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Note 6 - Syndicated Revolver
 9 Months Ended
Sep. 30, 2023
Notes to Financial Statements  
Debt Disclosure [Text Block]

6. Syndicated Revolver:

 

Third Amended 2019 Credit Facility 

 

In connection with entering into the 2023 Credit Agreement, on September 22, 2023, the Company paid off the principal balance, including accrued interest thereon, of the revolving loans outstanding under the Third Amended and Restated Credit Agreement (the “RBC Credit Agreement”), dated as of August 8, 2022, as amended, by and among the Company, certain subsidiaries of the Company as borrowers, certain other subsidiaries of the Company as guarantors, Royal Bank of Canada, as administrative agent (“RBC”), and the lenders party thereto, pursuant to which Tucows’ prior credit facility that provided the Borrowers with a $240 million revolving credit facility (the "2019 Credit Facility").  The RBC Credit Agreement automatically terminates upon the receipt by RBC of certain backstop letters of credit to be delivered by BMO.  

 

Prior to entering into the 2023 Credit Agreement, during the nine months ended September 30, 2023 the Company made repayments of $17.8 million on the 2019 Credit Facility.

 

2023 Credit Facility
 
On September 22, 2023, the Company and its wholly owned subsidiaries, Tucows.com Co., Ting Inc., Tucows (Delaware) Inc., Wavelo, Inc. and Tucows (Emerald), LLC (each, a “Borrower” and together, the “Borrowers,” collectively with the Company, “Tucows”) and certain other subsidiaries of the Company, as guarantors, entered into a Credit Agreement (the “Credit Agreement”) with Bank of Montreal, as administrative agent (“BMO” or the “Agent”), and the lenders party thereto, to, among other things, provide the Borrowers with a revolving credit facility in an aggregate amount not to exceed $240 million (the “2023 Credit Facility”). The Borrowers may request an increase to the Credit Facility through new commitments of up to $60 million if the Total Funded Debt to Adjusted EBITDA Ratio (as defined in the Credit Agreement) is less than 3.75:1.00.  The Credit Facility expires on September 22, 2026, which is the third anniversary of the effective date of the Credit Agreement. 
 
In connection with the 2023 Credit Facility, the Company incurred $0.9 million of fees paid to the Lenders and $0.3 million of legal fees related to the debt issuance. These fees 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. The Company evaluated the issuance of the 2023 Credit Facility and the termination of the 2019 Credit Facility (collectively referred to as the "Debt Transactions") under the loan modification and extinguishment guidance within ASC 470. The Debt Transactions were accounted for as a partial modification, partial extinguishment and new debt issuance at the syndicated lender level. Based on the application of the loan modification and extinguishment guidance within ASC 470 to the Debt Transactions, the Company has treated $50.9 million of the loan principal under the 2019 Credit Facility as an extinguishment of debt and $50.9 million of the loan principal under the 2023 Credit Facility as issuance of new debt. The remaining loan principal on the 2023 Credit Facility was treated as a loan modification within the guidance of ASC 470. In accordance with the debt extinguishment, the Company expensed $0.1 million of the unamortized debt issuance costs to Interest expense, net in the Consolidated Statements of Operation. 
 
During the three months ended September 30, 2023, the Company made a draw of $1.5 million on the 2023 Credit Facility. Subsequently on October 3, 2023, the Company made a repayment of $1.4 million on the 2023 Credit Facility. 
 

2023 Credit Facility Terms

 

The 2023 Credit Agreement contains customary representations and warranties, affirmative and negative covenants, and events of default. The 2023 Credit Agreement requires that the Company comply with certain customary non-financial covenants and restrictions. In addition, the Company has agreed to comply with the following financial covenants: (1) a leverage ratio by maintaining at all times a Total Funded Debt to Adjusted EBITDA Ratio of not more than (i) 4.50:1:00 at any time from and after the Closing Date to and including December 30, 2023; (ii) 4.25:1:00 from December 31, 2023 to and including March 30, 2024; (iii) 4.00:1.00 from March 31, 2024 to and including June 29, 2024; and (iv) 3.75:1.00 thereafter; and (2) an interest coverage ratio by maintaining as of the end of each rolling four financial quarter period, an Interest Coverage Ratio (as defined in the Credit Agreement) of not less than 3.00:1.00. The required principal repayment of $223.4 million is due in 2026.

 

During the three and nine months ended September 30, 2023, and the three and nine months ended September 30, 2022 the Company was in compliance with the covenants under its credit agreements in effect at the time.  

 

Borrowings under the 2023 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 2.00

  

Greater than or equal to 2.00 and less than 2.75

  

Greater than or equal to 2.75 and less than 3.50

  

Greater than or equal to 3.50 and less than 4.00

  

Greater than or equal to 4.00

 

Canadian dollar borrowings based on the Canadian Dollar Offered Rate or U.S. dollar borrowings based on SOFR and letter of credit fees (Margin)

  1.50%  2.00%  2.50%  3.00%  3.50%

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

  0.25%  0.75%  1.25%  1.75%  2.25%

Standby fees

  0.30%  0.40%  0.50%  0.60%  0.70%

 

The following table summarizes Excluding-Ting's borrowings under the credit facilities (Dollar amounts in thousands of U.S. dollars): 

 

  

September 30, 2023

  

December 31, 2022

 
         

Revolver

 $223,430  $239,700 

Less: unamortized debt discount and issuance costs

  (1,519)  (770)

Total Syndicated Revolver

  221,911   238,930 

Less: Syndicated Revolver, current portion

  -   - 

Syndicated Revolver, long-term portion

 $221,911  $238,930