Debt Obligations

9 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

Debt Obligations

9. Debt Obligations

Debt obligations consist of the following (in millions):

	September 30, 2021		December 31, 2020
Infrastructure
LIBOR plus 5.85% Note, due 2023	$	—	$	71.6
LIBOR plus 1.50% Line of Credit	—		38.7
3.25% Note due 2026	108.1		—
PRIME minus 1.10% Line of Credit	72.5		—
4.00% Note due 2024	25.0		—
8.00% Note due 2024	19.6		—
Other, various maturity dates	6.3		—
Obligations under finance leases	0.1		0.2
Spectrum
8.50% Note due 2021	19.3		19.3
10.50% Note due 2021	32.9		32.9
Other, various maturity dates	2.2		2.9
Obligations under finance leases	—		0.6
Non-Operating Corporate
11.50% Senior Secured Notes, due 2021	—		340.4
8.50% Senior Secured Notes, due 2026	330.0		—
7.50% Convertible Senior Notes, due 2022	3.2		55.0
7.50% Convertible Senior Notes, due 2026	51.8		—
LIBOR plus 5.75% Line of Credit	5.0		15.0
	676.0		576.6
Unamortized issuance discount, issuance premium, and deferred financing costs	(2.1)		(15.1)
Less: current portion of debt obligations	(71.1)		(433.6)
Debt obligations	$	602.8	$	127.9

approximately

Aggregate finance lease and debt payments, including interest are as follows (in millions):

	Finance Leases		Debt		Total
2021	$	0.1	$	64.6	$	64.7
2022	—		56.2		56.2
2023	—		56.4		56.4
2024	—		144.0		144.0
2025	—		41.3		41.3
Thereafter	—		503.9		503.9
Total minimum principal and interest payments	0.1		866.4		866.5
Less: Amount representing interest	—		(190.5)		(190.5)
Total aggregate finance lease and debt payments	$	0.1	$	675.9	$	676.0

The interest rates on the finance leases range from approximately 2.0% to 10.0%.

Infrastructure

In May 2021, DBMG repaid its revolving line of credit under the Credit and Security Agreement with Wells Fargo Bank ("Revolving Line") and its term loan under a financing agreement with TWC Asset Management Company LLC ("TWC Loan"). In addition, DBMG entered into a new credit facility with UMB Bank ("UMB"). Under the terms of the agreement, UMB agreed to a $110.0 million term loan ("UMB Term Loan") and $110.0 million revolving credit agreement ("UMB Revolving Line"). The UMB Term loan expires in 2026 and will bear interest at a rate of 3.25%. The UMB Revolving Line expires in 2024 and will bear interest at a rate of Prime Rate minus 1.10%. The proceeds were used to fully repay DBMG's existing debt obligations, fund a portion of the Banker Steel acquisition, and provide additional working capital capacity to DBMG.

The extinguishment of the Revolving Line and the TWC Loan yielded a loss on extinguishment of $1.5 million included in Loss on early extinguishment or restructuring of debt in the Condensed Consolidated Statement of Operations.

Spectrum

On August 30, 2021, HC2 Broadcasting repurchased $1.0 million of DTV's outstanding notes payable, inclusive of accrued interest, to certain institutional investors. Also on August 30, 2021, DTV extended its remaining outstanding notes by 60 days, and subsequent to quarter end, HC2 Broadcasting repurchased the remaining DTV outstanding Secured Notes. See Note 19. Subsequent Events for further information.

Non-Operating Corporate

On February 1, 2021, INNOVATE repaid its 2021 Senior Secured Notes and issued $330.0 million aggregate principal amount of 8.5% senior secured notes due 2026 (the "2026 Senior Secured Notes"). In addition, the Company entered into exchange agreements with certain holders of approximately $51.8 million aggregate principal amount of its existing $55.0 million 7.5% convertible senior notes due 2022 (the "2022 Convertible Notes"), pursuant to which the Company exchanged such holders' 2022 Convertible Notes for newly issued 7.5% convertible notes due 2026 (the "2026 Convertible Notes"). The 2026 Senior Secured Notes were issued in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

The Company accounted for the transactions under the debt extinguishment model as the present value of cash flows under the terms of the 2026 Senior Secured Notes and 2026 Convertible Notes was at least 10% different from the present value of the remaining cash flows under the 2021 Senior Secured Notes and the 2022 Convertible Notes.

The extinguishment of the 2021 Senior Secured Notes yielded a loss on extinguishment of $4.5 million. The extinguishment of the $51.8 million of 2022 Convertible Notes yielded a loss on extinguishment of $5.4 million, an acceleration of the amortization of discount of $5.3 million, and extinguishment of the bifurcated conversion option classified as equity of $7.7 million.

Senior Secured Notes

The 2026 Senior Secured Notes were issued under an indenture dated February 1, 2021, by and among the Company, the guarantors party thereto and U.S. Bank National Association, a national banking association ("U.S. Bank"), as trustee (the "Secured Indenture"). The 2026 Senior Secured Notes were issued at 100% of par.

Convertible Notes

The 2026 Convertible Notes were issued under a separate indenture dated February 1, 2021, between the Company and U.S. Bank, as trustee (the "Convertible Indenture"). The 2026 Convertible Notes were issued at 100% of par.

Each $1,000 of principal of the 2026 Convertible Notes will initially be convertible into 234.2971 shares of our common stock, which is equivalent to an initial conversion price of approximately $4.27 per share, subject to adjustment upon the occurrence of specified events.

The fair value of the embedded conversion feature contained in the 2026 Convertible Notes had a fair value of $12.3 million, which was recorded as a premium on the 2026 Convertible Notes. The 2026 Convertible Notes have an effective interest rate of 3.21%, which reflects the $12.3 million premium and $1.1 million of deferred financing fees.

At September 30, 2021, the 2026 Convertible Notes had a carrying value of $61.7 million and an unamortized premium of $10.9 million. Based on the closing price of our common stock of $4.10 on September 30, 2021, the if-converted value of the 2026 Convertible Notes did not exceed its principal value.

For the nine months ended September 30, 2021, interest cost recognized for the period relating to both the contractual interest coupon and amortization of discount net of premium was $2.6 million and $1.3 million, respectively.

Line of Credit

On February 23, 2021, the Company entered into a third amendment (the "Amendment") of the 6.75% line of credit with MSD PCOF Partners IX, LLC ("Revolving Credit Agreement"). Among other things, the Amendment (i) increases the aggregate principal amount of the Revolving Credit Agreement to $20.0 million, (ii) extends the maturity date of the Revolving Credit Amendment to February 23, 2024, (iii) updates the affirmative and negative covenants contained in the Amended Credit Agreement so that they are substantially consistent with the affirmative and negative covenants contained in the indenture that governs the 2026 Senior Secured Notes and (iv) reduces the interest rate margin applicable to loans borrowed under the Amended Credit Agreement to 5.75% from the 6.75% described above. Except as modified by the Amendment, the terms of the Revolving Credit Agreement remain in effect.

In May 2021, INNOVATE drew $5.0 million under the Revolving Credit Agreement. The Company used the proceeds to fund a portion of the redemption of the Company's Series A and A-2 Preferred Stock.

INNOVATE is in compliance with its debt covenants as of September 30, 2021.