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Note 8 - Long-term Debt

3 Months Ended

Mar. 31, 2024

8.	Long-Term Debt

As of March 31, 2024 and December 31, 2023, the Company’s borrowings were as follows:

(in thousands)	March 31, 2024			December 31, 2023
Long-term debt:
Term loan	$	27,700		$	30,723
Revolving line		8,400			6,400
Less: unamortized deferred financing costs		(490	)		(560	)
Total debt		35,610			36,563
Less: current portion of long-term debt		(4,000	)		(6,139	)
Current unamortized deferred financing costs		280			280
Long-term debt	$	31,890		$	30,704

The aggregate amounts of debt maturities are as follows:

(in thousands)
2024	$	4,000
2025		32,100
	$	36,100

The Company maintains a Credit Agreement (as amended, the “Credit Agreement”) with Citizens Bank, N.A., Wells Fargo Bank, National Association, and First Citizens Bank & Trust Company (together, the “Lenders”). The Credit Agreement provides for a term loan of $40.0 million and a $25.0 million senior revolving credit facility (including a $10.0 million sub-facility for the issuance of letters of credit and a $10.0 million swingline loan sub facility) (collectively, the “Credit Facility”). The Company’s obligations under the Credit Agreement are guaranteed by certain of the Company’s direct, domestic wholly-owned subsidiaries; none of the Company’s direct or indirect foreign subsidiaries has guaranteed the Credit Facility. The Company’s obligations under the Credit Agreement are secured by substantially all of the assets of Harvard Bioscience, Inc., and each guarantor (including all or a portion of the equity interests in certain of the Company’s domestic and foreign subsidiaries). The Credit Facility matures on December 22, 2025. Issuance costs of $1.4 million are amortized over the contractual term to maturity date on a straight-line basis, which approximates the effective interest method. Available and unused borrowing capacity under the revolving line of credit was $4.4 million as of March 31, 2024 based on the Credit Agreement, as amended pursuant to the March 2024 Amendment as described below. Total revolver borrowing capacity is limited by the consolidated net leverage ratio as defined under the amended Credit Agreement.

Borrowings under the Credit Facility will, at the option of the Company, bear interest at either (i) a rate per annum based on the Secured Overnight Financing Rate (“SOFR”) for an interest period of one, two, three or six months, plus an applicable interest rate margin determined as provided in the Credit Agreement, (a “SOFR Loan”), or (ii) an alternative base rate plus an applicable interest rate margin, each as determined as provided in the Credit Agreement (an “ABR Loan”). SOFR interest under the Credit Agreement is subject to applicable market rates and a floor of 0.50%. The alternative base rate is based on the Citizens Bank prime rate or the federal funds effective rate of the Federal Reserve Bank of New York and is subject to a floor of 1.0%. The applicable interest rate margin varies from 2.0% per annum to 3.25% per annum for SOFR Loans, and from 1.5% per annum to 3.0% per annum for ABR Loans, in each case depending on the Company’s consolidated net leverage ratio and is determined in accordance with a pricing grid set forth in the Credit Agreement. There are no prepayment penalties in the event the Company elects to prepay and terminate the Credit Facility prior to its scheduled maturity date, subject to SOFR Loan breakage and redeployment costs in certain circumstances.

The effective interest rate on the Company borrowings for the three months ended March 31, 2024 and 2023, was 7.7% and 7.9%, respectively, and the weighted average interest rate as of March 31, 2024, net of the effect of the Company’s interest rate swaps, was 7.4%. 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.

As of March 31, 2024, the term loan requires quarterly installments of $1.0 million with a balloon payment at maturity. Furthermore, within ninety days after the end of the Company’s fiscal year, the term loan may be permanently reduced pursuant to certain mandatory prepayment events including an annual “excess cash flow sweep”, as defined in the agreement; provided that, in any fiscal year, any voluntary prepayments of the term loan shall be credited against the Company’s “excess cash flow” prepayment obligations on a dollar-for-dollar basis for such fiscal year. As of December 31, 2023, the current portion of long-term debt included amounts due under the excess cash flow sweep of $2.0 million which was paid on March 29, 2024. Amounts outstanding under the revolving credit facility can be repaid at any time but are due in full at maturity.

The Credit Agreement includes customary affirmative, negative, and financial covenants binding on the Company. The negative covenants limit the ability of the Company, among other things, to incur debt, incur liens, make investments, sell assets and pay dividends on its capital stock. The financial covenants include a maximum consolidated net leverage ratio and a minimum consolidated fixed charge coverage ratio. The Credit Agreement also includes customary events of default.

In March, 2024, the Company entered into an amendment to the Credit Agreement (the “March 2024 Amendment”) pursuant to which the Lenders and administrative agent modified the definition of Consolidated EBITDA used in the calculation of certain financial covenants to adjust for charges related to the ongoing abandoned property audit (See Note 13) and commission fees expected to be paid in connection with the employee retention credit filings (See Note 5). The Company was in compliance with the covenants of the Credit Agreement, as amended, as of March 31, 2024.