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Note 10 - Long Term Debt

6 Months Ended

Jun. 30, 2020

10.

Long Term Debt

As of June 30, 2020, and December 31, 2019, the Company’s borrowings were comprised of:

	June 30,			December 31,
	2020			2019
	(in thousands)
Long-term debt:
Term loan	$	44,711			54,997
Revolving line		-			-
Less: unamortized deferred financing costs		(983	)		(1,180	)
Total debt		43,728			53,817
Less: current installments		(3,200	)		(3,200	)
Less: excess cash flow sweep		-			(4,093	)
Current unamortized deferred financing costs		393			393
Long-term debt	$	40,921		$	46,917

On January 31, 2018, the Company entered into a financing agreement by and among the Company and certain subsidiaries of the Company as borrowers (collectively, the Borrower), certain subsidiaries of the Company as guarantors, various lenders from time to time (the Lenders), and Cerberus Business Finance, LLC, as collateral agent and administrative agent for the Lenders (the Financing Agreement).

The Financing Agreement provided for senior secured credit facilities comprised of a $64.0 million term loan and up to a $25.0 million revolving line of credit subject to available borrowing base. The revolving facility is available for use by the Company and its subsidiaries for general corporate and working capital needs, and other purposes to the extent permitted by the Financing Agreement. Borrowings available under the revolving line of credit are limited to a borrowing base derived from the Company’s eligible accounts receivable and inventory, as defined in the Financing Agreement. As of June 30, 2020, borrowings available under the revolving facility were $7.5 million.

The Financing Agreement contains certain restrictive covenants, including a requirement to maintain a maximum leverage ratio among other financial and non-financial covenants, as defined in the Financing Agreement. The Company is compliant with all covenants under the Financing Agreement as of June 30, 2020. The maximum permitted leverage is the ratio of total debt to consolidated EBITDA, as defined in the Financing Agreement. The maximum permitted leverage ratio is 3.25 as of June 30, 2020 and for all quarters thereafter until the maturity of the Financing Agreement in 2023. Due to the negative impact of the COVID-19 pandemic on the Company’s revenue and consolidated EBITDA, the gap between the leverage ratio and maximum permitted leverage has reduced. During the three months ended June 30, 2020, the Company made an additional principal payment of $4.7 million on its term loan.

Based on the Company’s current operating plans, including actions taken to mitigate the negative impact of the COVID-19 pandemic on the Company’s business and financial condition, it expects that available cash, cash generated from current operations and debt capacity will be sufficient to finance current operations, any costs associated with restructuring activities and capital expenditures. This assessment includes consideration of the Company’s best estimates of the impact of the COVID-19 pandemic on its financial results. If the negative impact of the COVID-19 pandemic is more significant than anticipated it may impact the Company’s ability to comply with financial covenants in the future, which would require the Company to seek an amendment or waivers from its lenders, limit access to or require accelerated repayment of the existing credit facilities, or require the Company to pursue alternative financing. There are no assurances that any such alternative financing, if required, could be obtained at terms acceptable to the Company, or at all.

As of June 30, 2020, the weighted effective interest rate, net of the impact of the Company’s interest rate swap, on its borrowings was 8.9%. The carrying value of the debt approximates fair value because the interest rate under the obligation approximates market rates of interest available to the Company for similar instruments.

On April 18, 2020, the Company entered into a promissory note with PNC Bank, National Association, which provided for a loan in the amount of $6.1 million (the PPP Loan) pursuant to the Paycheck Protection Program (the PPP) of the CARES Act administered by the U.S. Small Business Administration (the SBA). On April 23, 2020, the SBA, in consultation with the U.S. Department of the Treasury issued guidance regarding consideration of alternate available sources of liquidity and its impact on qualification for PPP loans. The Company reassessed its business plans and liquidity available under its existing credit facility and elected to repay all PPP funds. The PPP Loan was repaid in full on May 4, 2020.