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NOTES PAYABLE AND LINES OF CREDIT
 6 Months Ended
Jun. 30, 2023
Debt Disclosure [Abstract]  
NOTES PAYABLE AND LINES OF CREDIT NOTES PAYABLE AND LINES OF CREDIT
Notes payable consisted of the following as of June 30, 2023 and December 31, 2022:
June 30, 2023December 31, 2022
Term Loan Credit Agreement maturing on August 31, 2026. Amortization payments are required quarterly. Interest rate at June 30, 2023 was 13.41%.
$344,431 $346,066 
ROF Consumer Finance Facility maturing on February 4, 2025. Interest rate at June 30, 2023 was 10.17%.
18,030 25,000 
Notes payable for leasehold improvements and other752 — 
Total principal amount363,213 371,066 
Less: unamortized debt issuance costs(21,668)(28,572)
Total long-term debt341,545 342,494 
Less: Current portion of long-term debt (18,186)(3,645)
Long-term debt, net of current portion$323,359 $338,849 
Floor plan notes payable as of June 30, 2023 and December 31, 2022:
June 30, 2023December 31, 2022
Floor plans notes payable - trade$74,331 $75,387 
Floor plans notes payable - non-trade172,107 144,789 
Floor plan notes payable$246,438 $220,176 
Term Loan Credit Agreement
On the RideNow Closing Date, the Company entered into a new term loan credit agreement (the “Oaktree Credit Agreement”) among the Company, as borrower, the lenders party thereto (the "Lenders"), and Oaktree Fund Administration, LLC, as administrative agent and collateral agent (the “Administrative Agent”). The Oaktree Credit Agreement provides for secured credit facilities in the form of a $280,000 principal amount of initial term loans (the “Initial Term Loan Facility”) and a $120,000 in aggregate principal amount of delayed draw term loans (the “Delayed Draw Term Loans Facility”). The proceeds from the Initial Term Loan Facility were used to consummate the RideNow Transaction and to provide for working capital. Loans under the Delayed Draw Term Loans Facility were subject to customary conditions precedent for facilities of this type including the need to meet certain financial tests and became available six (6) months after the RideNow Closing Date and were unavailable to be drawn after the eighteen (18) month anniversary of the RideNow Closing Date, which occurred on March 1, 2023. In connection with providing the debt financing for the RideNow Transaction, and pursuant to the commitment letter executed on March 15, 2021, the Company issued warrants to purchase $40,000 of shares of Class B Common Stock to Oaktree Capital Management, L.P. and its lender affiliates (the “Warrants”).
On February 18, 2022, in conjunction with the Freedom Transaction, the Company drew down $84,500 against the Delayed Draw Term Loans Facility. During the fourth quarter of 2022, the Company made a voluntary principal repayment of $15,000 to the Oaktree Credit Facility. As of June 30, 2023, the Oaktree Credit Agreement does not provide for any available financing under the Delayed Draw Term Loans Facility.
The loan under the Oaktree Credit Agreement is reported on the balance sheet as senior secured debt, net of debt discount and debt issuance costs of $21,668, including the fair value of the Warrants of $10,950. Borrowings under the Oaktree Credit Agreement bear interest at a rate per annum equal, at the Company’s option, to either (a) LIBOR (with a floor of 1.00%), plus an applicable margin of 8.25% or (b) a fluctuating adjusted base rate in effect from time to time, plus an applicable margin of 7.25%, provided that Amendment No. 5 (as defined below) provides that an additional 0.50% of interest will accrue from the
Amendment No 5 Effective Date (as defined below) through June 20, 2024 (which additional interest may be paid in cash or paid-in-kind). At the Company’s option, one percent (1.00%) of such interest may be payable in kind. The interest rate on June 30, 2023, was 13.41%. Interest expense for the three and six months ended June 30, 2023 was $13,353 and $26,295, respectively, which included amortization of $1,672 and $3,260, respectively, related to the discount and debt issuance costs. Interest expense for the three and six months ended June 30, 2022 was $11,009 and $19,700, respectively, which included amortization of $1,960 and $3,236, respectively related to the discount and debt issuance costs. While the Oaktree Credit Agreement notes that Secured Overnight Financing Rate ("SOFR") may be selected as the alternative benchmark rate, this alternative benchmark had not been selected as of June 30, 2023. The Company selected SOFR as the alternative benchmark effective July 1, 2023.
Obligations under the Oaktree Credit Agreement are secured by a first-priority lien on substantially all of the assets of the Company and its wholly-owned subsidiaries (the “Subsidiary Guarantors”), although certain assets of the Company and Subsidiary Guarantors are subject to a first-priority lien in favor of floor plan lenders, and such liens and priority are subject to certain other exceptions. The Subsidiary Guarantors also guarantee the obligations of the Company under the Oaktree Credit Agreement.
We provided customary representations and covenants under the Oaktree Credit Agreement which include financial covenants and collateral performance covenants.
At June 30, 2023, the Company was not in compliance with certain leverage ratio financial covenants under the Oaktree Credit Agreement. On August 9, 2023 (the "Amendment No. 5 Effective Date"), the Company, the Subsidiary Guarantors party thereto, the Administrative Agent, and the Lenders party thereto executed Amendment No. 5 to Term Loan Credit Agreement (the “Amendment No. 5”), pursuant to which, among other things: (i) all leverage ratio financial covenants under the Oaktree Credit Agreement were (a) eliminated and not tested for the for the quarters ending June 30, 2023 and September 30, 2023 and (b) made less restrictive for the quarters ending December 31, 2023, March 31, 2024, and June 30, 2024; (ii) additional performance covenants were added requiring the Company and its subsidiaries to use commercially reasonable best efforts to dispose of certain non-core real estate and monetize its consumer loan portfolios (with corresponding requirements to use such proceeds of such sales to pay down the term loans under the Oaktree Credit Agreement); (iii) an additional performance covenant was added requiring the Company raise net cash proceeds of not less than $100,000 from the issuance of common equity interests in the Company by December 1, 2023 (with a corresponding requirement to use certain of such equity proceeds to pay down the term loans under the Oaktree Credit Agreement), and (iv) an additional performance covenant was added requiring the Company to issue warrants, exercisable for an anticipated aggregate of 1,212,121 shares at an anticipated price of $12 per share, in a form to be agreed upon, to the Lender. In connection with Amendment No. 5, the Company agreed to pay a nominal fee which may be paid in cash or paid-in-kind.
The elimination of the June 30, 2023 leverage ratio financial covenants was made effective as of June 30, 2023, and the Lenders agreed in Amendment No. 5 that no event of default exists or arises from such leverage ratio financial covenants as of such date.
Based on the amended terms of the Oaktree Credit Agreement, the Company believes that it will be in compliance with all covenants under the Oaktree Credit Agreement, as amended by Amendment No. 5, for the next one year period. As of June 30, 2023, the Company has classified obligations under the Oaktree Credit Agreement as non-current liabilities.
RumbleOn Finance Line of Credit
On February 4, 2022, RumbleOn Finance and ROF SPV I, LLC ("ROF"), an indirect subsidiary of RumbleOn, entered into a consumer finance facility ("ROF Consumer Finance Facility") primarily to provide up to $25,000 for the underwriting of consumer loans underwritten by ROF. Credit Suisse AG, New York Branch (“Credit Suisse”) is the managing agent of the ROF Consumer Finance Facility, and RumbleOn Finance is the borrower. All loans under this agreement are secured by certain collateral including the consumer finance loans purchased by the ROF Consumer Finance Facility.
We provided customary representations and covenants under the related agreements which include financial covenants and collateral performance covenants. Loans sold to or in the ROF Consumer Finance Facility are subject to certain eligibility criteria, concentration limits and reserves.
As of June 30, 2023, RumbleOn Finance did not meet the interest rate spread requirement set forth in the ROF Consumer Finance Facility as a result of increased interest rates and limited growth of our consumer finance business. The lender has indicated no current intention to request early repayment of the principal balance due under the ROF Consumer Finance Facility as of June 30, 2023. We intend to sell the loan portfolio held at RumbleOn Finance and pay off the outstanding balance during the second half of 2023. As of June 30, 2023, the outstanding balance due under the ROF Consumer Finance
Facility was $18,030, which is reflected in the current portion of long-term debt and line of credit in the accompanying Condensed Consolidated Balance Sheets.
The value of the loan receivable assets held by RumbleOn Finance, which approximated $24,883 net of allowance for loan losses, is included in assets held for sale in the accompanying Condensed Consolidated Balance Sheets as of June 30, 2023.
Floor Plan Notes Payable
The Company relies on its floorplan vehicle financing credit lines (“Floorplan Lines”) to finance new and used vehicle inventory at its retail locations and for the wholesale segment. Floor plan notes payable - trade reflects amounts borrowed to finance the purchase of specific new and, to a lesser extent, used vehicle inventory with corresponding manufacturers' captive finance subsidiaries (“trade lenders”). Floor plan notes payable - non-trade represents amounts borrowed to finance the purchase of specific new and used vehicle inventories with non-trade lenders. Changes in vehicle floor plan notes payable - trade are reported as operating cash flows and changes in floor plan notes payable - non-trade are reported as financing cash flows in the accompanying Consolidated Statements of Cash Flows.
Inventory serves as collateral under floor plan notes payable borrowings. The inventory balance in its entirety also serves as collateral under the Oaktree Credit Agreement.
On October 26, 2022, the Company entered into a Floorplan Line with J.P. Morgan (the “J.P. Morgan Credit Line”). As of June 30, 2023, advances under the J.P. Morgan Credit Line are limited to $75,000 and the outstanding balance was $27,104. Interest expense on the J.P. Morgan Credit Line for the three and six months ended June 30, 2023 was $421 and $808, respectively.
As of June 30, 2023, the Company is in compliance with the covenant terms of its floor plan agreements.