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Note 8 - Loan Payable
 12 Months Ended
Dec. 31, 2022
Notes to Financial Statements  
Debt Disclosure [Text Block]

8. Loan Payable:

 

Amended 2019 Credit Facility

 

On June 14, 2019, the Company and its wholly-owned subsidiaries, Tucows.com Co., Ting Fiber, Inc., Ting Inc., Tucows (Delaware) Inc. and Tucows (Emerald), LLC entered into an Amended and Restated Senior Secured Credit Agreement (the “Amended 2019 Credit Facility”) with Royal Bank (“RBC”), as administrative agent, and lenders party thereto (collectively with RBC, the “Lenders”) under which the Company had access to an aggregate of up to $240 million in funds, which consisted of $180 million guaranteed credit facility and a $60 million accordion facility. The Amended 2019 Credit Facility replaced the Company’s 2017 Amended Credit Facility.

 

In connection with the Amended 2019 Credit Facility, the Company incurred $0.3 million of fees paid to the Lenders and $0.2 million of legal fees related to the debt issuance. Of these fees, $0.4 million are debt issuance costs, which have been reflected as a reduction to the carrying amount of the loan payable and will be amortized over the term of the credit facility agreement and $0.1 million were recorded in General and administrative expenses for the year ended December 31, 2019.

 

The obligations of the Company under the Amended 2019 Credit Agreement are secured by a first priority lien on substantially all of the personal property and assets of the Company and has a four-year term, maturing on June 13, 2024.

 

Second Amended 2019 Credit Facility

 

On October 26, 2021, the Company entered into a Second Amended and Restated Senior Secured Credit Agreement (the “Second Amended 2019 Credit Agreement”) with the Lenders and Toronto-Dominion Bank (collectively the “New Lenders”) to, among other things, increase the existing revolving credit facility from $180 million to $240 million. The Second Amended Credit 2019 Agreement provides the Company with access to an aggregate of $240 million in committed funds. The Second Amended 2019 Credit Agreement also provides for two additional interest rate tiers if the Company exceeds a 3.50x Total Funded Debt to Adjusted EBITDA Ratio.

 

In connection with the Second Amended 2019 Credit Facility, the Company incurred $0.3 million of fees related to the debt issuance, which have been reflected as a reduction to the carrying amount of the loan payable and will be amortized over the term of the credit facility agreement.

 

Third Amended 2019 Credit Facility 

 

On August 8, 2022, the Company entered into a Third Amended and Restated Senior Secured Credit Agreement (the “Amended Credit Agreement”) with its existing syndicate of lenders (the Lenders). The Amended Credit Agreement continue to provide the Company with access to an aggregate of $240 million in committed funds (the Credit Facility). Under the Amended Credit Agreement, and in connection with the Unit Purchase Agreement (as defined in Note 13 - Redeemable preferred shares), the Lenders agreed that Ting Fiber Inc. (converted to Ting LLC) and its wholly owned subsidiaries ceased to be Guarantors under the Credit Facility and shall automatically be released from the respective guarantee and security documents, including a release of the Lenders' security interests and liens upon the assets of such entities. Additionally, the Amended Credit Agreement extended the maturity of the Credit Facility to June 14, 2024. The Company was subject to the following financial covenants at all times, which are to be calculated on a rolling four quarter basis: (i) maximum Total Funded Debt to Adjusted EBITDA Ratio of 4.00:1.00 until September 29, 2023 and 3.75:1.00 thereafter; and (ii) minimum Interest Coverage Ratio of 3.00:1.00. The financial covenant calculations will exclude the financial results of Ting Fiber Inc. (converted to Ting LLC) and its wholly owned subsidiaries. The Amended Credit Agreement also requires the Company to comply with other customary terms and conditions. The Amended Credit Agreement added SOFR loans as a form of advance available under the Credit Facility to replace LIBOR rate advances, and such SOFR Loans may bear interest based on Adjusted Daily Simple SOFR (defined to be the applicable SOFR rate published by the Federal Reserve bank of New York plus 0.10% per annum subject to a floor of zero) or Adjusted Term SOFR (defined to be the applicable SOFR rate published by CME Group Benchmark Administration Limited plus 0.10% for one-month, 0.15% for three-months, and 0.25% for six-months per annum).

 

On March 14, 2023, the Company entered into an Amending Agreement No.2 to the Third Amended and Restated Senior Secured Credit Agreement (the "Credit Agreement Amendment") with its existing syndicate of lenders as more fully described in Note 21(c) - Subsequent events. 

 

Credit Facility Terms

 

The Credit Facility is revolving with interest only payments with no scheduled repayments during the term.

 

The Amended Credit Facility Agreement contains customary representations and warranties, affirmative and negative covenants, and events of default. The Amended Credit Agreement was entered into in August 2022 which required the Company to comply with the following financial covenants at all times, which are to be calculated on a rolling four quarter basis: (i) maximum Total Funded Debt to Adjusted EBITDA Ratio of 4.00:1.00 until September 29, 2023; (ii) 3.75:100 thereafter and; (iii) minimum Interest Coverage Ratio of 3.00:1.00. As at and for the periods ending  December 31, 2022 and  December 31, 2021 the Company was in compliance with these covenants.

  

Borrowings under the Amended Credit Agreement will accrue interest and standby fees based on the Company’s Total Funded Debt to Adjusted EBITDA ratio and the availment type as follows: 

 

  

If Total Funded Debt to EBITDA is:

 

Availment type or fee

 

Less than 1.75

  

Greater than or equal to 1.75 and less than 2.25

  

Greater than or equal to 2.25 and less than 2.75

  

Greater than or equal to 2.75 and less than 3.25

  

Greater than or equal to 3.25 and less than 3.75

  

Greater than or equal to 3.75

 

Canadian dollar borrowings based on Bankers’ Acceptance or U.S. dollar borrowings based on SOFR (Margin)

  1.50%  1.75%  2.25%  2.50%  2.75%  3.00%

Canadian or U.S. dollar borrowings based on Prime Rate or U.S. dollar borrowings based on Base Rate (Margin)

  0.25%  0.50%  1.0%  1.25%  1.50%  1.75%

Standby fees

  0.30%  0.35%  0.45%  0.50%  0.55%  0.60%

 

The following table summarizes the Company’s borrowings under the credit facilities (Dollar amounts in thousands of U.S. dollars): 

 

  

December 31, 2022

  

December 31, 2021

 
         

Revolver

  $239,700  $191,400 

Less: unamortized debt discount and issuance costs

  (770)  (652)

Total loan payable

  238,930   190,748 

Less: loan payable, current portion

  -   - 

Loan payable, long-term portion

  $238,930  $190,748 

 

The following table summarizes our scheduled principal repayments as of  December 31, 2022 (Dollar amounts in thousands of U.S. dollars):

 

2023

  - 

2024

  239,700 
  $239,700 

  

Each reporting period, the Company assesses its ability to continue as a going concern for one year from the date the financial statements are issued. The Company’s evaluation includes its ability to meet its future contractual obligations and other conditions and events that may impact liquidity.

 

As of December 31, 2022, the Company had cash and cash equivalents of $23.5M. In the next 12 months, Excluding Ting has lease commitments of $0.9 million and other operating expense commitments of $17.6 million and no capital expenditure commitments. We believe that the current cash and cash equivalents and capital commitments along with operating cash flows will be sufficient to fund operations, loan repayments and cash flow requirements for the next twelve months.

 

In the long-term, we may seek additional financing to accelerate the growth of our Wavelo business, repurchase shares or future acquisitions.