Credit Facility, Promissory Notes Payable, Bank Loans, and Lines of Credit

9 Months Ended

Sep. 30, 2024

Debt Disclosure [Abstract]

Credit Facility, Promissory Notes Payable, Bank Loans, and Lines of Credit

9.Credit Facility, Promissory Notes Payable, Bank Loans, and Lines of Credit

The Company’s debt balance consisted of the following (in thousands):

	September 30, 2024			December 31, 2023
Term Loan	$	285,250		$	280,000
Revolver Loan		146,732			—
Promissory Note Payable		9,875			2,000
Total debt		441,857			282,000
Less: Current portion of debt		(15,000	)		(19,500	)
Less: Unamortized financing costs		(3,738	)		(3,561	)
Long-term debt	$	423,119		$	258,939

The estimated fair value of our long-term debt was determined using Level 2 inputs primarily related to comparable market prices. As of September 30, 2024 and December 31, 2023, the carrying value was not materially different from fair value, as the interest rates on the Company’s debt approximated rates currently available to the Company.

The following are the future commitments of the Company’s debt for the years ending December 31 (in thousands):

	Amount
2024 (excluding the nine months ended September 30, 2024)	$	3,750
2025		16,875
2026		169,232
2027		34,250
2028		217,750
Total	$	441,857

Amended Credit Facility

Amended Credit Agreement

On June 16, 2021, the Company entered into an amended and restated credit agreement (as subsequently amended as described below, the “Amended Credit Agreement”) with Truist Bank, in its capacity as administrative agent for the lenders, issuing bank, swingline lender, and lender, and the banks and other financial institutions from time to time as party thereto, to, among other things, to amend and restate that certain credit agreement, dated September 11, 2019, by and among the Company, Truist Bank, and certain lenders thereto, in its entirety. The Amended Credit Agreement provides for a five-year revolving credit facility (the “Amended Credit Facility”) to the Company of $400.0 million (“Revolver Loan”), which includes a letter of credit sub-facility of up to $25.0 million (which was amended to $50.0 million, as described below) and a swingline loan sub-facility of $25.0 million which expires on June 16, 2026.

On December 20, 2022, an amendment was made to the Amended Credit Agreement, in which all amounts borrowed under the Amended Credit Agreement as of the effective date were automatically converted from London Interbank Offer Rate (“LIBOR”) Loans to Secured Overnight Financing Rate (“SOFR”) Loans with an initial interest period of one month on, and as of, the amendment effective date. Amounts borrowed under the Revolver Loan bear interest at an annual rate equal to either, at the Company’s option, (a) the Term SOFR Reference Rate (as defined in the Amended Credit Agreement), adjusted for any Term SOFR Adjustment (as defined in the Amended Credit Agreement) plus a spread ranging from 1.25% to 2.50%, as determined on a quarterly basis based on the Company’s Consolidated Total Net Leverage Ratio (as defined in the Amended Credit Agreement), or (b) a base rate, plus a spread ranging from 0.25% to 1.50%, as determined on a quarterly basis based on the Company’s Consolidated Total Net Leverage Ratio. As of September 30, 2024, the Company had borrowings of $146.7 million outstanding on the Revolver Loan, and the interest rate on the Revolver Loan was 7.20%.

On September 8, 2023, a Second Amendment to the Amended Credit Agreement was entered into, which, among other things, increased the letter of credit sub-facility from $25.0 million to $50.0 million.

On November 3, 2023, the Company entered into a Third Amendment to the Amended Credit Agreement (“Third Amendment”) with Truist Bank and the other financial institutions party thereto. The Third Amendment provided a new term loan to the Company in an aggregate amount of up to $300.0 million, with $180.0 million funded at the closing of the Third Amendment, and $120.0 million available to be drawn by the Company as delayed draw loans during the six months subsequent to the closing of the Third Amendment (collectively, the “Term Loan”). The Term Loan matures on November 3, 2028 (or such earlier date on which it is terminated in accordance with the provisions of the Amended Credit Agreement) and amortizes quarterly at 5% per annum for each of the first two years, 7.5% per annum for years three and four, and 10% per annum for year five. The Term Loan bears interest at an annual rate equal to either, at the Company’s option, (a) the Term SOFR Reference Rate, adjusted for any Term SOFR Adjustment, plus a spread from 1.50% to 2.75%, as determined on a quarterly basis based on the Company’s Consolidated Total Net Leverage Ratio, or (b) a base rate, plus a spread of 0.50% to 1.75%, as determined on a quarterly basis based on the Company’s Consolidated Total Net Leverage Ratio. As of September 30, 2024, the outstanding borrowings on the Term Loan were $285.3 million, and the interest rate on the Term Loan was 7.20%.

In May 2024, the Company entered into a Fourth Amendment to the Amended Credit Agreement, which updates the letter of credit provisions in the Amended Credit Agreement to provide the Company with the ability to have letters of credit issued under the Amended Credit Agreement that extend beyond the maturity date of the Amended Credit Agreement.

The Amended Credit Agreement requires the Company to comply with two key financial ratios, each calculated on a consolidated basis. The Company must maintain a maximum consolidated total net leverage ratio of not greater than 3.75 to 1.00 as of the last day of each fiscal quarter, provided that for any fiscal quarter during which the Company or certain subsidiaries consummate a permitted acquisition or investment, and the aggregate purchase price is greater than $75.0 million, the maximum consolidated total net leverage ratio may temporarily increase by 0.25 to 1.00 to 4.00 to 1.00. The Company must maintain a minimum consolidated interest coverage ratio of not less than 3.25 to 1.00 as of the last day of each fiscal quarter.

Under the Amended Credit Agreement, the terms and conditions of the Guaranty and Security Agreement (the “Guaranty and Security Agreement”) between the Company, Astrana Health Management, Inc. (“AHM”), and Truist Bank remain in effect. Pursuant to the Guaranty and Security Agreement, the Company and AHM have granted the lenders under the Amended Credit Agreement a security interest in substantially all of their assets to secure obligations under the Amended Credit Agreement, including, without limitation, all stock and other equity issued by their subsidiaries (including AHM) and all rights with respect to the $545.0 million loan from the Company to Astrana Medical.

Promissory Note Payable

FYB Promissory Note Agreement with CCHCA

On May 1, 2023, the Company acquired 100% of the equity interest in For Your Benefit, Inc. (“FYB”). As part of the acquisition, the Company assumed FYB's promissory note payable to Chinese Community Health Care Association (“CCHCA”). The principal on the promissory note was $2.0 million, with a maturity date of May 9, 2024. The interest rate was the prime rate plus 1.0%. The prime rate was updated annually on the effective date of the note and as published by the Wall Street Journal. On September 30, 2024, upon the settlement of the purchase price of the Company’s acquisition of FYB, the FYB promissory note was forgiven to resolve the settlement amount due from the sellers to the Company. As a result, during the three and nine months ended September 30, 2024, the Company wrote off the principal of $2.0 million and any unpaid interest within other income in the accompanying condensed consolidated statements of income.

I Health Promissory Note Payable - Related Party

On April 1, 2024, the Company received $8.3 million as a promissory note (the “I Health Promissory Note”) with a maturity date of March 31, 2027. I Health may accelerate the maturity date if the Company does not exercise the I Health Call Option (see Note 5 — “Investments in Other Entities - Equity Method”). The promissory note has an interest rate of 4.30% per annum on the principal amount. Accrued interest is payable on each anniversary of the promissory note payable. I Health is accounted for under the equity method based on the 25% equity ownership interest held by the Company (see Note 5 — “Investments in Other Entities - Equity Method”). On July 1, 2024, an amendment was made to the I Health Promissory Note that, among other things, increased the original principal amount by an additional $1.6 million. As a result, the total amount payable under the I Health Promissory Note is $9.9 million.

Deferred Financing Costs

At September 30, 2024 and December 31, 2023, unamortized deferred financing costs were $4.8 million and $6.1 million, respectively. As of September 30, 2024 and December 31, 2023, $1.0 million and $2.6 million, respectively, of unamortized deferred financing costs was recognized in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets, and consisted of unamortized deferred financing costs related to unborrowed amounts available on the Revolver Loan. As of September 30, 2024 and December 31, 2023, $3.7 million and $3.6 million, respectively, of unamortized deferred financing costs was recorded as a direct reduction against the amounts borrowed on the Term Loan and Revolver. The remaining unamortized deferred financing costs related to the Revolver Loan are amortized over the life of the Revolver Loan using the straight-line method. The remaining unamortized deferred financing costs related to the Term Loan are amortized over the life of the Term Loan using the effective interest rate method. Interest expense in the condensed consolidated statements of income included amortization of deferred debt issuance costs.

Effective Interest Rate

The Company’s average effective interest rate on its total debt during the nine months ended September 30, 2024 and 2023, was 7.08% and 6.07%, respectively.

Lines of Credit

APC Business Loan

On September 10, 2019, the APC Business Loan Agreement with Preferred Bank (the “APC Business Loan Agreement”) was amended to, among other things, decrease loan availability to $4.1 million, limit the purpose of the indebtedness under the APC Business Loan Agreement to the issuance of standby letters of credit, and include as a permitted lien, the security interest in all of its assets that APC granted to AHM under a Security Agreement dated on or about September 11, 2019, securing APC’s obligations to AHM under their management services agreement dated as of July 1, 1999, as amended.

Standby Letters of Credit

The Company established irrevocable standby letters of credit with Truist Bank under the Amended Credit Agreement for a total of $25.0 million for the benefit of CMS and certain health plans as of September 30, 2024. Unless the institution provides notification that the standby letters of credit will be terminated prior to the expiration date, the letters will be automatically extended without amendment for additional one-year periods from the present or any future expiration date.

Certain IPAs consolidated by the Company established irrevocable standby letters of credit with Preferred Bank under the APC Business Loan Agreement for a total of $3.9 million for the benefit of certain health plans as of September 30, 2024. The standby letters of credit are automatically extended without amendment for additional one-year periods from the present or any future expiration date, unless notified by the institution in advance of the expiration date that the letter will be terminated.