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Debt Obligations

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Debt Obligations

9. Debt Obligations

Debt obligations consist of the following (in millions):

						June 30, 2021						December 31, 2020
Infrastructure
LIBOR plus 5.85% Note, due 2023						$	—					$	71.6
LIBOR plus 1.50% Line of Credit						—						38.7
LIBOR plus 3.25% Note, due 2026						109.6						—
LIBOR plus 2.15% Line of Credit						71.1						—
4.00% Note due 2024						27.5						—
8.00% Note due 2024						19.6						—
Other, various maturity dates						6.5						—
Obligations under finance leases						0.1						0.2
Spectrum
8.50% Note due 2021						19.3						19.3
10.50% Note due 2021						32.9						32.9
Other, various maturity dates						2.9						2.9
Obligations under finance leases						0.1						0.6
Non-Operating Corporate
11.50% Senior Secured Notes, due 2021						—						340.4
8.50% Senior Secured Notes, due 2026						330.0						—
7.50% Convertible Senior Notes, due 2022						3.2						55.0
7.50% Convertible Senior Notes, due 2026						51.8						—
LIBOR plus 5.75% Line of Credit						5.0						15.0
						679.6						576.6
Unamortized issuance discount, issuance premium, and deferred financing costs						(3.1)						(15.1)
Less: current portion of debt obligations						(70.2)						(433.6)
Debt obligations						$	606.3					$	127.9

Aggregate finance lease and debt payments, including interest are as follows (in millions):

						Finance Leases						Debt						Total
2021						$	0.2					$	71.5					$	71.7
2022						—						57.6						57.6
2023						—						57.1						57.1
2024						—						142.2						142.2
2025						—						40.2						40.2
Thereafter						—						507.5						507.5
Total minimum principal and interest payments						0.2						876.1						876.3
Less: Amount representing interest						—						(196.7)						(196.7)
Total aggregate finance lease and debt payments						$	0.2					$	679.4					$	679.6

The interest rates on the finance leases range from approximately 2.0% to 10.0%.

Infrastructure

In May 2021, DBMG repaid its revolving line of credit under the Credit and Security Agreement with Wells Fargo Bank ("Revolving Line") and its term loan under a financing agreement with TWC Asset Management Company LLC ("TWC Loan"). In addition, DBMG entered into a new credit facility with UMB Bank ("UMB"). Under the terms of the agreement, UMB agreed to a $110.0 million term loan ("UMB Term Loan") and $110.0 million revolving credit agreement ("UMB Revolving Line"). The UMB Term loan expires in 2026 and will bear interest at a rate of 3.25%. The UMB Revolving Line expires in 2024 and will bear interest at a rate of Prime Rate minus 1.10%. The proceeds were used to fully repay DBMG's existing debt obligations, fund a portion of the Banker Steel acquisition, and provide additional working capital capacity to DBMG.

The extinguishment of the Revolving Line and the TWC Loan yielded a loss on extinguishment of $1.6 million included in Loss on early extinguishment or restructuring of debt in the Condensed Consolidated Statement of Operations.

Non-Operating Corporate

On February 1, 2021, HC2 repaid its 2021 Senior Secured Notes and issued $330.0 million aggregate principal amount of 8.5% senior secured notes due 2026 (the "2026 Senior Secured Notes"). In addition, the Company entered into exchange agreements with certain holders of approximately $51.8 million aggregate principal amount of its existing $55.0 million 7.5% convertible senior notes due 2022 (the "2022 Convertible Notes"), pursuant to which the Company exchanged such holders' 2022 Convertible Notes for newly issued 7.5% convertible notes due 2026 (the "2026 Convertible Notes"). The 2026 Senior Secured Notes were issued in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

The Company accounted for the transactions under the debt extinguishment model as the present value of cash flows under the terms of the 2026 Senior Secured Notes and 2026 Convertible Notes was at least 10% different from the present value of the remaining cash flows under the 2021 Senior Secured Notes and the 2022 Convertible Notes.

The extinguishment of the 2021 Senior Secured Notes yielded a loss on extinguishment of $4.5 million. The extinguishment of the $51.8 million of 2022 Convertible Notes yielded a loss on extinguishment of $5.4 million, an acceleration of the amortization of discount of $5.3 million, and extinguishment of the bifurcated conversion option classified as equity of $7.7 million.

Senior Secured Notes

The 2026 Senior Secured Notes were issued under an indenture dated February 1, 2021, by and among the Company, the guarantors party thereto and U.S. Bank National Association, a national banking association ("U.S. Bank"), as trustee (the "Secured Indenture"). The 2026 Senior Secured Notes were issued at 100% of par.

Convertible Notes

The 2026 Convertible Notes were issued under a separate indenture dated February 1, 2021, between the Company and U.S. Bank, as trustee (the "Convertible Indenture"). The 2026 Convertible Notes were issued at 100% of par.

Each $1,000 of principal of the 2026 Convertible Notes will initially be convertible into 234.2971 shares of our common stock, which is equivalent to an initial conversion price of approximately $4.27 per share, subject to adjustment upon the occurrence of specified events.

The fair value of the embedded conversion feature contained in the 2026 Convertible Notes had a fair value of $12.3 million, which was recorded as a premium on the 2026 Convertible Notes. The 2026 Convertible Notes have an effective interest rate of 3.21%, which reflects the $12.3 million premium and $1.1 million of deferred financing fees.

At June 30, 2021, the 2026 Convertible Notes had a carrying value of $62.2 million and an unamortized premium of $11.4 million. Based on the closing price of our common stock of $3.98 on June 30, 2021, the if-converted value of the 2026 Convertible Notes did not exceed its principal value.

For the six months ended June 30, 2021, interest cost recognized for the period relating to both the contractual interest coupon and amortization of discount net of premium was $1.6 million and $0.8 million, respectively.

Line of Credit

On February 23, 2021, the Company entered into a third amendment (the "Amendment") of the 6.75% line of credit with MSD PCOF Partners IX, LLC ("Revolving Credit Agreement"). Among other things, the Amendment (i) increases the aggregate principal amount of the Revolving Credit Agreement to $20.0 million, (ii) extends the maturity date of the Revolving Credit Amendment to February 23, 2024, (iii) updates the affirmative and negative covenants contained in the Amended Credit Agreement so that they are substantially consistent with the affirmative and negative covenants contained in the indenture that governs the 2026 Senior Secured Notes and (iv) reduces the interest rate margin applicable to loans borrowed under the Amended Credit Agreement to 5.75% from the 6.75% described above. Except as modified by the Amendment, the terms of the Revolving Credit Agreement remain in effect.

In May 2021, HC2 drew $5.0 million of the Revolving Credit Agreement. The Company used the proceeds to fund the redemption of the Company's Series A and A-2 Preferred Stock.

HC2 is in compliance with its debt covenants as of June 30, 2021.

X

- Definition

The entire disclosure for debt and capital lease obligations can be reported. Information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. Also includes descriptions and amounts of capital leasing arrangements that consist of direct financing, sales type and leveraged leases. Disclosure may include the effect on the balance sheet and the income statement resulting from a change in lease classification for leases that at inception would have been classified differently had guidance been in effect at the inception of the original lease.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/otherTransitionRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 840
-URI http://asc.fasb.org/topic&trid=2208923

Reference 2: http://fasb.org/us-gaap/role/ref/otherTransitionRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-URI http://asc.fasb.org/topic&trid=2208564

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- References

No definition available.

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