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Debt
 12 Months Ended
Dec. 31, 2021
Debt Disclosure [Abstract]  
Debt Disclosure [Text Block]

Note 10—Debt

 

Convertible senior notes

 

Convertible senior notes consist of the following (in thousands):

 

   

December 31, 2021

    

December 31, 2020

  
   

Principal/

    

Debt

            

Principal/

    

Debt

          
   

Fair Value

    

Issuance

    

Net

    

Fair Value

    

Issuance

    

Net

  
   

Amount

    

Costs

    

Amount

    

Amount

    

Costs

    

Amount

  

3.25% convertible senior notes due 2023 *

   $ —     $ —     $ —     $ 34,134     $ —     $ 34,134  

 

*The amounts presented for the 3.25% convertible senior notes due 2023 within the table represent the fair value as of December 31, 2020 (see Note 16 - Fair Value Measurements). The principal amount of these notes is $22.9 million as of December 31, 2020. The accrued, but unpaid, payment-in-kind interest is $0.9 million as of December 31, 2020.

 

In August 2019, the Company entered into and consummated multiple, binding definitive agreements (collectively, the “Recapitalization Transaction”) among Wells Fargo, Oasis Investments II Master Fund Ltd. and an ad hoc group of holders of the Company’s 4.875% convertible senior notes due 2020 ( the “Investor Parties”) to recapitalize the Company’s balance sheet, including the extension to the Company of incremental liquidity and at least three-year extensions of substantially all of the Company’s outstanding convertible debt obligations and revolving credit facility. The Company’s Term Loan Agreement entered into with Great American Capital Partners (See Note 11 – Credit Facilities) was paid in full and terminated in connection with the Recapitalization Transaction.

 

In connection with the Recapitalization Transaction, the Company issued (i) amended and restated notes with respect to the Company’s $21.6 million Oasis Note issued on November 7, 2017, and the $8.0 million Oasis Note issued on July 26, 2018 (together, the “Existing Oasis Notes”), and (ii) a new $8.0 million convertible senior note having the same terms as such amended and restated notes (the "New $8.0 million Oasis Note" and collectively, the “New Oasis Notes” or the "3.25% convertible senior notes due 2023"). Interest on the New Oasis Notes is payable on each May 1 and November 1 until maturity and accrues at an annual rate of (i) 3.25% if paid in cash or 5.00% if paid in stock plus (ii) 2.75% payable in kind. The New Oasis Notes mature 91 days after the amounts outstanding under the 2019 Recap Term Loan are paid in full, and in no event later than July 3, 2023.

 

Excluding the impact of the Reverse Stock Split, the New Oasis Notes provide, among other things, that the initial conversion price is $1.00. The conversion price will be reset on each February 9 and August 9, starting on February 9, 2020 (each, a “reset date”) to a price equal to 105% of the 5-day VWAP preceding the applicable reset date. Under no circumstances shall the reset result in a conversion price be below the greater of (i) the closing price on the trading day immediately preceding the applicable reset date and (ii) 30% of the stock price as of the Transaction Agreement Date, or August 7, 2019, and will not be greater than the conversion price in effect immediately before such reset. The Company may trigger a mandatory conversion of the New Oasis Notes if the market price exceeds 150% of the conversion price under certain circumstances. The Company may redeem the New Oasis Notes in cash if a person, entity or group acquires shares of the Company’s Common Stock, par value $0.001 per share (the “Common Stock”), and as a result owns at least 49% of the Company’s issued and outstanding Common Stock. In connection with the issuance of the New Oasis Notes, the Company recognized a loss on extinguishment of the Existing Oasis Notes of approximately $10.4 million. On February 9, 2020, excluding the impact of the Reverse Stock Split, the conversion price of the New Oasis Notes reset to $1.00 per share ($10.00 per share after reverse stock split). On August 9, 2020, the conversion price of the New Oasis Notes reset to $5.647. On February 9, 2021, the conversion price of the New Oasis Notes recalculated and remained unchanged at $5.647.

 

During 2020, $15.1 million of the New Oasis Notes (including $0.5 million in PIK interest) were converted for 2,126,780 shares of common stock. As a result, the Company recorded an increase to additional paid-in capital of $20.2 million.

 

During 2021, $24.0 million of the New Oasis Notes (including $1.2 million in PIK interest) were converted for 4,246,828 shares of common stock. As a result, the Company recorded an increase to additional paid-in capital of $50.8 million.

 

A director of the Company is a portfolio manager at Oasis Management.

 

The Company has elected to measure and present the New Oasis Notes at fair value using Level 3 inputs and as a result, recognized a loss of $16.4 million, $2.3 million and $5.1 million for the year ended December 31, 2021, 2020 and 2019, respectively, related to changes in the fair value of the 3.25% convertible senior notes due 2023.

 

In June 2014, the Company sold an aggregate of $115.0 million principal amount of 4.875% convertible senior notes due 2020 (the “2020 Notes”). The 2020 Notes are senior unsecured obligations of the Company paying interest semi-annually in arrears on June 1 and December 1 of each year at a rate of 4.875% per annum and will mature on June 1, 2020. Excluding the impact of the Reverse Stock Split, the initial conversion rate for the 2020 Notes was 103.7613 shares of the Company’s common stock per $1,000 principal amount of notes, equivalent to an initial conversion price of approximately $9.64 per share of common stock, subject to adjustment in certain events. In January 2016, the Company repurchased and retired an aggregate of $2.0 million principal amount of the 2020 Notes. In addition, approximately $0.1 million of the unamortized debt issuance costs were written off and a $0.1 million gain was recognized in conjunction with the retirement of the 2020 Notes.

 

In connection with the Recapitalization Transaction, the 2020 Notes with a face amount of $111.1 million of the total $113.0 million that were outstanding at the time of the Recapitalization Transaction were refinanced and the maturity dates were extended. Of the refinanced amount, $103.8 million was refinanced with the Investor Parties through the issuance of the New Common Equity (as defined below), the New Preferred Equity (as defined below) (see Note 15 - Common Stock and Preferred Stock) and new secured term debt that matures in February 2023 (see Term Loan section below). Additionally, $1.0 million of accrued interest was refinanced with the Investor Parties. The remaining refinanced amount of $7.3 million was exchanged into the new $8.0 million Oasis Note discussed above. In connection with the issuance of the new secured term loan, as well as the New Common Equity and the New Preferred Equity, the Company recognized a loss on extinguishment of the 2020 Notes refinanced with the Investor Parties of approximately $2.4 million, and wrote off $0.7 million of unamortized debt issuance costs related to the 2020 Notes during the year ending December 31, 2019.

 

The remaining $1.9 million principal amount of the 2020 Notes were redeemed at par at maturity on June 1, 2020.

 

On February 5, 2021, Benefit Street Partners and Oasis Investment II Master Funds Ltd, both related parties, entered into a purchase and sale agreement wherein Benefit Street Partners purchased $11.0 million of principal amount, plus all accrued and unpaid interest thereon, of the New Oasis Notes from Oasis Investment II Master Funds Ltd (see Note 12 – Related Party Transactions). The transaction closed on February 8, 2021. As of December 31, 2021, Benefit Street Partners held nil in principal amount of the New Oasis Notes.

 

Key components of the 4.875% convertible senior notes due 2020 consist of the following (in thousands):

 

   

Year ended December 31,

  
   

2021

    

2020

    

2019

  

Contractual interest expense

   $ —     $ 32     $ 3,370  

Amortization of debt issuance costs recognized as interest expense

     —       —       460  
    $ —     $ 32     $ 3,830  

 

Key components of the 3.25% convertible senior notes due 2020 consist of the following (in thousands):

 

   

Year ended December 31,

  
   

2021

    

2020

    

2019

  

Contractual interest expense

   $ —     $ —     $ 580  

 

Key components of the 3.25% convertible senior notes due 2023 consist of the following (in thousands):

 

   

Year ended December 31,

  
   

2021

    

2020

    

2019

  

Contractual interest expense

   $ 620     $ 2,004     $ 899  

 

Term Loan

 

Term loan consists of the following (in thousands):

 

   

December 31, 2021

    

December 31, 2020

  
           

Debt Discount/

                    

Debt Discount/

          
   

Principal

   

Issuance

    

Net

    

Principal

   

Issuance

    

Net

  
   

Amount

    

Costs*

    

Amount

    

Amount**

    

Costs*

    

Amount

  

2019 Recap Term Loan

   $ —     $ —     $ —     $ 119,801     $ (8,471 )   $ 111,330  

2021 BSP Term Loan

     98,505       (2,986 )     95,519       —       —       —  

 

* The term loan was valued using the discounted cash flow method to determine the implied debt discount. The debt discount and issuance costs are being amortized over the life of the term loan on a straight-line basis which approximates the effective interest method.

 

** The amount presented excludes accrued, but unpaid, PIK interest of $4.7 million as of December 31, 2020.

 

In August 2019, in connection with the Recapitalization Transaction, the Company entered into the 2019 Recap Term Loan Agreement, with certain of the Investor Parties, and Cortland Capital Market Services LLC, as agent, for a $134.8 million 2019 Recap Term Loan. The Company also issued common stock and preferred stock (see Note 15 - Common Stock and Preferred Stock) to the Investor Parties.

 

Amounts outstanding under the 2019 Recap Term Loan accrue interest at 10.50% per annum, payable semi-annually (with 8% per annum payable in cash and 2.5% per annum payable in kind). 

 

The 2019 Recap Term Loan Agreement contains negative covenants that, subject to certain exceptions, limit the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, make restricted payments, pledge assets as security, make investments, loans, advances, guarantees and acquisitions, undergo fundamental changes and enter into transactions with affiliates. The original terms of the 2019 Recap Term Loan Agreement required the Company to maintain a trailing 12-month EBITDA (as defined and adjusted therein) of not less than $34.0 million and a minimum liquidity of not less than $10.0 million commencing with the fiscal quarter ended September 30, 2020.

 

On October 16, 2020, the Company reached an agreement (the “Amendment”) with holders of its 2019 Recap Term Loan and Wells Fargo, holder of its revolving credit facility, to amend its 2019 Recap Term Loan Agreement and defer its EBITDA covenant calculation until March 31, 2022. Under the Amendment, the trailing 12-month EBITDA requirement was reduced to $25.0 million, which will not be calculated earlier than March 31, 2022. The Amendment also required the Company to pre-pay $15.0 million of the 2019 Recap Term Loan immediately and, under certain conditions, pre-pay up to an additional $5.0 million no later than the third quarter of fiscal year 2021. In connection with the amendment, on October 20, 2020, the Company paid $15.0 million of its outstanding principal amount and $0.3 million in related interest and PIK interest. As of December 31, 2021, the Company had nil outstanding under the 2019 Recap Term Loan Agreement. As of December 31, 2020, the Company had $124.5 million (including $4.7 million in PIK interest) outstanding under the 2019 Recap Term Loan Agreement, $5.0 million of which is recorded as short term debt, and $114.8 million is recorded as long term debt on the consolidated balance sheet.

 

The 2019 Recap Term Loan Agreement contains events of default that are customary for a facility of this nature, including nonpayment of principal, nonpayment of interest, fees or other amounts, material inaccuracy of representations and warranties, violation of covenants, cross-default to other material indebtedness, bankruptcy or insolvency events, material judgment defaults and a change of control as specified in the 2019 Recap Term Loan Agreement. If an event of default occurs, the maturity of the amounts owed under the 2019 Recap Term Loan Agreement may be accelerated.

 

The obligations under the 2019 Recap Term Loan Agreement are guaranteed by the Company, the subsidiary borrowers thereunder and certain of the other existing and future direct and indirect subsidiaries of the Company and are secured by substantially all of the assets of the Company, the subsidiary borrowers thereunder and such other subsidiary guarantors, in each case, subject to certain exceptions and permitted liens.

 

Amortization expense classified as interest expense related to the $3.8 million of debt issuance costs associated with the issuance of the 2019 Recap Term Loan was $0.4 million, $1.0 million and $0.4 million for the year ended December 31, 2021, 2020 and 2019, respectively.

 

Amortization expense classified as interest expense related to the $10.1 million debt discount associated with the issuance of the 2019 Recap Term Loan was $1.2 million, $2.8 million and $1.1 million for the year ended December 31, 2021, 2020 and 2019, respectively.

 

The fair value of the Company’s 2019 Recap Term Loan is considered Level 3 fair value (see Note 16 – Fair Value Measurements for further discussion of the fair value hierarchy) and are measured using the discounted future cash flow method. In addition to the debt terms, the valuation methodology includes an assumption of a discount rate that approximates the current yield on a debt security with comparable risk. This assumption is considered an unobservable input in that it reflects the Company’s own assumptions about the inputs that market participants would use in pricing the asset or liability. The Company believes that this is the best information available for use in the fair value measurement. The estimated fair value of the 2019 Recap Term Loan as of December 31, 2020 was $129.6 million compared to a carrying value of $116.0 million.

 

On June 2, 2021, the Company repaid in full and terminated the 2019 Recap Term Loan Agreement, dated as of August 9, 2019, with Cortland Capital Market Services LLC, as agent.

 

On June 2, 2021, the Company and certain of its subsidiaries, as borrowers, entered into the 2021 BSP Term Loan Agreement with Benefit Street Partners L.L.C., as Sole Lead Arranger, and BSP Agency, LLC, as agent, for a $99.0 million Initial Term Loan and a $19.0 million Delay Draw Term Loan. Net proceeds from the issuance of the 2021 BSP Term Loan, after deduction of $2.2 million in closing fees and $0.5 million of other administrative fees paid directly to the lenders, totaled $96.3 million. These fees are being amortized over the life of the 2021 BSP Term Loan on a straight-line basis which approximates the effective interest method. Proceeds from the Initial Term Loan, together with available cash from the Company, were used to repay the Company’s 2019 Recap Term Loan under the agreement dated as of August 9, 2019 with Cortland Capital Market Services LLC, as agent for certain investor parties. The Delayed Draw Term Loan provision was designed to provide necessary capital to redeem any of the Company’s outstanding 3.25% convertible senior notes due 2023, upon their maturity, which, upon repayment of the 2019 Recap Term Loan, accelerated to no later than 91 days from the repayment of the 2019 Recap Term Loan, or September 1, 2021. On July 29, the Company terminated its Delayed Draw Term Loan option as it determined it had sufficient liquidity to fund any outstanding convertible senior notes that remained upon maturity.

 

Amounts outstanding under the 2021 BSP Term Loan will bear interest at either (i) LIBOR plus 6.50% - 7.00% (determined by reference to a net leverage pricing grid), subject to a 1.00% LIBOR floor, or (ii) base rate plus 5.50% - 6.00% (determined by reference to a net leverage pricing grid), subject to a 2.00% base rate floor. The 2021 BSP Term Loan matures in June 2027.

 

The 2021 BSP Term Loan Agreement contains negative covenants that, subject to certain exceptions, limit the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, make restricted payments, pledge its assets as security, make investments, loans, advances, guarantees and acquisitions, undergo fundamental changes and enter into transactions with affiliates. Commencing with the fiscal quarter ending June 30, 2021, the Company is required to maintain a Net Leverage Ratio of 4:00x, with step-downs occurring each fiscal year starting with the quarter ending March 31, 2022 through the quarter ending September 30, 2024 in which the Company is required to maintain a Net Leverage Ratio of 3:00x. As of the Closing Date, the Company must maintain a minimum cash balance of not less than $20.0 million. The minimum cash balance can be reduced to $15.0 million in increments of $1.0 million for every $5.0 million in principal repayment of the 2021 BSP Term Loan.

 

The 2021 BSP Term Loan Agreement contains events of default that are customary for a facility of this nature, including (subject in certain cases to grace periods and thresholds) nonpayment of principal, nonpayment of interest, fees or other amounts, material inaccuracy of representations and warranties, violation of covenants, cross-default to certain other existing indebtedness, bankruptcy or insolvency events, certain judgment defaults and a change of control as specified in the 2021 BSP Term Loan Agreement. If an event of default occurs, the maturity of the amounts owed under the 2021 BSP Term Loan Agreement may be accelerated.

 

The obligations under the 2021 BSP Term Loan Agreement are guaranteed by the Company, the subsidiary borrowers thereunder and certain of the other existing and future direct and indirect subsidiaries of the Company and are secured by substantially all of the assets of the Company, the subsidiary borrowers thereunder and such other subsidiary guarantors, in each case, subject to certain exceptions and permitted liens and subject to the priority lien granted under the JPMorgan ABL Credit Agreement.

 

The agent and Sole Lead Arranger under the 2021 BSP Term Loan are affiliates of an affiliate of the Company, which affiliate, at the time of refinancing, owned common stock and the 3.25% convertible senior notes due 2023 of the Company, as well as the Company’s outstanding Series A Preferred Stock.

 

Amortization expense classified as interest expense related to the $1.0 million of debt issuance costs associated with the issuance of the 2021 BSP Term Loan was $0.1 million for the year ended December 31, 2021.

 

Amortization expense classified as interest expense related to the $2.3 million debt discount associated with the issuance of the 2021 BSP Term Loan was $0.2 million for the year ended December 31, 2021.

 

The fair value of the Company’s 2021 BSP Term Loan is considered Level 3 fair value (see Note 16 – Fair Value Measurements for further discussion of the fair value hierarchy) and are measured using the discounted future cash flow method. In addition to the debt terms, the valuation methodology includes an assumption of a discount rate that approximates the current yield on a debt security with comparable risk. This assumption is considered an unobservable input in that it reflects the Company’s own assumptions about the inputs that market participants would use in pricing the asset or liability. The Company believes that this is the best information available for use in the fair value measurement. The estimated fair value of the 2021 BSP Term Loan as of December 31, 2021 was $97.3 million compared to a carrying value of $95.5 million.

 

As of December 31, 2021, the Company was in compliance with the financial covenants under the 2021 BSP Term Loan Agreement.

 

The aggregate principal amount of long-term debt maturing in the next five years and thereafter is as follows:

 

     

2021 BSP Term Loan

  
2022 *   $ 2,104  

2023

       2,475  

2024

       2,475  

2025

       2,475  

2026

       2,475  

Thereafter

       86,501  
      $ 98,505  

 

*Represents the Company’s current portion of principal amortization payments for the 2021 BSP Term Loan.

 

Loan under Paycheck Protection Program

 

On June 12, 2020, the Company received a $6.2 million PPP Loan under the PPP within the CARES Act. The PPP Loan matures on June 2, 2022, and was subject to the CARES Act terms which included, among other terms, an interest rate of 1.00% per annum and monthly installment payments of $261,275 commencing on September 27, 2021. The PPP Loan allowed for prepayment at any time prior to maturity with no prepayment penalties. The PPP Loan was subject to events of default and other provisions customary for a loan of this type. A PPP Loan may be forgiven, partially or in full, if certain conditions are met, principally based on having been disbursed for permissible purposes and maintaining certain average levels of employment and payroll as required by the CARES Act. On September 10, 2021, the full amount of the PPP Loan was forgiven. Income from the forgiveness of the PPP Loan is recognized as a $6.2 million gain on loan forgiveness in the consolidated statements of operations.