, covenants with respect to the use of proceeds, payment of taxes and other obligations, continuation of the Company’s business and the maintenance of existing rights and privileges, the maintenance of property and insurance, amongst others.

In addition, the Credit Facility also contains customary negative covenants, including, but not limited to, covenants that restrict (subject to certain exceptions) the ability of the Company and its subsidiaries and party thereto as guarantors (the “Credit Facility Guarantors”) to incur additional indebtedness, grant liens on assets, make investments, engage in mergers and acquisitions, and pay dividends and other restricted payments, and certain financial covenants. At December 31, 2020, we were subject to the following financial covenants under our Credit Facility: (A) a Total Leverage Ratio not to exceed, (i) 5.75 to 1.00 for the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020 and (ii) 5.50 to 1.00 for the quarter ended December 31, 2020 and each quarter ended thereafter, (B) a Senior Secured Leverage Ratio (as defined in the Credit Facility) not to exceed 2.00 to 1.00 as of the end of any period of four consecutive fiscal quarters, and (C) a Fixed Charge Coverage Ratio (as defined in the Credit Facility) of not less than 1.20 to 1.00 as of the end of any period of four consecutive fiscal quarters. These financial maintenance covenants are calculated for the Company and its subsidiaries on a consolidated basis.

On May 18, 2020, we received a limited waiver under our Credit Facility for the failure to comply with the Total Leverage Ratio covenant for the fiscal quarter ended March 31, 2020. In connection with the waiver, we also entered into a fourth amendment to the Credit Facility which increased the interest rate margin applicable to borrowings by up to 0.625% at each pricing level based on the Total Leverage Ratio. We did not incur any transaction costs related to the limited waiver and fourth amendment to the Credit Facility.

On August 7, 2020, we obtained a limited consent from the lenders under our Credit Facility in connection with our privately-negotiated repurchases of our Convertible Notes (as defined in Note 13). See Note 13 to the Consolidated Financial Statements included herein, for a discussion of our privately-negotiated repurchases.

We were in compliance with the total leverage ratio, fixed charge coverage ratio and senior secured leverage ratio covenants contained in our Credit Facility at December 31, 2020.

Our Credit Facility and Acquisition debt consisted of the following (in thousands):


	December 31, 2019		December 31, 2020
Credit Facility	$	83,800	$	47,200
Debt issuance costs, net of accumulated amortization of $337 and $819, respectively	(1,618)		(1,136)
Total Credit Facility	$	82,182	$	46,064

Acquisition debt	$	6,964	$	5,509
Less: current portion	(1,306)		(1,027)
Total acquisition debt, net of current portion	$	5,658	$	4,482

At December 31, 2020, we had outstanding borrowings under the Credit Facility of $47.2 million. We had one letter of credit for $2.0 million issued on November 30, 2019 and outstanding under the Credit Facility, which was increased to $2.1 million on September 29, 2020. The letter of credit bears interest at 3.125% and will expire on November 26, 2021. The letter of credit automatically renews annually and secures our obligations under our various self-insured policies. At December 31, 2020, we had $140.7 million of availability under the Credit Facility after giving affect to the $2.1 million of the outstanding letter of credit.

Outstanding borrowings under our Credit Facility bear interest at either a prime rate or a LIBOR rate, plus an applicable margin based upon our leverage ratio. At December 31, 2020, the prime rate margin was equivalent to 1.5% and the LIBOR rate margin was 2.5%. The weighted average interest rate on our Credit Facility for the years ended December 31, 2019 and 2020 was 2.9% and 3.8%, respectively.

We have no material assets or operations independent of our subsidiaries. All assets and operations are held and conducted by subsidiaries, each of which have fully and unconditionally guaranteed our obligations under the Credit Facility. Additionally, we do not currently have any significant restrictions on our ability to receive dividends or loans from any Credit Facility Guarantors.

The interest expense and amortization of debt issuance costs related to our Credit Facility are as follows (in thousands):


	Years ended December 31,
	2018		2019		2020
Credit Facility interest expense	$	4,351	$	1,601	$	3,738
Credit Facility amortization of debt issuance costs	234		229		482

Acquisition debt consists of deferred purchase price and promissory notes payable to sellers. A majority of the deferred purchase price and notes bear no interest and are discounted at imputed interest rates ranging from 7.3% to 10.0%. Original maturities range from five to twenty years.

The imputed interest expense related to our acquisition debt are as follows (in thousands):


	Years ended December 31,
	2018		2019		2020
Acquisition debt imputed interest expense	$	791	$	622	$	489

The aggregate maturities of our Credit Facility and acquisition debt for the next five years subsequent to December 31, 2020 and thereafter, excluding debt issuance costs, are as follows (in thousands):


	Credit Facility		Acquisition Debt
Years ending December 31,
2021	$	—	$	1,386
2022	—		825
2023	47,200		825
2024	—		772
2025	—		772
Thereafter	—		3,332
Total Credit Facility and acquisition debt	$	47,200	$	7,912
Less: Interest	—		(2,403)
Present value of Credit Facility and acquisition debt	$	47,200	$	5,509