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Debt Obligations | 3 Months Ended
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Mar. 31, 2024
Debt Disclosure [Abstract] |
Debt Obligations | 11. Debt Obligations Debt obligations, including finance lease obligations, consisted of the following (in millions):
| March 31, 2024 |  | December 31, 2023
Infrastructure |
PRIME minus 0.75% Line of Credit due 2025 | $ | 70.0 |  |  | $ | 100.0 |
3.25% Term Loan due 2026 | 86.3 |  |  | 91.4 |
4.00% Note due 2024 | 2.5 |  |  | 5.0 |
Obligations under finance leases | 0.9 |  |  | 2.4 |
Total Infrastructure | $ | 159.7 |  |  | $ | 198.8 |
Spectrum |  |  |
8.50% Note due 2025 | $ | 19.3 |  |  | $ | 19.3 |
11.45% Notes due 2025 | 50.4 |  |  | 50.4 |
Total Spectrum | $ | 69.7 |  |  | $ | 69.7 |
Life Sciences |  |  |
20.00% Note due 2024 | $ | 20.7 |  |  | 17.4 |
Total Life Sciences | $ | 20.7 |  |  | $ | 17.4 |
Non-Operating Corporate |  |  |
8.50% Senior Secured Notes due 2026 | $ | 330.0 |  |  | $ | 330.0 |
7.50% Convertible Senior Notes due 2026 | 51.8 |  |  | 51.8 |
SOFR plus 5.75% Line of Credit | 20.0 |  |  | 20.0 |
CGIC Unsecured Note due 2026 | 35.1 |  |  | 35.1 |
Total Non-Operating Corporate | $ | 436.9 |  |  | $ | 436.9 |
Total outstanding principal | $ | 687.0 |  |  | $ | 722.8 |
Unamortized issuance discount, issuance premium, and deferred financing costs | (11.3) |  |  | (13.0) |
Less: current portion of debt obligations | (34.2) |  |  | (30.5) |
Debt obligations, net of current portion | $ | 641.5 |  |  | $ | 679.3 |
As of March 31, 2024, estimated future aggregate finance lease and debt payments, including interest, were as follows (in millions):
|  | Finance Leases |  | Debt |  | Total
2024 |  | $ | 0.3 |  |  | $ | 68.2 |  |  | $ | 68.5 |
2025 |  | 0.3 |  |  | 239.6 |  |  | 239.9 |
2026 |  | 0.2 |  |  | 494.2 |  |  | 494.4 |
2027 |  | 0.2 |  |  | — |  |  | 0.2 |
2028 |  | — |  |  | — |  |  | — |
Total minimum principal and interest payments |  | 1.0 |  |  | 802.0 |  |  | 803.0 |
Less: Amount representing interest |  | (0.1) |  |  | (115.9) |  |  | (116.0) |
Total aggregate finance lease and debt payments |  | $ | 0.9 |  |  | $ | 686.1 |  |  | $ | 687.0 |
The interest rates on finance leases ranged from approximately 3.0% to 8.5%. Infrastructure DBMG has a $135.0 million Revolving Line with UMB that bears interest at a Prime Rate minus a spread with an interest rate floor of 4.25%. The effective interest rate on the Revolving Line with UMB was 8.06% and 8.33% as of March 31, 2024 and December 31, 2023, respectively. The Revolving Line with UMB matures on August 15, 2025, and interest is paid monthly. The Revolving Line with UMB also includes a commitment fee equal to 0.25% per annum times the average daily unused availability under the line. DBMG also has a $86.3 million UMB Term Loan, which expires May 31, 2026, and bears interest at an annual rate of 3.25% with an effective interest rate of 3.3%. Interest is paid monthly. The UMB Term Loan and Revolving Line with UMB associated with the Infrastructure segment contain customary restrictive and financial covenants related to debt levels and performance, including a Fixed Charge Coverage Ratio covenant, as defined in their agreements. The $2.5 million 4.00% note matured on March 31, 2024 and was fully redeemed on April 2, 2024. Refer to Note 16. Related Parties for additional information. Spectrum The maturity date of Spectrum's 8.50% and 11.45% Notes, as amended, is August 15, 2025. The exit fees associated with the notes, which are payable on the earlier of maturity or repayment of the principal, were recorded as original issue discount and are amortized over the remaining life of the notes. A corresponding liability is reflected in Other Liabilities in the Condensed Consolidated Balance Sheets. As of both March 31, 2024 and December 31, 2023, the Company had total capitalized estimated exit fees of $15.9 million, which are reflected in Other Liabilities (non-current) in the Condensed Consolidated Balance Sheet. Interest is capitalized and payable upon maturity of the notes. As of March 31, 2024, the effective interest rates on the notes, as amended, ranged from 20.6% to 24.0% per annum. During November 2023, concurrently with Broadcasting's execution of the Ninth Amendment to Secured Notes, which among other things extended the maturity of the notes, INNOVATE Corp. entered into a related side letter with the lenders, whereby INNOVATE Corp. has agreed to utilize proceeds from the sale of certain of its existing operations, as allowable under the Company's current agreements and indentures and after all other required payments have been made, for repayment of a portion of Broadcasting's Senior Secured Notes. Assuming there are sufficient proceeds remaining after such repayment, an additional $1.0 million fee is payable if repayment occurs by November 9, 2024, or $2.0 million if repayment occurs after that date. In exchange for the additional fee, the institutional investors will return their equity interests in HC2 Broadcasting Holdings, Inc. and equity interests in DTV America. Life Sciences During 2023, R2 Technologies entered into additional notes and amendments with Lancer Capital, and on November 15, 2023, the maturity date of all outstanding prior existing notes was extended to the earlier of January 31, 2024 or within five business days of the date on which R2 Technologies receives an aggregate $20.0 million from the consummation of a debt or equity financing. The notes expired on January 31, 2024 and, effective January 31, 2024, a new 20% note with an aggregate original principal amount of $20.0 million was issued, which is comprised of the prior outstanding principal amounts and unpaid accrued interest of $2.6 million which was capitalized into the new principal balance. Future interest is payable monthly in arrears, in cash or, if not paid in cash, accrued and unpaid interest will be capitalized monthly into the principal balance. The new note also includes an exit fee payable upon the earliest of the maturity date, the acceleration date of the principal amount of the note, for any reason as defined in the agreement, or the date upon which any prepayment is made. The exit fee shall be equal to 10.5% of the principal amount being repaid if payment is made anytime from April 1, 2024 through April 30, 2024. As a result of the addition of the exit fee, the modification was determined to be an extinguishment under ASC 470-50 and the amount of the new exit fee payable to the existing lender of $2.2 million is included in Other (expense) income, net on the Condensed Consolidated Statement of Operations. The maturity date of the new note is April 30, 2024 or within five business days of the date on which R2 Technologies receives an aggregate $20.0 million from the consummation of a debt or equity financing or has a change in control, as defined in the agreement, with an optional prepayment of the entire then-outstanding and unpaid principal and accrued interest upon five-days written notice to Lancer Capital. Subsequent to quarter end, effective April 30, 2024, the note was extended to May 17, 2024, and the exit fee payable was updated to 10.71% of the principal amount for repayments made after May 1, 2024. As of March 31, 2024, the per annum interest rate on the outstanding principal balance is 20%. For the three months ended March 31, 2024 and 2023, R2 Technologies recognized interest expense of $0.9 million and $0.5 million, respectively, related to the contractual interest coupon on the notes with Lancer Capital. As part of the agreement, all unpaid accrued interest on the new note is capitalized into the principal balance on a monthly basis. As a result, an additional $0.7 million of unpaid accrued interest incurred subsequent to January 31, 2024, was capitalized into the principal balance during the three months ended March 31, 2024. As of March 31, 2024, all unpaid accrued interest on the new note had been capitalized into the principal balance, and there was no accrued interest payable. As of December 31, 2023, the related accrued interest payable not capitalized into the principal balance was $2.4 million. The accrued exit fee was $2.2 million as of March 31, 2024, which is included in Accrued liabilities on the Condensed Consolidated Balance Sheet. Non-Operating Corporate 2026 Senior Secured Notes The $330.0 million aggregate principal amount of 8.50% senior secured notes due February 1, 2026 (the "2026 Senior Secured Notes") was issued in 2021 at 100% of par, with a stated annual interest rate of 8.50% and an effective interest rate of 9.3%, which reflects $10.8 million of deferred financing fees, including underwriting fees. For the three months ended March 31, 2024 and 2023, aggregate interest expense, including the contractual interest coupon and amortization of the deferred financing fees, was $7.6 million and $7.5 million, respectively. 2026 Convertible Notes The $51.8 million of 7.50% 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 with a stated annual interest rate of 7.50%. 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 mature on August 1, 2026 unless earlier converted, redeemed or purchased. The 2026 Convertible Notes have an effective interest rate of 3.21%, which reflects the initial $12.3 million premium and $1.1 million of deferred financing fees. 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. As of March 31, 2024, the 2026 Convertible Notes had a net carrying value of $56.7 million inclusive of an unamortized premium of $5.5 million and unamortized deferred financing costs of $0.5 million. Based on the closing price of our common stock of $0.70 on March 31, 2024, the if-converted value of the 2026 Convertible Notes did not exceed its principal value. For both the three months ended March 31, 2024 and 2023, aggregate interest expense recognized relating to both the contractual interest coupon and amortization of discount net of premium and deferred financing costs was $0.5 million. Revolving Line of Credit The Company has a revolving credit agreement with MSD PCOF Partners IX, LLC ("MSD"), which has a maximum commitment of $20.0 million ("Revolving Line of Credit"). The Revolving Line of Credit has an interest rate margin applicable to loans borrowed under the Revolving Line of Credit of 5.75%, and interest is paid quarterly. The Revolving Line of Credit also includes a commitment fee at a per annum rate of 1.0% calculated based off the actual daily amount of unused availability under the revolving credit line with MSD. On April 25, 2023, the Company and MSD extended the maturity date of its Revolving Line of Credit from February 23, 2024, to March 16, 2025, and also changed the benchmark rates for interest to SOFR-based rates and lowered the amount of net cash proceeds from certain asset sales in excess of which a prepayment is required from $50.0 million to $10.0 million. The affirmative and negative covenants governing the Revolving Line of Credit are substantially consistent with the affirmative and negative covenants contained in the indenture that governs the 2026 Senior Secured Notes. As of both March 31, 2024 and December 31, 2023, the outstanding balance was $20.0 million. Subsequent to quarter end, on May 6, 2024, the Company and MSD extended the maturity date of its Revolving Line of Credit from March 16, 2025 to May 16, 2025. CGIC Unsecured Note Due 2026 On May 9, 2023, in connection with the redemption of the DBMGi Preferred Stock, the Company issued a subordinated unsecured promissory note to Continental General Insurance Company ("CGIC") in the principal amount of $35.1 million (the "CGIC Unsecured Note"). Refer to Note 15. Temporary Equity and Equity for additional information. The CGIC Note is due February 28, 2026, and bears interest at 9.0% per annum through May 8, 2024, 16.0% per annum from May 9, 2024 to May 8, 2025, and 32.0% per annum thereafter, and the effective interest rate on the note is 18.1%. The CGIC Unsecured Note also requires a mandatory prepayment from the proceeds from certain asset sales and the greater of $3.0 million or 12.5% of the net proceeds from certain equity sales. Other covenants in the CGIC Unsecured Note are generally consistent with the Company's Indenture governing the 8.50% Senior Secured Notes due 2026, dated as of February 1, 2021, by and among the Company, the guarantors party thereto and U.S. Bank National Association. For the three months ended March 31, 2024, interest expense recognized relating to the CGIC Unsecured Note was $1.6 million and cash paid for interest to CGIC was $0.8 million. Subsequent to the quarter end, as a result of the closing of the Rights Offering on April 24, 2024, INNOVATE redeemed $4.1 million of the CGIC Unsecured Note on April 26, 2024. INNOVATE is in compliance with its debt covenants as of March 31, 2024.

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