Debt

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Debt

DEBT

The Company’s borrowings consist of the following:

				As of
(in thousands)	Maturities	Stated Interest Rate	Effective Interest Rate	September 30, 2022		December 31, 2021
Unsecured notes (1)	2026	5.75%	5.75%	$	397,367	$	396,830
Revolving credit facility	2027	1.61% - 6.63%	2.55%	180,662		209,643
Truist Bank commercial note (2)	2031	1.85% - 4.13%	2.73%	23,767		24,504
Truist Bank commercial note	2032	2.10% - 4.56%	3.04%	69,542		22,500
Truist Bank commercial note (3)	2032	3.49% - 4.31%	4.06%	26,886		—
Pinnacle Bank term loan	2024	4.15%	4.19%	8,715		9,558
Other indebtedness	2025 - 2030	0.00% - 16.00%		3,397		4,466
Total Debt				710,336		667,501
Less: current portion				(141,802)		(141,749)
Total Long-Term Debt				$	568,534	$	525,752

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(1)     The carrying value is net of $2.6 million and $3.2 million of unamortized debt issuance costs as of September 30, 2022 and December 31, 2021, respectively.

(2)     The carrying value is net of $0.1 million of unamortized debt issuance costs as of September 30, 2022 and December 31, 2021.

(3)     The carrying value is net of $0.1 million of unamortized debt issuance costs as of September 30, 2022.

At September 30, 2022 and December 31, 2021, the fair value of the Company’s 5.75% unsecured notes, based on quoted market prices (Level 2 fair value assessment), totaled $389.0 million and $417.5 million, respectively.

On May 3, 2022, the Company amended the revolving credit facility to, among other things, (i) extend the maturity of the facility to May 30, 2027, (ii) eliminate borrowings under separate U.S. Dollar and multicurrency tranches, (iii) update certain interest rate benchmarks including replacing USD London Interbank Offered Rate (LIBOR) with SOFR for borrowings denominated in U.S. dollars, (iv) incorporate a sub-facility for the issuance of letters of credit, and (v) allow for applicable margin for borrowings to be determined and adjusted quarterly based on the Company’s Total Net Leverage Ratio. The outstanding balance on the Company’s $300 million unsecured revolving credit facility was $180.7 million as of September 30, 2022, consisting of U.S. dollar borrowings of $126 million with interest payable at SOFR plus 1.375% or prime rate plus 0.375%, and British Pound (GBP) borrowings of £50 million with interest payable at Daily Sterling Overnight Index Average (SONIA) plus 1.375%.

On July 5, 2022, the Company’s automotive subsidiary amended its commercial note, dated December 28, 2021, with Truist Bank to, among other things, increase the aggregate loan amount to $71.6 million. The amended commercial note is payable over a 10-year period in monthly installments of $1.0 million, plus accrued and unpaid interest, for the first 24 months and $0.5 million, plus accrued and unpaid interest, for the remaining 96 months due on the first day of each month, with a final payment of the outstanding principal balance due on July 1, 2032. The amended commercial note bears interest at variable rates based on SOFR plus 2.05% per annum. The commercial note contains terms and conditions, including remedies in the event of a default by the automotive subsidiary.

On July 5, 2022, the Company’s automotive subsidiary entered into three additional commercial notes with Truist Bank in an aggregate amount of $27.2 million. The commercial notes are each payable over a 10-year period in aggregate monthly installments of $0.1 million, plus accrued and unpaid interest, due on the first day of each month, with a final payment of the outstanding principal balances due on July 1, 2032. The commercial notes each bear interest at variable rates based on SOFR plus 1.8% per annum. The commercial notes contain terms and conditions, including remedies in the event of a default by the automotive subsidiary. On the same date, the Company’s automotive subsidiary entered into three interest rate swap agreements with a total notional value of $27.2 million and a maturity date of July 1, 2032. The interest rate swap agreements will pay the automotive subsidiary interest on the $27.2 million notional amount based on SOFR plus 1.8% per annum and the automotive subsidiary will pay the counterparty a fixed rate of 4.861% per annum. The new interest rate swap agreements were entered into to convert the variable rate borrowings under these commercial notes into fixed rate borrowings. Based on the terms of the new interest rate swap agreements and the underlying borrowings, the new interest rate swaps were determined to be effective and thus qualify as cash flow hedges.

The fair value of the Company’s other debt, which is based on Level 2 inputs, approximates its carrying value as of September 30, 2022 and December 31, 2021. The Company is in compliance with all financial covenants of the revolving credit facility, commercial notes, and Pinnacle Bank term loan as of September 30, 2022.

During the three months ended September 30, 2022 and 2021, the Company had average borrowings outstanding of approximately $714.1 million and $545.9 million, respectively, at average annual interest rates of approximately

4.9% and 4.8%, respectively. During the three months ended September 30, 2022 and 2021, the Company incurred net interest expense of $10.8 million and $9.4 million, respectively.

During the nine months ended September 30, 2022 and 2021, the Company had average borrowings outstanding of approximately $676.5 million and $531.3 million, respectively, at average annual interest rates of approximately 4.6% and 4.9%, respectively. During the nine months ended September 30, 2022 and 2021, the Company incurred net interest expense of $36.8 million and $22.5 million, respectively.

During the three and nine months ended September 30, 2022, the Company recorded interest expense of $1.4 million and $12.8 million, respectively, to adjust the fair value of the mandatorily redeemable noncontrolling interest. During the three and nine months ended September 30, 2021, the Company recorded net interest expense of $2.6 million and $2.7 million, respectively, to adjust the fair value of the mandatorily redeemable noncontrolling interest. The fair value of the mandatorily redeemable noncontrolling interest was based on the fair value of the underlying subsidiaries owned by GHC One and GHC Two, after taking into account any debt and other noncontrolling interests of its subsidiary investments. The fair value of the owned subsidiaries is determined by reference to either a discounted cash flow or EBITDA multiple, which approximates fair value (Level 3 fair value assessment).