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Debt
 3 Months Ended
Mar. 31, 2022
Debt Disclosure [Abstract]  
Debt

Note 7. Debt

As of March 31, 2022, the Company had $30.0 million outstanding under its current term loan facility and $0.0 million outstanding under its revolving credit facility. The Company has available $45.0 million under its revolving credit facility (unaudited).

The following table reflects the current and noncurrent portions of the external debt facilities at December 31, 2021 and March 31, 2022 (in thousands):

 

 

December 31,

 

 

March 31,

 

 

 

2021

 

 

2022

 

 

 

 

 

 

(unaudited)

 

Term loan facility

 

$

30,000

 

 

$

30,000

 

Less debt issuance costs

 

 

(546

)

 

 

(511

)

Total debt

 

 

29,454

 

 

 

29,489

 

Less current portion of term facility

 

 

(2,625

)

 

 

(3,281

)

Current portion of debt issuance costs

 

 

136

 

 

 

143

 

Total long-term external debt, net

 

$

26,965

 

 

$

26,351

 

 

Secured credit agreement

The Company is currently operating under is credit agreement entered into on November 17, 2021 with Bank of America ("BofA Credit Agreement") which provides for the provisions of loans and other financial accommodations in an aggregate principal amount of up to $75.0 million in the form of (i) a five-year term loan facility (the "Term Facility") in the amount of $30.0 million and (ii) a five-year revolving credit facility (the "Revolving Facility") in the amount of $45.0 million, including a $5.0 million sublimit for the issuance of letters of credit and a $5.0 million sublimit for swingline loans. On November 17, 2021, the Company borrowed $30.0 million as a Eurodollar Rate loan with a six (6) month interest period. Both the Term Facility and the Revolving Facility mature on November 17, 2026.

Interest accrues on the outstanding principal amount of the Term and Revolving Facilities on a quarterly basis and is equal to a base rate equal rate per annum determined by reference to the 1-month, 3-month or 6-month US Dollar LIBOR rate as selected by the Company, plus an applicable margin between 1.75% to 2.25% as determined by the Company’s performance as measured by the consolidated leverage ratio. At March 31, 2022, the applicable margin was 1.75% and the effective interest rate on the term loan was 2.44%. In addition to paying interest on the outstanding principal under the term loan facility, the Company is required to pay a quarterly commitment fee on the unutilized commitments under the revolving credit facility ranging from 0.20% to 0.25% as determined by the Company's performance as measured by the consolidated leverage ratio. The commitment fee was 0.20% at March 31, 2022. The Company is also required to pay letter of credit fees on the maximum amount available to be drawn under all outstanding letters of credit in an amount equal to the applicable margin on LIBOR-based borrowings under the revolving credit facility on a per annum basis, payable in arrears, as well as fronting fees for the issuance of letters of credit and agency fees.

Under the BofA Credit Agreement, commencing on March 31, 2022, the Company is required to make quarterly principal payments of $0.7 million, with the remaining principal due on maturity on November 17, 2026. The principal payment of $0.7 million that was due on March 31, 2022 was paid on April 1, 2022. The Company is required to pay interest quarterly on the outstanding balance. The Company is permitted to voluntarily reduce the unutilized portion of the commitment amount and repay outstanding loans under the BofA Credit Agreement at any time without premium or penalty.

Maturities on the external debt outstanding at March 31, 2022 is as follows (unaudited and in thousands):

Year ending December 31,

 

 

 

2022 (April - December)

 

$

2,625

 

2023

 

 

2,625

 

2024

 

 

2,625

 

2025

 

 

2,625

 

2026

 

 

19,500

 

Total

 

$

30,000

 

Borrowings under the BofA Credit Agreement are secured by a first-priority lien on substantially all of the Company’s assets, the equity interests in the Company’s subsidiaries, and any intercompany debt. The Credit Agreement contains certain customary affirmative and negative covenants that are usual and customary for companies with similar credit ratings. As of March 31, 2022, the Company was in compliance with all affirmative and negative covenants (unaudited).

Net interest expense, including bank charges and amortization of debt issuance costs on the external debt, was $1.1 million and $0.5 million for the three-month periods ended March 31, 2021 and 2022, respectively.

Expected Discontinuation of LIBOR

In July 2017, the United Kingdom’s Financial Conduct Authority, or FCA, which regulates LIBOR, announced it will no longer compel banks to submit rates for the calculation of LIBOR after 2021. On December 31, 2021, the 1-week and 2-month US Dollar LIBOR ceased, but the remaining five US Dollar LIBOR tenors (overnight and 1-month, 3-month, 6-month and 12-month) will not cease until June 30, 2023. The base interest rate on the Company’s BofA Credit Agreement may be determined by reference to the 1-month, 3-month or 6-month US Dollar LIBOR rate, as selected by the Company. The BofA Credit Agreement matures on November 17, 2026, which is subsequent to the cessation of all tenors of the US Dollar LIBOR rate.

The Company is evaluating the potential impact of the transition from LIBOR as an interest rate bench mark to other potential alternative reference rates, including SOFR. Eurodollar loans under the BofA Credit Agreement are currently indexed to the Eurodollar Rate (the rate equivalent to LIBOR). The BofA Credit Agreement contemplates the discontinuation of LIBOR and provides that a benchmark replacement rate shall be determined by reference to other applicate rates and additionally allows for the Company to switch to a Base Rate Loan, as defined in the BofA Credit Agreement. The Company will continue to actively assess the related opportunities and risks involved in this transition.