v3.19.3.a.u2

Debt | 12 Months Ended
--- | ---
Dec. 31, 2019
Debt Disclosure [Abstract] |
Debt | Debt The Company’s outstanding long-term debt was as follows:
| December 31, 2019 |  | December 31, 2018
| (in thousands)
Senior secured term loan facility | $ | 250,000 |  |  | $ | — |
Deferred government grant obligations | 3,500 |  |  | 3,500 |
Less: unamortized debt issuance costs | (7,238 | ) |  | — |
Other | 358 |  |  | — |
Long-term debt | $ | 246,620 |  |  | $ | 3,500 |
The Company believes the carrying value of its long-term debt approximates the fair value of the debt as the terms and interest rates approximate the market rates. As of December 31, 2019, the Company had a current portion of long-term debt balance of $0.6 million related to other borrowings, and had no such balance as of December 31, 2018. Credit Agreement On May 22, 2019, the Company entered into a credit agreement (the “Credit Agreement”) with Owl Rock Capital Corporation, as administrative agent and collateral agent, and certain other lenders party thereto that provides for a $250 million senior secured term loan facility (the “Term Loan”). Subject to certain exceptions, the Term Loan under the Credit Agreement may be increased or new term loans may be established in an amount not to exceed (i) $50 million plus (ii) the amount of certain prepayments made by the Company plus (iii) an unlimited amount, subject to the achievement of either a certain First Lien LQA University Segment Revenue Leverage Ratio (as defined in the Credit Agreement) or a certain First Lien Net Leverage Ratio (as defined in the Credit Agreement), as applicable. On February 25, 2020 (the “First Amendment Effective Date”), the Company amended the credit agreement (as amended, the “Credit Agreement”) to modify the Minimum Graduate LQAR (as defined below) and Minimum Alternative Credential LTMR (as defined below) required for the fiscal quarters ending June 30, 2020, September 30, 2020 and December 31, 2020. In addition, the amendment increases the applicable interest rate margins and extends the prepayment premium applicable to certain voluntary prepayments and mandatory prepayments. In connection with the amendment, the Company incurred incremental issuance costs of $2.5 million, which will be amortized as a component of interest expense over the remaining term of the Credit Agreement. The Credit Agreement governing the Term Loan requires the Company to comply with several customary financial and other restrictive covenants, such as maintaining leverage ratios in certain situations, maintaining insurance coverage, and restricting the Company’s ability to make certain investments. The Company is also required to maintain liquidity of $25.0 million of unrestricted cash as of the last day of each fiscal quarter. The Credit Agreement also includes covenants that require the Company to maintain minimum: (i) annualized last quarter Graduate Program Segment revenue (“Minimum Graduate LQAR”) and (ii) Alternative Credential Segment revenue for the last four consecutive fiscal quarters (“Minimum Alternative Credential LTMR”). For the quarter and four consecutive fiscal quarters ended December 31, 2019, the Company’s Minimum Graduate LQAR and Minimum Alternative Credential LTMR were $432.9 million and $218.8 million, respectively, which exceeded the requirements of $397.8 million and $185.0 million, respectively. The Term Loan matures on May 22, 2024 and currently bears interest, at the Company’s option, at variable rates based on (i) a customary alternative base rate (with a floor of 2.00%) plus an applicable margin of 5.75% or (ii) an adjusted LIBOR rate (with a floor of 1.00%) for the interest period relevant to such borrowing plus an applicable margin of 6.75%. The effective interest rate of the Term Loan for the year ended December 31, 2019 was 8.91%. Voluntary prepayments and mandatory prepayments following or in connection with any asset sales, debt issuance or casualty events or following any acceleration of the Term Loan are subject to a 2% prepayment premium if made prior to the first anniversary of the First Amendment Effective Date, and a 1% prepayment premium if made on or after the first anniversary of the First Amendment Effective Date, but prior to the second anniversary of the First Amendment Effective Date; provided, that a 1% prepayment penalty shall apply to the extent the prepayment is made prior to the first anniversary of the First Amendment Effective Date with the proceeds from the sale of equity securities, equity-linked securities and/or derivative securities settled in, or convertible into, equity securities. During the year ended December 31, 2019, the Company incurred interest expense of $13.2 million in connection with the Credit Agreement. As of December 31, 2019, the Company’s accrued interest balance associated with the Credit Agreement was $0.1 million. Comerica Line of Credit Effective in the second quarter of 2019, the Company terminated its $25.0 million revolving line of credit agreement and letters of credit with Comerica Bank. No amounts were outstanding under this credit agreement as of December 31, 2019 or 2018. Deferred Government Grant Obligations The Company has a total of two outstanding conditional loan agreements with Prince George’s County, Maryland and the State of Maryland for an aggregate amount of $3.5 million, each bearing an interest rate of 3% per annum. These agreements are conditional loan obligations that may be forgiven provided that the Company attains certain conditions related to employment levels at 2U’s Lanham, Maryland headquarters. The conditional loan with the State of Maryland has a maturity date of December 31, 2026, and the conditional loan with Prince George’s County, Maryland has a maturity date of June 22, 2027. As of December 31, 2019, the Company did not meet the employment level threshold set forth in the conditional loan agreement with Prince George’s County, Maryland and a $0.6 million portion of the $1.5 million principal balance and $0.1 million of accrued interest as of that date were no longer subject to forgiveness and became payable upon demand. The Company is in discussions with Prince George’s County, Maryland to amend the employment conditions under this conditional loan agreement. The interest expense related to these loans for the years ended December 31, 2019 and 2018 was immaterial. As of December 31, 2019 and 2018, the Company’s combined accrued interest balance associated with the deferred government grant obligations was $0.3 million and $0.2 million, respectively. Letters of Credit Certain of the Company’s operating lease agreements entered into require security deposits in the form of cash or an unconditional, irrevocable letter of credit. As of December 31, 2019, the Company has entered into standby letters of credit totaling $18.4 million as security deposits for the applicable leased facilities and in connection with the deferred government grant obligations. The Company maintains restricted cash as collateral for standby letters of credit for the Company’s leased facilities and in connection with the deferred government grant obligations.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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