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Debt | 3 Months Ended
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Mar. 31, 2025
Debt Disclosure [Abstract] |
Debt Disclosure | Debt 2022 Credit Facility On July 12, 2022, the LLC entered into the Third Amended and Restated Credit Agreement (the "2022 Credit Facility") to amend and restate the Second Amended and Restated Credit Agreement (the "2021 Credit Facility"). The 2022 Credit Facility provides for revolving loans, swing line loans and letters of credit (the "2022 Revolving Credit Facility") up to a maximum aggregate amount of $600 million ("the 2022 Revolving Loan Commitment") and a $400 million term loan (the “2022 Term Loan”). All amounts outstanding under the 2022 Revolving Credit Facility will become due on July 12, 2027, which is the termination date of the 2022 Revolving Loan Commitment. The 2022 Credit Facility also permits the LLC, prior to the applicable maturity date, to increase the 2022 Revolving Loan Commitment and/or obtain additional term loans in an aggregate amount of up to $250 million, subject to certain restrictions and conditions. The LLC may borrow, prepay and reborrow principal under the 2022 Revolving Credit Facility from time to time during its term. Advances under the 2022 Revolving Credit Facility can be either term Secured Overnight Financing Rate ("SOFR") loans or base rate loans. Term SOFR revolving loans bear interest on the outstanding principal amount thereof for each interest period at a rate per annum based on the applicable SOFR as administered by the Federal Reserve Bank of New York (or a successor administrator), as adjusted, plus a margin ranging from 1.50% to 2.50%, based on the ratio of consolidated net indebtedness to adjusted consolidated earnings before interest expense, tax expense, and depreciation and amortization expenses for such period (the “Consolidated Total Leverage Ratio”). Base rate revolving loans bear interest on the outstanding principal amount thereof at a rate per annum equal to the highest of (i) Federal Funds rate plus 0.50%, (ii) the “prime rate”, and (iii) the applicable SOFR plus 1.0% (the “Base Rate”), plus a margin ranging from 0.50% to 1.50%, based on the Company's Consolidated Total Leverage Ratio. Advances under the 2022 Term Loan can be either term SOFR loans or base rate loans. The 2022 Term Loan was advanced in full on the closing date for the 2022 Credit Facility as a Term SOFR loan with an interest period of one month. On the last day of an interest period, Term SOFR loans may be converted to Term SOFR loans of a different interest period or to Base Rate loans. Term SOFR term loans bear interest on the outstanding principal amount thereof for each interest period at a rate per annum based on the Term SOFR for such interest period plus a margin ranging from 1.50% to 2.50%, based on the Consolidated Total Leverage Ratio. Base rate term loans bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus a margin ranging from 0.50% to 1.50%, based on the Consolidated Total Leverage Ratio. Under the 2022 Revolving Credit Facility, an aggregate amount of up to $100 million in letters of credit may be issued, as well as swing line loans of up to $25 million outstanding at one time. The issuance of such letters of credit and the making of any swing line loan would reduce the amount available under the 2022 Revolving Credit Facility. Net availability under the 2022 Revolving Credit Facility was approximately $596.6 million at March 31, 2025, however, t he Company was not in compliance with the financial covenants contained in the 2022 Credit Facility as of March 31, 2025 and as a result, the availability of the 2022 Revolving Credit Facility at March 31, 2025 would have been limited. Letters of credit outstanding at March 31, 2025 totaled approximately $3.5 million. The 2022 Revolving Credit Facility is secured by all of the assets of the LLC, including all of its equity interests in, and loans to, its subsidiaries. Please see "Note Q – Subsequent Events” for additional information concerning the 2022 Credit Facility. Amendment of 2022 Credit Facility On January 9, 2025, the LLC entered into a First Incremental Facility Amendment (the “Amendment”) to its existing 2022 Credit Facility. The Amendment was by and among the LLC, the lenders party thereto, and Bank of America, N.A., as administrative agent for the Lenders (the “Administrative Agent”). The Amendment modifies the 2022 Credit Facility to provide for (a) an additional advance of the term loan in the aggregate amount of $200 million (the “Incremental Term Loan”) on the date of the Amendment, and (b) delayed draw term loan commitments in the aggregate amount of $100 million (the “Incremental Delayed Draw Term Loan Commitments,” and the loan drawn thereunder is referred to herein as the “Incremental Delayed Draw Term Loan”), which may be reduced or terminated by the LLC upon five business days’ notice and pursuant to which the Company may make no more than two draws by July 9, 2025. The proceeds from the Incremental Term Loan and the Incremental Delayed Draw Term Loan will be used for new acquisitions, working capital, capital expenditures and other general corporate purposes. The Incremental Term Loan, along with the existing term loan under the Credit Agreement, requires quarterly repayments of principal amounts ranging from $3.75 million to $11.25 million, which commenced on March 31, 2025, with a final payment of principal and interest due on July 12, 2027. The LLC will pay to the Administrative Agent, for the account of each Lender in accordance with its applicable percentage of the Incremental Delayed Draw Term Loan Commitments, a commitment fee equal to the product of (i) a rate ranging from 0.25% to 0.45% per annum, based on the Consolidated Total Leverage Ratio, times (ii) the actual daily amount by which the Incremental Delayed Draw Term Loan Commitments exceed the Incremental Delayed Draw Term Loan. Such commitment fee only accrues during the period when the Incremental Delayed Draw Term Loan Commitments are available (the “Availability Period”), which is the period from January 9, 2025 to the earlier of (a) July 9, 2025 and (b) the date on which the Incremental Delayed Draw Term Loan Commitments have been terminated. Commencing on the first quarter ending after the earlier of (i) the date Incremental Delayed Draw Term Loan is fully drawn and (ii) the end of the Availability Period, the LLC will be required to make quarterly repayments of principal amounts ranging from 0.625% to 1.875% of the drawn Incremental Delayed Draw Term Loan (which amounts will be reduced by certain prepayment, if any), unless such loan is accelerated sooner. The Amendment contains customary representations and warranties. All other material terms and conditions of the Credit Agreement were unchanged. Please see "Note Q – Subsequent Events” for additional information concerning the 2022 Credit Facility. Senior Notes 2032 Senior Notes On November 17, 2021, the Company consummated the issuance and sale of $300 million aggregate principal amount of our 5.000% Senior Notes due 2032 (the “2032 Notes” or "2032 Senior Notes") offered pursuant to a private offering to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933 (the "Securities Act"), and to non-U.S. persons under Regulation S under the Securities Act. The 2032 Notes were issued pursuant to an indenture, dated as of November 17, 2021 (the “2032 Notes Indenture”), between the Company and U.S. Bank National Association, as trustee (the “Trustee”). The 2032 Notes bear interest at the rate of 5.000% per annum and will mature on January 15, 2032. Interest on the 2032 Notes is payable in cash on January 15 and July 15 of each year, beginning on July 15, 2022. The proceeds from the sale of the 2032 Notes were used to repay a portion of our debt outstanding under the 2021 Revolving Credit Facility. Please see "Note Q – Subsequent Events” for additional information concerning the 2032 Senior Notes. 2029 Senior Notes On March 23, 2021, we consummated the issuance and sale of $1,000 million aggregate principal amount of our 5.250% Senior Notes due 2029 (the "2029 Notes" or "2029 Senior Notes") offered pursuant to a private offering to qualified institutional buyers in accordance with Rule 144A under the Securities Act, and to non-U.S. persons under Regulation S under the Securities Act. The 2029 Notes were issued pursuant to an indenture, dated as of March 23, 2021 (the “2029 Notes Indenture”), between the Company and U.S. Bank National Association, as trustee (the "Trustee"). The 2029 Notes bear interest at the rate of 5.250% per annum and will mature on April 15, 2029. Interest on the 2029 Notes is payable in cash on April 15th and October 15th of each year. The first interest payment date on the 2029 Senior Notes was October 15, 2021. The 2029 Notes are general unsecured obligations of the Company and are not guaranteed by our subsidiaries. Please see "Note Q – Subsequent Events” for additional information concerning the 2029 Senior Notes. Covenants The Company is subject to certain customary affirmative and restrictive covenants arising under the 2022 Credit Facility. The following table reflects actual and required financial ratios as of March 31, 2025 included as part of the affirmative covenants in the 2022 Credit Facility:
Description of Required Covenant Ratio |  | Covenant Ratio Requirement |  | Actual Ratio
Fixed Charge Coverage Ratio |  | Greater than or equal to 1.50: 1.00 |  | 0.62:1:00
Total Secured Debt to EBITDA Ratio |  | Less than or equal to 3.50: 1.00 |  | 1.69:1:00
Total Debt to EBITDA Ratio |  | Less than or equal to 5.00: 1.00 |  | 6.46:1:00
Borrowings under our 2022 Credit Facility are subject to certain conditions and customary events of default, including, without limitation, failure to make payments, cross-default to certain other debt, breaches of covenants, breaches of representations and warranties, a change in control, certain monetary judgments, and bankruptcy and ERISA events. Upon any such event of default, the principal amount of any unpaid loans and all other obligations under the 2022 Credit Facility may be declared immediately due and payable and any letters of credit then outstanding may be required to be cash collateralized, and the Agent and the Lenders may exercise any rights or remedies available to them under the 2022 Credit Facility. The Company was not in compliance with such financial covenants as of March 31, 2025 and the year ended December 31, 2024 and had not received forbearance or other relief from its lenders as of those dates. As a result, the lenders had the contractual right on those dates to accelerate the Company’s outstanding obligations under the 2022 Credit Facility. Accordingly, the Company has classified outstanding borrowings under the 2022 Term Loan and 2022 Revolving Credit facility as current at March 31, 2025 and December 31, 2024 in the Consolidated Financial Statements. Furthermore, because the 2029 Notes and 2032 Notes may have been subject to acceleration had the lenders under the 2022 Credit Facility exercised their acceleration rights, the 2029 Notes and 2032 Notes have also been classified as current at March 31, 2025 and December 31, 2024 in the Condensed Consolidated Financial Statements. Lugano Financing Arrangements Lugano entered into various financing arrangements with third parties that were not recorded in the financial statements of Lugano as debt. Pursuant to some of these agreements, the third-party investors agreed to provide a specific amount of cash to purportedly jointly invest with Lugano in a specified jewel or piece of jewelry. The arrangements provided that Lugano would be responsible for purchasing, holding and insuring the jewelry until Lugano found a buyer or the third-party investor otherwise requested a return of their cash contribution. According to the terms of the arrangement, the third-party investors made an upfront payment to Lugano in exchange for the right to receive a return of their initial investment plus either (i) a portion of the profit when the jewelry was sold to a buyer, or (ii) interest on their invested cash if the third-party requested to liquidate their investment prior to the sale of the specified jewelry to a buyer. Lugano also entered into financing arrangements that were not specific to the acquisition of a specified jewel or piece of jewelry. These arrangements involved cash receipts that were recorded as payment of accounts receivable balances or customer deposits and cash payments that were recorded as inventory purchases or purchase deposits. Other financing arrangements with third parties involved the receipt of cash by Lugano from third parties and repayment of cash to those third parties that was not associated with purported investment in a specified jewel or piece of jewelry. In connection with the Lugano Investigation, the Company determined that the inventory and sales transactions recorded in connection with these financing agreements were invalid because they were inconsistent with the underlying substance of the agreements. These financing arrangements represent debt and the financing arrangements and related interest expense have been recorded in the restated consolidated financial statements. Interest expense was determined based on documentation related to the underlying arrangement or, when no documentation existed related to the financing arrangement, imputed based on various factors associated with the arrangement. Certain financing arrangements that were entered into during 2024 and the three months ended March 31, 2025 contained unique interest terms reflecting a guaranteed return on the arrangements that have resulted in a calculation of interest expense at a higher rate than the historical effective interest rate on the Lugano financing arrangements. The Lugano financing arrangements have been classified as current in the accompanying condensed consolidated balance sheets for the periods ended March 31, 2025 and December 31, 2024. The following table provides the Lugano financing arrangements and effective interest rates at March 31, 2025 and December 31, 2024 (in thousands):
| March 31, 2025 |  | December 31, 2024
|  |  | (As Restated)
| Effective Interest Rate |  | Amount |  | Effective Interest Rate |  | Amount
Lugano financing arrangements | 19.54 | % |  | $ | 181,682 |  | 11.43 | % |  | $ | 169,765
The following table provides the Company’s outstanding long-term debt and effective interest rates at March 31, 2025 and December 31, 2024 (in thousands):
| March 31, 2025 |  | December 31, 2024
| Effective Interest Rate |  | Amount |  | Effective Interest Rate |  | Amount
2029 Senior Notes | 5.25 | % |  | $ | 1,000,000 |  |  | 5.25 | % |  | $ | 1,000,000 |
2032 Senior Notes | 5.00 | % |  | 300,000 |  |  | 5.00 | % |  | 300,000 |
2022 Term Loan | 6.73 | % |  | 571,250 |  |  | 7.60 | % |  | 375,000 |
2022 Revolving Credit Facility |  |  | — |  |  | 7.62 | % |  | 110,000 |
Less: Unamortized debt issuance costs |  |  | (11,186) |  |  |  |  | (10,710) |
Total debt |  |  | $ | 1,860,064 |  |  |  |  | $ | 1,774,290 |
Less: Current Portion, term loan facilities |  |  | (1,860,064) |  |  |  |  | (1,774,290) |
Long-term debt |  |  | $ | — |  |  |  |  | $ | — |
The following table reflects the annual maturities of the Company's debt obligations, including the Lugano financing arrangements which are classified as current. As noted above, the Company was not in compliance with certain of its covenants under the 2022 Credit Facility as of the quarter ended March 31, 2025 and the year ended December 31, 2024 and as a result, the 2022 Revolving Credit Facility, the 2022 Term Loan and the 2029 and 2032 Senior Notes have been classified as current in the accompanying Condensed Consolidated Balance Sheets at March 31, 2025 and December 31, 2024. Annual maturities of the Company's debt obligations are as follows (in thousands):
Remainder of 2025 (1) |  | $ | 200,432 |
2026 |  | 37,500 |
2027 |  | 515,000 |
2028 |  | — |
2029 |  | 1,000,000 |
2030 and thereafter |  | 300,000 |
|  | $ | 2,052,932 |
(1) Debt obligations in 2025 include $181.7 million in Lugano financing arrangements, which are classified as current in the accompanying condensed consolidated balance sheet. The Senior Notes consisted of the following carrying value and estimated fair value (in thousands):
|  |  |  |  |  | Fair Value Hierarchy Level |  | March 31, 2025
|  | Maturity Date |  | Rate |  |  | Carrying Value |  | Fair Value
2032 Senior Notes |  | January 15, 2032 |  | 5.000 | % |  | 2 |  | $ | 300,000 |  |  | $ | 268,500 |
2029 Senior Notes |  | April 15, 2029 |  | 5.250 | % |  | 2 |  | $ | 1,000,000 |  |  | $ | 940,000 |
Debt Issuance Costs Deferred debt issuance costs represent the costs associated with the issuance of the Company's financing arrangements. Since the Company can borrow, repay and reborrow principal under the 2022 Revolving Credit Facility, the debt issuance costs associated with the 2022 Revolving Credit Facility have been classified as other non-current assets in the accompanying condensed consolidated balance sheet. The debt issuance costs associated with the 2022 Term Loan and Amendment and Senior Notes are classified as a reduction of long-term debt in the accompanying condensed consolidated balance sheets. The Company recorded $1.2 million in deferred debt issuance costs related to the Amendment of the 2022 Credit Facility in the three months ended March 31, 2025. The following table summarizes debt issuance costs at March 31, 2025 and December 31, 2024, and the balance sheet classification in each of the periods presented (in thousands):
| March 31, 2025 |  | December 31, 2024
Deferred debt issuance costs | $ | 33,725 |  |  | $ | 32,526 |
Accumulated amortization | (18,922) |  |  | (17,797) |
Deferred debt issuance costs, net | $ | 14,803 |  |  | $ | 14,729 |
Balance sheet classification: |  |  |
Other noncurrent assets | $ | 3,617 |  |  | $ | 4,019 |
Current portion, long-term debt | 11,186 |  |  | 10,710 |
| $ | 14,803 |  |  | $ | 14,729 |

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