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SHORT-TERM BANK DEBT AND LONG-TERM DEBT
 9 Months Ended
Sep. 30, 2023
Debt Disclosure [Abstract]  
SHORT-TERM BANK DEBT AND LONG-TERM DEBT

NOTE 13 - SHORT-TERM BANK DEBT AND LONG-TERM DEBT

 

   December 31,   September 30, 
   2022   2023 
       (unaudited) 
Short-term bank debt  $5,709   $10,704 
Current maturities of long-term debt  $4,603   $1,433 
Long-term debt - less current maturities  $11,403   $9,617 

 

 

Long-Term Debt

 

In connection with the Transactions, Powerfleet Israel incurred NIS denominated debt in term loan borrowings on October 3, 2019 which was the closing date of the Transactions (the “Closing Date”), under the Credit Agreement, pursuant to which Hapoalim agreed to provide Powerfleet Israel with two senior secured term loan facilities in an initial aggregate principal amount of $30,000 (comprised of two facilities in the aggregate principal amount of $20,000 and $10,000, respectively (the “Term A Facility” and “Term B Facility”, respectively, and collectively, the “Term Facilities”)) and a five-year revolving credit facility (the “Revolving Facility”) to Pointer denominated in NIS in an initial aggregate principal amount of $10,000 (collectively, the “Credit Facilities”). As of September 30, 2023, the Company borrowed NIS8,420, or $2,200, under the Revolving Facility. 

 

The Credit Facilities will mature on the date that is five years from the Closing Date, or October 3, 2024. The indicative interest rate provided for the Term Facilities in the original Credit Agreement was approximately 4.73% for the Term A Facility and 5.89% for the Term B Facility. The interest rate for the Revolving Facility is, with respect to NIS-denominated loans, Hapoalim’s prime rate + 2.5%, and with respect to US dollar-denominated loans, LIBOR + 4.6% (amended to SOFR + 2.15%). In addition, the Company agreed to pay a 1% commitment fee on the unutilized and uncancelled availability under the Revolving Facility. The Credit Facilities are secured by the shares held by Powerfleet Israel in Pointer and by Pointer over all of its assets. The original Credit Agreement includes customary representations, warranties, affirmative covenants, negative covenants (including the following financial covenants, tested quarterly: Pointer’s net debt to EBITDA; Pointer’s net debt to working capital; minimum equity of Powerfleet Israel; Powerfleet Israel equity to total assets; Powerfleet Israel net debt to EBITDA; and Pointer EBITDA to current payments and events of default).

 

On August 23, 2021, the Borrowers entered into an amendment (the “Amendment”), effective as of August 1, 2021, to the Credit Agreement with Hapoalim. The Amendment memorializes the agreements between the Borrowers and Hapoalim regarding a reduction in the interest rates of the two Term Facilities. Pursuant to the Amendment, commencing as of November 12, 2020, the interest rate with respect to the Term A Facility was reduced to a fixed rate of 3.65% per annum and the interest rate with respect to the Term B Facility was reduced to a fixed rate of 4.5% per annum. The Amendment also provides, among other things, for (i) a reduction in the credit allocation fee on undrawn and uncancelled amounts of the Revolving Facility from 1% to 0.5% per annum, (ii) removal of the requirement that Powerfleet Israel maintain $3,000 on deposit in a separate reserve fund, and (iii) modifications to certain of the affirmative and negative covenants, including a financial covenant regarding the ratio of the Borrowers’ debt levels to Pointer’s EBITDA. The Company is in compliance with all covenants as of September 30, 2023. 

 

In connection with the Credit Facilities, the Company incurred debt issuance costs of $742. For the three-month periods ended September 30, 2022 and 2023, the Company recorded $49 and $29, respectively, of amortization of the debt issuance costs. For the nine-month periods ended September 30, 2022 and 2023, the Company recorded $168 and $108, respectively, of amortization of the debt issuance costs. The Company recorded charges of $196 and $132 to interest expense on its consolidated statements of operations for the three-month periods ended September 30, 2022 and 2023, respectively, related to interest expense associated with the Credit Facilities. The Company recorded charges of $642 and $445 to interest expense on its consolidated statements of operations for the nine-month periods ended September 30, 2022 and 2023, respectively, related to interest expense associated with the Credit Facilities.

 

On October 31, 2022, the Borrowers entered into the Third Amendment with Hapoalim. The Third Amendment provides for, among other things, the New Revolver. The New Revolver will be available for a period of one month, commencing on October 31, 2022, and will continue to be available for successive one-month periods until and including October 30, 2023, unless the Borrowers deliver a notice to Hapoalim of their request not to renew the New Revolver. As of September 30, 2023, the Company borrowed NIS32,500, or $8,500, under the New Revolver. 

 

The New Revolver will initially bear interest at the SOFR + 2.59%. Such interest is subject to monthly changes by Hapoalim, provided that Hapoalim gives Pointer advance notice regarding such change prior to the end of the applicable calendar month.

 

The New Revolver is secured by a first ranking fixed pledge and assignment by Pointer over its new bank account, which was opened in connection with the New Revolver, and all of the rights relating thereunder as well as a cross guarantee by Powerfleet Israel.

 

Pointer is required to pay a credit allocation fee equal to 0.5% per annum on undrawn and uncancelled amounts of the New Revolver.

 

Scheduled maturities of the long-term debt as of September 30, 2023 are as follows:

 

      
October 2023 - September 2024  $1,433 
October 2024   9,617 
Long Term debt   11,050 
Less: Current portion   1,433 
Total  $9,617 

 

The Term B Facility is not subject to amortization over the life of the loan and instead the original principal amount is due in one installment on the fifth anniversary of the Closing Date.