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LONG-TERM DEBT | 9 Months Ended
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Sep. 30, 2024
LONG-TERM DEBT |
LONG-TERM DEBT | 7. LONG-TERM DEBT 2023 CoBank Credit Facility On July 13, 2023, the Company, along with certain of its subsidiaries as guarantors, entered into a new Credit Agreement with CoBank, ACB and a syndicate of other lenders (as may be amended from time to time, the “2023 CoBank Credit Facility”). On July 10, 2024, the Company amended its credit facility to add certain subsidiaries as guarantors and to provide further flexibility for the Company to take on certain grant and government program obligations. The 2023 CoBank Credit Facility provides for a five-year $170 million revolving credit facility (the “2023 CoBank Revolving Loan”) and a six-year $130 million term loan facility (the “2023 CoBank Term Loan”). The Company may use (i) up to $25 million under the 2023 CoBank Credit Facility for letters of credit, and (ii) up to $20 million under a swingline sub-facility. Upon the closing of the 2023 CoBank Credit Facility, the Company drew all of the 2023 CoBank Term Loan and approximately $13.6 million of the 2023 CoBank Revolving Loan. These borrowings were used to repay $139.5 million of debt outstanding under the 2019 CoBank Credit Facility at close. The 2023 CoBank Term Loan must be repaid in quarterly principal payments in the amounts set forth below, with the outstanding principal balance maturing on July 13, 2029. The 2023 CoBank Revolving Loan may be repaid at any time on or prior to its maturity on July 13, 2028. All amounts outstanding under the 2023 CoBank Credit Facility will be due and payable upon the earlier of the maturity date or the acceleration of the loans and commitments upon an event of default. ​
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2023 CoBank Term Loan Quarterly Payment Dates | 2023 CoBank Term Loan Quarterly Repayments
December 31, 2023 – June 30, 2025 | $812,500 (2.5% per annum)
September 30, 2025 – June 30, 2026 | $1,625,000 (5% per annum)
September 30, 2026 – June 30, 2029 | $2,437,500 (7.5% per annum)
​ Amounts borrowed under the 2023 CoBank Credit Facility bear interest at a rate equal to, at the Company’s option, either (i) the secured overnight financing rate as administered by the Federal Reserve Bank of New York (SOFR) plus an applicable margin ranging between 2.00% to 3.75% for the 2023 CoBank Term Loan or 1.75% to 3.50% for Revolving Loans or (ii) a base rate plus an applicable margin ranging from 1.00% to 2.75% for the Term Loan or 0.75% to 2.50% for the 2023 CoBank Revolving Loans. Swingline loans will bear interest at the base rate plus the applicable margin for base rate loans. The base rate is equal to the higher of (i) 1.00% plus the one-month SOFR rate (ii) the federal funds effective rate (as defined in the 2023 CoBank Credit Agreement) plus 0.50% per annum; and (iii) the prime rate (as defined in the 2023 CoBank Credit Agreement). The applicable margin is determined based on the ratio (as further defined in the 2023 CoBank Credit Agreement) of the Company’s maximum Total Net Leverage Ratio. Under the terms of the 2023 CoBank Credit Agreement, the Company must also pay a fee ranging from 0.25% to 0.50% on the average daily unused portion of the 2023 CoBank Credit Facility over each calendar quarter. The 2023 CoBank Credit Agreement contains a financial covenant (as further defined in the 2023 CoBank Credit Agreement) that imposes a maximum Total Net Leverage Ratio, as well as customary representations, warranties and covenants, including covenants limiting additional indebtedness, liens, guaranties, mergers and consolidations, substantial asset sales, investments and loans, sale and leasebacks, transactions with affiliates and fundamental changes. The maximum Total Net Leverage Ratio is measured each fiscal quarter and is required to be less than or equal to 3.25 to 1.0. The 2023 CoBank Credit Agreement provides for events of default customary for credit facilities of this type, including but not limited to non-payment, defaults on other debt, misrepresentation, breach of covenants, representations and warranties, insolvency and bankruptcy. The Company capitalized $4.5 million of fees associated with the 2023 CoBank Credit Facility which are being amortized over the life of the debt and $3.5 million were unamortized as of September 30, 2024. The Company had $126.8 million outstanding under the 2023 CoBank Term Loan as of September 30, 2024. Under the 2023 CoBank Revolving Loan, the Company had $69.1 million outstanding and $100.9 million of availability as of September 30, 2024. The Company was in compliance with all financial covenants as of September 30, 2024. In October 2023, the Company entered into a two year, forward starting 1-month floating to fixed SOFR interest rate swap agreement. The swap was effective November 13, 2023 in a non-amortizing notional amount of $50.0 million, has a fixed SOFR rate of 4.896% and matures on November 13, 2025. The swap agreement had a fair value of $(0.7) million and $(0.5) million as of September 30, 2024 and December 31, 2023. 2019 CoBank Credit Facility On April 10, 2019, the Company entered into a credit facility, with CoBank, ACB and a syndicate of other lenders (as amended, the “2019 CoBank Credit Facility”). The 2019 CoBank Credit Facility provided for a $200 million revolving credit facility that included (i) up to $75 million for standby or trade letters of credit and (ii) up to $10 million under a swingline sub-facility. In connection with the execution of the 2023 CoBank Credit Facility, as defined above, outstanding borrowings under the 2019 CoBank Credit Facility were repaid in full. Amounts borrowed under the 2019 CoBank Credit Facility bore interest at a rate equal to, at the Company’s option, either (i) the London Interbank Offered Rate (“LIBOR”) plus an applicable margin ranging between 1.25% to 2.25% or (ii) a base rate plus an applicable margin ranging from 0.25% to 1.25%. Swingline loans bore interest at the base rate plus the applicable margin for base rate loans. The base rate was equal to the higher of (i) 1.00% plus the higher of (x) LIBOR for an interest period of one month and (y) LIBOR for an interest period of one week; (ii) the Federal Funds Effective Rate (as defined in the 2019 CoBank Credit Facility) plus 0.50% per annum; and (iii) the Prime Rate (as defined in the 2019 CoBank Credit Facility). The applicable margin was determined based on the Total Net Leverage Ratio (as defined in the 2019 CoBank Credit Facility). Under the terms of the 2019 CoBank Credit Facility, the Company also paid a commitment fee ranging from 0.150% to 0.375% of the average daily unused portion of the 2019 CoBank Credit Facility over each calendar quarter. Letter of Credit Facility On November 14, 2022, the Company entered into a General Agreement of Indemnity to issue performance Standby Letters of Credit on behalf of the Company and its subsidiaries. As of September 30, 2024, $30.9 million of Standby Letters of Credit had been issued under this agreement. 2024 Alaska Credit Facility On August 29, 2024, Alaska Communications (the “Borrower”) entered into a Credit Agreement (the “2024 Alaska Credit Agreement”) with Bank of America, N.A., as administrative agent, and a syndicate of lenders (the “2024 Alaska Credit Facility”), to provide debt financing in the form of a $300 million, five-year secured term loan facility (the “2024 Alaska Term Facility”) and a $90 million revolving facility (the “2024 Alaska Revolving Facility”). The 2024 Alaska Term Facility proceeds were used (a) to refinance Alaska Communications’ outstanding indebtedness under the 2022 Alaska Credit Facility, as defined below, in the amount of approximately $279 million plus accrued and unpaid interest, (b) to pay fees and expenses associated with the completion of this transaction, and (c) for general corporate purposes. As of September 30, 2024, $300.0 million was outstanding under the 2024 Alaska Term Facility. Proceeds from the 2024 Alaska Revolving Facility are to be used, subject to certain limitations, (a) to issue letters of credit to replace or backstop existing letters of credit of Alaska Communications and its direct and indirect subsidiaries, and (b) for working capital purposes, capital expenditures and other general corporate purposes. As of September 30, 2024, there were no outstanding borrowings under the 2024 Alaska Revolving Facility and $1.3 million of letters of credit were issued. As a result, $88.7 million was available under the 2024 Alaska Revolving Facility as of September 30, 2024. The 2024 Alaska Credit Facility also provides for incremental term loans (“Incremental Term Loans”) up to an aggregate principal amount of the greater of $91 million and Alaska Communications’ trailing consolidated twelve-month EBITDA (as defined in the 2024 Alaska Credit Agreement), subject to the Borrower meeting certain conditions. In connection with the 2024 Alaska Credit Facility, the Company incurred $6.9 million of fees and rolled over $2.1 million of fees from the 2022 Alaska Credit Facility to be amortized over the life of the debt. Additionally, the Company expensed $3.8 million of costs as a transaction-related charge and $0.7 million as a loss on extinguishment of debt included in other expense, within our statement of operations, during the three months ended September 30, 2024. The maturity date for the 2024 Alaska Credit Facility is August 29, 2029. Amounts outstanding under the 2024 Alaska Credit Facility bear an interest rate of the following: ​
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Tier / Level | Alaska Communications Total Net Leverage Ratio | Applicable Margin for Term SOFR Loans and L/C Participation Fees | Applicable Margin for Base Rate Loans and Reimbursement Obligations | Applicable Margin for Commitment Fees
I | Greater than 4.00:1.00 | 4.50% | 3.50% | 0.40%
II | Less than or equal to 4.00:1.00 but greater than 3.25:1.00 | 4.00% | 3.00% | 0.35%
III | Less than or equal to 3.25:1.00 but greater than 2.50:1.00 | 3.50% | 2.50% | 0.30%
IV | Less than or equal to 2.50:1.00 | 3.00% | 2.00% | 0.25%
​ Principal payments on the 2024 Alaska Term Facility are due quarterly commencing in the fourth quarter of 2026 in quarterly amounts as follows: from the fourth quarter of 2026 through the third quarter of 2027, $1,875,000; and from the fourth quarter of 2027 through the second quarter of 2029, $3,750,000. The remaining unpaid balance is due on the final maturity date. Payments on any principal amount outstanding under the Incremental Term Loans will be made in installments, on the dates and in the amounts set forth in the applicable amendment for such Incremental Term Loans. The Borrower may prepay all revolving loans under the 2024 Alaska Revolving Facility at any time without premium or penalty (other than any customary SOFR breakage costs), subject to certain notice requirements and balance restrictions. The Borrower is required to maintain financial ratios, based on a calculation of EBITDA defined in the 2024 Alaska Credit Agreement, including (a) a maximum Consolidated Net Total Leverage Ratio of 4.75:1.00, stepping down to 4.50:1.00 beginning with the third quarter of 2027, and stepping down to 4.25:1.00 beginning with the third quarter of 2028; and (b) a minimum Consolidated Fixed Charge Coverage Ratio of not less than 1.25:1.00. Customary covenants restricting the incurrence or assumption of debt, granting or assuming liens, declaring dividends and making other restricted payments, making investments, dispositions, engaging in transactions with affiliates, changes to the nature of business, modifying organizational documents and material agreements, entering into sale and leaseback transactions, amending or making prepayments on certain subordinated debt, and entering into mergers and acquisitions. The 2024 Alaska Credit Facility is secured by substantially all of the personal property and certain material real property owned by Alaska Communications Systems Holdings, the parent company of Alaska Communications (“Holdings”), the Borrower, and its wholly owned subsidiaries, excluding, among other things, certain federal and state licenses where a pledge is prohibited by applicable law or is permitted only with the consent of a governmental authority that has not been obtained. The 2024 Alaska Credit Agreement contains usual and customary affirmative and negative covenants of the parties for credit facilities of this type or as otherwise deemed appropriate by the administrative agent, subject to customary exceptions and materiality standards. The 2024 Alaska Credit Agreement also contains certain customary covenants and events of default, as well as, in the event of an occurrence of an “Event of Default,” customary remedies for the lenders, including the acceleration of any amounts outstanding under the 2024 Alaska Credit Facility. Holdings and its wholly owned subsidiaries are guarantors of the Borrower’s obligations under the 2024 Alaska Credit Agreement. The Company is not a guarantor under the 2024 Alaska Credit Agreement, and the lenders have no recourse against the Company in the event of an occurrence of an “Event of Default.” Additionally, the 2024 Alaska Credit Agreement includes certain customary conditions that must be met for the Borrower to borrow under the 2024 Alaska Credit Agreement from time to time. 2022 Alaska Credit Facility On December 23, 2022, Alaska Communications entered into a Credit Agreement (the “2022 Alaska Credit Facility”) with Fifth Third Bank, National Association, as Administrative Agent, and a syndicate of lenders to provide a Revolving Credit Commitment of $75.0 million (the “2022 Alaska Revolving Facility”) and Term Loan Commitment of $230.0 million (the “2022 Alaska Term Loan”). The key terms and conditions of the 2022 Alaska Credit Facility included the following:
| ● | Amounts outstanding bore an interest rate of the forward-looking SOFR rate with a one-month interest period, plus the SOFR Spread Adjustment of 10 basis points, plus a margin ranging from 3.00% to 4.00% based on Alaska Communications’ Consolidated Total Net Leverage Ratio (as defined in the Credit Agreement) or at an alternate base rate at a margin that is 1% lower than the counterpart SOFR margin;
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| ● | Principal repayments of $1.4 million were made quarterly commencing with the fourth quarter of 2023;
| ● | Alaska Communications was required to maintain financial ratios as defined in the 2022 Alaska Credit Facility, including (a) a maximum Consolidated Net Total Leverage Ratio of 4.00 to 1, stepping down to 3.75 to 1 beginning with the second quarter of 2024; and (b) a minimum Consolidated Fixed Charge Coverage Ratio of not less than 1.25 to 1. In addition to these financial ratios, Alaska Communications was subject to customary representations, warranties and covenants, including limitations on additional indebtedness, liens, consolidations, mergers, assets sales, advances, investments and loans, transactions with affiliates, sale and leaseback transactions, subordinated indebtedness, and changes in the nature of its business; and
| ● | The 2022 Alaska Credit Facility was non-recourse to the Company and is secured by substantially all of the personal property and certain material real property owned by Alaska Communications.
On August 29, 2024, all outstanding amounts under the 2022 Alaska Credit Facility were repaid in full using the proceeds received upon the completion of the 2024 Alaska Credit Facility. Alaska Term Facility On June 15, 2022, Holdings entered into a secured lending arrangement with Bristol Bay Industrial, LLC (the “Alaska Term Facility”). The Alaska Term Facility provided for a secured delayed draw term loan in an aggregate principal amount of up to $7.5 million and the proceeds were used to pay certain invoices from a contractor for work performed in connection with a fiber build. Interest on the Alaska Term Facility accrued at a fixed rate of 4.0% and scheduled quarterly payments of principal commenced on March 31, 2023. The Alaska Term Facility was repaid in full during the three months ended June 30, 2024. Alaska Interest Rate Swap Agreements In November 2023, Alaska Communications entered into two forward starting 1-month floating to fixed SOFR interest rate swap agreements. The total non-amortizing notional amount of the agreements is $200.0 million, with fixed SOFR rates of 4.8695% and 4.8980% and both agreements mature on June 30, 2025. The swap agreements had a fair value of $(1.3) million and $(1.2) million as of September 30, 2024 and December 31, 2023, respectively. FirstNet Receivables Credit Facility On March 26, 2020, Commnet Finance, a wholly owned subsidiary of Commnet Wireless, entered into a receivables credit facility with the Company, Commnet Wireless, and CoBank, ACB (the “Receivables Credit Facility”). The Receivables Credit Facility provides for a senior secured delayed draw term loan in an aggregate principal amount of up to $75.0 million and the proceeds may be used to acquire certain receivables from Commnet Wireless. The receivables to be financed and sold under the Receivables Credit Facility, which provide the loan security, relate to the obligations of AT&T under the FirstNet Agreement. On December 19, 2023, CoBank amended the Receivables Credit Facility and extended the delayed draw period to December 31, 2024. The maturity date for each loan will be set by CoBank and will match the weighted average maturity of the certain receivables financed. Interest on the loans accrue at a fixed annual interest rate to be quoted by CoBank. The Receivables Credit Facility contains customary events of termination, representations and warranties, affirmative and negative covenants and events of default customary for facilities of this type. As of September 30, 2024, Commnet Wireless had $46.6 million outstanding, of which $7.9 million was classified as being current on the Company’s balance sheet, and $9.2 million of availability under the Receivables Credit Facility. Commnet Wireless capitalized $0.8 million in fees associated with the Receivables Credit Facility which are being amortized over the life of the debt and $0.4 million were unamortized as of September 30, 2024. One Communications (Guyana) Credit Facilities On October 12, 2022, One Communications (Guyana) f/k/a GTT received approval from Republic Bank (Guyana) Limited for a $2.9 million term facility and a $5.7 million overdraft facility (the “Guyana Credit Facilities”). The Guyana Credit Facilities are secured by real estate assets and carry a fixed interest rate of 7.5% which will be reviewed by the bank from time to time and subject to change at the bank’s discretion. The term facility is repayable over five years in equal monthly installments of principal and interest, commencing one month after funds are advanced. The overdraft facility will expire on February 28, 2025. As of September 30, 2024, there were no outstanding amounts under the GTT Credit Facilities. Sacred Wind Term Debt In connection with the Sacred Wind acquisition completed on November 7, 2022, the Company assumed $31.6 million of term debt (the “Sacred Wind Term Debt”) with the United States of America acting through the Administrator of the Rural Utilities Service (“RUS”). The loan agreements are dated as of October 23, 2006 and March 17, 2016. RUS provides financial assistance in the form of loans under the Rural Electrification Act of 1936 to furnish or improve telecommunications and/or broadband services in rural areas. The Sacred Wind Term Debt is secured by substantially all assets of Sacred Wind and an underlying mortgage to the United States of America. These mortgage notes are to be repaid in equal monthly installments covering principal and interest beginning after date of issue and expiring by 2035. The Sacred Wind Term Debt contains certain restrictions on the declaration or payment of dividends, redemption of capital stock or investment in affiliated companies without the consent by the RUS noteholders. The agreements also contain a financial covenant which Sacred Wind was not in compliance with as of December 31, 2021. Sacred Wind submitted a corrective action plan to comply with the financial covenant as of December 31, 2025. On May 5, 2022, Sacred Wind’s corrective action plan was accepted by the RUS. As of September 30, 2024, the Company was in compliance with that corrective action plan. As of September 30, 2024, $25.8 million was outstanding under the Sacred Wind Term Debt. Of that amount, $3.4 million was current and $22.4 million was long term. The mortgage notes carry fixed interest rates ranging from 0.88% to 5.0%. Viya Debt The Company, and certain of its subsidiaries, have entered into a $60.0 million loan agreement (the “Viya Debt”) with Rural Telephone Finance Cooperative (“RTFC”). The Viya Debt agreement contains customary representations, warranties, and affirmative and negative covenants (including limitations on additional debt, guaranties, sale of assets and liens) and a financial covenant that limits the maximum ratio of indebtedness to annual operating cash flow to 3.5 to 1.0 (the “Net Leverage Ratio”). This covenant is tested on an annual basis at the end of each fiscal year. Interest is paid quarterly at a fixed rate of 4.0% per annum and principal repayment is not required until maturity on July 1, 2026. Prepayment of the Viya Debt may be subject to a fee under certain circumstances. The debt is secured by certain assets of the Viya subsidiaries and is guaranteed by the Company. The Company paid a fee of $0.9 million in 2016 to lock the interest rate at 4% per annum over the term of the Viya Debt. The fee was recorded as a reduction to the Viya Debt carrying amount and is being amortized over the life of the loan. As of September 30, 2024, $60.0 million of the Viya Debt remained outstanding and $0.2 million of the rate lock fee was unamortized. On May 5, 2022, RTFC agreed to amend the Net Leverage Ratio to 7.0 to 1.0 through the maturity date of July 1, 2026. The Ratio is tested annually, and the Company was in compliance with the Net Leverage Ratio as of December 31, 2023. Debt Maturity The table below summarizes the annual maturities of the Company’s debt instruments (amounts in thousands):
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​ | US | ​ | International | ​ | Corporate and | ​ | Total | Receivable
Amounts Maturing During | Telecom | ​ | Telecom | ​ | Other | ​ | Debt | Credit Facility
October 1, 2024 through December 31, 2024 | $ | 919 | ​ | $ | — | ​ | $ | 813 | ​ | $ | 1,732 | $ | 1,950
Year ending December 31, 2025 | ​ | 3,469 | ​ | ​ | — | ​ | ​ | 4,875 | ​ | ​ | 8,344 | ​ | 8,027
Year ending December 31, 2026 | ​ | 5,469 | ​ | ​ | 60,000 | ​ | ​ | 8,125 | ​ | ​ | 73,594 | ​ | 8,405
Year ending December 31, 2027 | ​ | 13,098 | ​ | ​ | — | ​ | ​ | 9,750 | ​ | ​ | 22,848 | ​ | 8,803
Year ending December 31, 2028 | ​ | 18,858 | ​ | ​ | — | ​ | ​ | 78,870 | ​ | ​ | 97,728 | ​ | 9,224
Thereafter | ​ | 283,942 | ​ | ​ | — | ​ | ​ | 93,437 | ​ | ​ | 377,379 | ​ | 10,198
Total | ​ | 325,755 | ​ | ​ | 60,000 | ​ | ​ | 195,870 | ​ | ​ | 581,625 | ​ | 46,607
Debt Discounts | ​ | (9,083) | ​ | ​ | (175) | ​ | ​ | (3,461) | ​ | ​ | (12,719) | ​ | (398)
Book Value as of September 30, 2024 | $ | 316,672 | ​ | $ | 59,825 | ​ | $ | 192,409 | ​ | $ | 568,906 | $ | 46,209
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