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Debt | 9 Months Ended
--- | ---
Sep. 30, 2023
Debt Disclosure [Abstract] |
Debt | DEBT The following table summarizes the net carrying amount of the Company's outstanding debt as of September 30, 2023 and December 31, 2022, net of debt issuance costs (in thousands):
| September 30, 2023 |  | December 31, 2022
| Outstanding principal |  | Debt issuance costs |  | Net carrying amount |  | Outstanding principal |  | Debt issuance costs |  | Net carrying amount
Current portion | $ | 3,656 |  |  | $ | — |  |  | $ | 3,656 |  |  | $ | 3,250 |  |  | $ | — |  |  | $ | 3,250 |
Long term | 57,281 |  |  | (532) |  |  | 56,749 |  |  | 60,125 |  |  | (663) |  |  | 59,462 |
Total debt | $ | 60,937 |  |  | $ | (532) |  |  | $ | 60,405 |  |  | $ | 63,375 |  |  | $ | (663) |  |  | $ | 62,712 |
Runway Term Loan Agreement - Runway Growth Credit Finance Corp. On September 30, 2019, the Company entered into a Loan and Security Agreement with Runway Growth Finance Corp. (f/k/a Runway Growth Credit Fund Inc.) ("Runway") which, as subsequently amended, provided for up to $65.0 million of borrowings (as subsequently amended, the "Runway Term Loan"). The Runway Term Loan bore interest at a variable rate equal to LIBOR (at a floor of 0.50%) plus 7.75%. The Runway Term Loan was secured by substantially all of the assets of the Company and required us to comply with various affirmative and negative debt covenants. In connection with the origination of the Runway Term Loan, a warrant for 333,333 Class P Units was issued. The fair value of the warrant was $0.1 million at the time of issuance which was accounted for as a debt origination cost (contra-liability). The Company was required to make interest-only payments on the Runway Term Loan through April 15, 2022, at which time the Runway Term Loan began amortizing, with equal monthly payments of principal, which would have fully amortized the principal amount of the Runway Term Loan by October 15, 2023, plus interest being paid by the Company to Runway in consecutive monthly installments until October 15, 2023. The Runway Term Loan carried a prepayment fee of 3.00% declining to 0.00% based on the anniversary date of payment, and a final payment fee equal to 4.5% of the principal amount repaid upon prepayment, plus $0.2 million. On May 24, 2022, concurrently with entry into the Silicon Valley Bank ("SVB") Credit Agreement (as defined below), the Company repaid all outstanding amounts under the Runway Term Loan, totaling $58.2 million with proceeds from the SVB Credit Agreement. In connection with the repayment and termination of the Runway Term Loan, the Company was required to pay a 1.00% prepayment fee, plus a final payment fee. The Runway Term Loan was scheduled to mature on October 15, 2023. As a result of the extinguishment of the Runway Term Loan, the Company recognized a loss on debt extinguishment of $0.6 million associated with the prepayment fee and the write-off of unamortized debt issuance costs. Credit Agreement - Silicon Valley Bank On May 24, 2022 (the "Closing Date"), Brilliant Earth, LLC, as borrower, and SVB, as administrative agent and collateral agent for the lenders, entered into a credit agreement (the "SVB Credit Agreement") which provides for a secured term loan credit facility of $65.0 million (the "SVB Term Loan Facility") and a secured revolving credit facility in an amount of up to $40.0 million (the "SVB Revolving Credit Facility," and together with the SVB Term Loan Facility, the "SVB Credit Facilities"). The SVB Credit Facilities were used to refinance existing indebtedness, pay related fees and expenses, and will be used from and after the Closing Date for working capital and general corporate purposes. The Credit Facilities mature on May 24, 2027 (the "SVB Maturity Date"). The SVB Credit Facilities are secured by substantially all assets of Brilliant Earth, LLC and any of its future material subsidiaries, subject to customary exceptions. Brilliant Earth, LLC's future material subsidiaries (subject to certain customary exceptions) will guarantee repayment of the SVB Credit Facilities. Borrowings under the SVB Credit Facilities bear interest at either (a) a secured overnight financing rate plus an annual adjustment of 0.125%, plus an applicable margin of 2.25% to 2.75%, depending on the Consolidated Total Leverage Ratio (defined below), or an alternate base rate plus an applicable margin of 1.25% to 1.75%, depending on the Consolidated Total Leverage Ratio, each subject to a 0.00% floor. In addition, Brilliant Earth, LLC has agreed to pay a commitment fee on the first day of each quarter on the unused amount of the SVB Revolving Credit Facility, equal to 0.25% to 0.35% per annum depending on the Consolidated Total Leverage Ratio. The Consolidated Total Leverage Ratio is defined as the ratio, as of the last day of any four fiscal quarter period, of (a) Consolidated Total Indebtedness of the Company and its subsidiaries to (b) the Consolidated EBITDA for such period (each term as further defined in the Credit Agreement). The SVB Term Loan Facility is required to be repaid on the last day of each calendar quarter (commencing on September 30, 2022), in an amount equal to 1.25% per quarter through June 30, 2024, 1.875% per quarter from September 30, 2024 through June 30, 2025, and 2.50% per quarter thereafter, with the balance payable on the SVB Maturity Date. The SVB Term Loan Facility is also subject to certain mandatory prepayment requirements in connection with asset sales, casualty events and debt incurrence, subject to customary exceptions. The SVB Credit Facilities are subject to customary affirmative covenants and negative covenants as well as financial maintenance covenants. The financial covenants are tested at the end of each fiscal quarter, and require that (a) the Company and its subsidiaries not have a Consolidated Fixed Charge Coverage Ratio (defined as the ratio of (i) Consolidated EBITDA, less cash taxes (including tax distributions), less certain capital expenditures, less cash dividends and other cash restricted payments, to (ii) the sum of cash interest expense and scheduled principal payments on outstanding debt (in each case, as further defined in the SVB Credit Agreement)) of less than 1.25 to 1.00, (b) the Company and its subsidiaries not have a Consolidated Total Leverage Ratio of more than 4.00 to 1.00, and (c) Brilliant Earth, LLC and its subsidiaries not have a Consolidated Borrower Leverage Ratio (defined substantially similar as Consolidated Total Leverage Ratio, but limited to Brilliant Earth, LLC and its subsidiaries) in excess of 3.00 to 1.00 (which level is subject to temporary increases to 4.00 to 1.00 in connection with certain acquisitions). As of September 30, 2023, the Company was in compliance with such covenants. At September 30, 2023, deferred issuance costs included in other assets totaled $0.3 million, net of accumulated amortization of $0.1 million. At September 30, 2023, deferred issuance costs included in long-term debt totaled $0.5 million, net of accumulated amortization of $0.2 million. These costs are being amortized to interest expense over the term of the loan. The Company's debt effective interest rate was 8.49% and 4.74% for the three months ended September 30, 2023 and 2022, respectively. Interest expense was $1.3 million, and $0.7 million for the three months ended September 30, 2023 and 2022, respectively; and the amortization of deferred issuance costs was $0.1 million and $0.1 million for the three months ended September 30, 2023 and 2022, respectively. The Company's debt effective interest rate was 8.14% and 7.58% for the nine months ended September 30, 2023 and 2022, respectively. Interest expense was $3.6 million and $3.2 million for the nine months ended September 30, 2023 and 2022, respectively; and the amortization of deferred issuance costs was $0.2 million and $0.5 million for the nine months ended September 30, 2023 and 2022, respectively. On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation ("FDIC") was appointed as receiver. On March 14, 2023, the FDIC announced the establishment of Silicon Valley Bridge Bank, N.A., which assumed the deposits and obligations of SVB. On March 26, 2023, the FDIC announced that it had entered into a purchase and assumption agreement with First-Citizens Bank & Trust Company, Raleigh, North Carolina ("First Citizens") under which all deposits and loans of SVB were assumed by First Citizens. As of September 30, 2023, there w ere no am ounts outstanding under the SVB Revolving Credit Facility. As of September 30, 2023, the aggregate future principal payments under the SVB Term Loan Facility were as follows (in thousands):
| Principal |  |  |  |
For the remainder of the year ending December 31, 2023 | $ | 813 |  |  |  |  |
Years ending December 31, |  |  |  |  |
2024 | 4,062 |  |  |  |  |
2025 | 5,688 |  |  |  |  |
2026 | 6,500 |  |  |  |  |
2027 | 43,874 |  |  |  |  |
Total aggregate future principal payments | $ | 60,937 |  |  |  |  |

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