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Credit Arrangements | 6 Months Ended
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Jun. 30, 2023
Credit Arrangements [Abstract] |
Credit Arrangements |
Note 7. | Credit Arrangements
As expected, discontinuation of LIBOR occurred on June 30, 2023 (“LIBOR Cessation Date”) and will affect the rates used in the Company’s Credit Arrangements after that date. On March 15, 2022, the U.S. Congress enacted the Adjustable Interest Rate LIBOR Act (the “LIBOR Act”) to address LIBOR’s cessation and to establish a clear and uniform process for replacing the overnight and one-, three-, six- and 12-month tenors of USD LIBOR in existing contracts that do not provide for the use of a clearly defined or practicable replacement benchmark rate (“tough legacy contracts”). Further, the Board of Governors of the Federal Reserve System (the “Board”) has issued regulations, 12 C.F.R. Part 253, “Regulations Implementing the Adjustable Interest Rate LIBOR Act (Regulation ZZ)” together with the LIBOR Act, constitute the “Federal LIBOR Legislation,” which relates to the LIBOR transition. Bank Debt On May 12, 2021, the Company entered into a Revolving Credit Agreement (the “Credit Agreement”) with Truist Bank as the lender (the “Lender”). The Credit Agreement provides for an unsecured $10,000 revolving credit facility that matures on April 12, 2024. Under the Credit Agreement, the Company will pay interest on the unpaid principal balance of outstanding revolving loans at the LIBOR Rate (as defined in the Credit Agreement) plus 2.00%, subject to a LIBOR floor rate of 1.00%. On June 28, 2023, the Company received a LIBOR cessation notice from the Lender detailing the replacement rates that would be used effective immediately after the LIBOR Cessation Date of June 30, 2023, as provided for in the Credit Agreement. The use of an alternate benchmark rate selected by the Lender (“Benchmark Replacement”) in place of LIBOR will not be used until the first reset date under the terms of the Credit Agreement following the LIBOR Cessation Date. The Benchmark Replacement that will be used is the Term Secured Overnight Financing Rate (“SOFR”) published by CME Group Benchmark Administration Limited (“CME”) and provides an indicative, forward-looking measurement of the SOFR based on market expectations implied from leading derivatives markets. The Credit Agreement requires the Company to comply with certain covenants, including a debt to capital ratio that restricts the Company from incurring consolidated indebtedness that exceeds 35% of the Company’s consolidated capitalization at any time. The Credit Agreement also contains customary representations and warranties and events of default. Events of default include, among others, (a) the failure by the Company to pay any amounts owed under the Credit Agreement when due, (b) the failure to perform and not timely remedy certain covenants, (c) a change in control of the Company and (d) the occurrence of bankruptcy or insolvency events. Upon an event of default, the Lender may, among other things, declare all obligations under the Credit Agreement immediately due and payable and terminate the revolving commitments. As of June 30, 2023, the Company had outstanding borrowings of $3,000 under the Credit Agreement. Junior Subordinated Debentures The Company has two unconsolidated Connecticut statutory business trusts, which exist for the exclusive purposes of: (i) issuing trust preferred securities (“Trust Preferred Securities”) representing undivided beneficial interests in the assets of the trusts; (ii) investing the gross proceeds of the Trust Preferred Securities in junior subordinated deferrable interest debentures (“Junior Subordinated Debentures”) of the Company; and (iii) engaging in those activities necessary or incidental thereto. On May 1, 2023, the Company received notice from its trustee and administrator of the statutory business trusts, that Federal LIBOR Legislation (discussed above) provides that the benchmark rate for tough legacy contracts, such as the statutory trusts contracts, will be replaced by operation of law on the first London banking day after June 30, 2023 with a benchmark replacement selected by the Board, as adjusted by the applicable spread adjustment recommended by the Board. The trustee and administrator has determined that our contracts will be replaced with 3-month CME Term SOFR plus applicable tenor spread of 0.26161 percent. The financial structure of each of Atlantic American Statutory Trust I and II as of June 30, 2023 was as follows:
|  | Atlantic American Statutory Trust I |  |  | Atlantic American Statutory Trust II |
JUNIOR SUBORDINATED DEBENTURES (1) (2) |  |  |  |  |  |
Principal amount owed June 30, 2023 |  | $ | 18,042 |  |  | $ | 23,196 |
Less: Treasury debt (3) |  |  | — |  |  |  | (7,500 | )
Net balance June 30, 2023 |  | $ | 18,042 |  |  | $ | 15,696 |
Net balance December 31, 2022 |  | $ | 18,042 |  |  | $ | 15,696 |
Coupon rate |  | LIBOR + 4.00% |  |  | LIBOR + 4.10% |
Interest payable |  | Quarterly |  |  | Quarterly |
Maturity date |  | December 4, 2032 |  |  | May 15, 2033 |
Redeemable by issuer |  | Yes |  |  | Yes |
TRUST PREFERRED SECURITIES |  |  |  |  |  |  |  |
Issuance date |  | December 4, 2002 |  |  | May 15, 2003 |
Securities issued |  |  | 17,500 |  |  |  | 22,500 |
Liquidation preference per security |  | $ | 1 |  |  | $ | 1 |
Liquidation value |  | $ | 17,500 |  |  | $ | 22,500 |
Coupon rate |  | LIBOR + 4.00% |  |  | LIBOR + 4.10% |
Distribution payable |  | Quarterly |  |  | Quarterly |
Distribution guaranteed by (4) |  | Atlantic American Corporation |  |  | Atlantic American Corporation |
(1) | For each of the respective debentures, the Company has the right at any time, and from time to time, to defer payments of interest on the Junior Subordinated Debentures for a period not exceeding 20 consecutive quarters up to the debentures’ respective maturity dates. During any such period, interest will continue to accrue and the Company may not declare or pay any cash dividends or distributions on, or purchase, the Company’s common stock nor make any principal, interest or premium payments on or repurchase any debt securities that rank equally with or junior to the Junior Subordinated Debentures. The Company has the right at any time to dissolve each of the trusts and cause the Junior Subordinated Debentures to be distributed to the holders of the Trust Preferred Securities.
(2) | The Junior Subordinated Debentures are unsecured and rank junior and subordinate in right of payment to all senior debt of the Parent and are effectively subordinated to all existing and future liabilities of its subsidiaries.
(3) | On August 4, 2014, the Company acquired $7,500 of the Junior Subordinated Debentures.
(4) | The Parent has guaranteed, on a subordinated basis, all of the obligations under the Trust Preferred Securities, including payment of the redemption price and any accumulated and unpaid distributions to the extent of available funds and upon dissolution, winding up or liquidation.

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- Definition The entire disclosure for 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 235 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(c)) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 470 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//470/tableOfContent Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Subparagraph (i) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1C -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1C -Subparagraph (c) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1E -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1E Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1I -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1I -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1I -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I + Details
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