Debt

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Debt

7. Debt

Term Loans

In May 2022, we borrowed $140.0 million for the delivery of one 747-8F aircraft under a twelve-year term loan due in May 2034. The term loan is secured by a mortgage against one 747-8F aircraft and has a fixed interest rate of 4.17% with principal and interest payable quarterly. The term loan is subject to customary fees, covenants and events of default.

Convertible Notes

In June 2015, we issued $224.5 million aggregate principal amount of convertible senior notes with 2.25% coupon (the “2015 Convertible Notes”) in an underwritten public offering. We used the majority of the net proceeds to refinance debt related to 747-400

freighter aircraft with an average coupon of 8.1%. In connection with the offering of the 2015 Convertible Notes, we purchased convertible note hedges whereby we had the right to receive a certain number of shares of our common stock at a fixed price per share. In addition, we sold warrants to the option counterparties whereby the holders of the warrants have the option to purchase a certain number of shares of our common stock at a fixed price per share.

On June 1, 2022, the 2015 Convertible Notes reached maturity and were settled in full. In the aggregate, we paid $210.4 million and issued 138,509 shares of common stock to those holders that elected to convert their outstanding notes and we paid $6.2 million to holders that did not elect to convert their outstanding notes. In connection with the settlement of the 2015 Convertible Notes, we exercised our rights under the convertible note hedge transactions with the counterparties on June 1, 2022 and received 25,957 shares of our common stock.

In May 2017, we issued $289.0 million aggregate principal amount of convertible senior notes that mature on June 1, 2024 with a 1.88% coupon (the “2017 Convertible Notes”) in an underwritten public offering. We used the majority of the net proceeds to repay our then outstanding revolving credit facility. The 2017 Convertible Notes are senior unsecured obligations and accrue interest payable semiannually on June 1 and December 1 of each year. The 2017 Convertible Notes are due on their maturity date, unless earlier converted or repurchased pursuant to their respective terms.

In connection with the offering of the 2017 Convertible Notes, we purchased convertible note hedges whereby we have the right to receive a certain number of shares of our common stock at a fixed price per share. In addition, we sold warrants to the option counterparties whereby the holders of the warrants have the option to purchase a certain number of shares of our common stock at a fixed price per share.

Taken together, the purchase of the convertible note hedges and the sale of warrants are intended to offset economic dilution from the conversion of the 2017 Convertible Notes when the stock price is below the exercise price of the respective warrants and to effectively increase the overall conversion price from $61.08 to $92.20 per share for the 2017 Convertible Notes.

On or after September 1, 2023 until the close of business on the second scheduled trading day immediately preceding the maturity date, a holder may convert all or a portion of its 2017 Convertible Notes. Upon conversion, the 2017 Convertible Notes will be settled, at our election, in cash, shares of our common stock, or a combination of cash and shares of our common stock. Prior to September 1, 2023, a holder may also convert under certain circumstances, including if the price of our common stock is greater than or equal to 130% of the conversion price for at least 20 trading days during the 30 consecutive trading days ending on the last trading day of the quarter. Our current intent and policy is to settle conversions with a combination of cash and shares of common stock.

The price of our common stock was greater than or equal to 130% of the conversion price of the 2017 Convertible Notes for at least 20 trading days during the 30 consecutive trading days ending on the last trading day of the quarter ended March 31, 2022. Therefore, our 2017 Convertible Notes were convertible at the holders’ option only through June 30, 2022. We received conversion notices on our 2017 Convertible Notes for an immaterial amount, none of which were settled, during the three months ended June 30, 2022.

Through December 31, 2021, we separately accounted for the liability and equity components of convertible notes based on their relative values. Debt issuance costs related to the issuance of convertible notes were also previously allocated to the liability and equity components based on their relative values. With the adoption of the amended accounting guidance for convertible notes on January 1, 2022 (see Note 2 for further discussion), amounts, including debt issuance costs, that were previously classified within equity were reclassified to the liability component, net of any remaining unamortized amounts. Debt issuance costs are amortized to interest expense using the effective interest method over the term of each convertible notes.

The 2017 Convertible Notes consisted of the following as of June 30, 2022:

	2017 Convertible Notes
Remaining life in months		23
Gross proceeds	$	289,000
Less: debt issuance cost, net of amortization		(2,034	)
Net carrying amount	$	286,966

The following table presents the amount of interest expense recognized related to the convertible notes:

	For the Three Months Ended				For the Six Months Ended
	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Contractual interest coupon	$	2,196	$	2,618	$	4,814	$	5,236
Amortization of debt discount		-		4,745		-		9,416
Amortization of debt issuance costs		427		406		936		808
Total interest expense recognized	$	2,623	$	7,769	$	5,750	$	15,460

Revolving Credit Facility

In December 2021, we amended and extended our previous three-year $200.0 million secured revolving credit facility into a new four-year $250.0 million secured revolving credit facility (the “Revolver”) for general corporate purposes. As of June 30, 2022, there were no amounts outstanding and we had $250.0 million of unused availability, based on the collateral borrowing base.

Other Debt

In April 2022, we refinanced a term loan secured by a 747-8F aircraft and received proceeds of $90.0 million from a financing with an 84-month term for this aircraft at a blended fixed rate of 3.86%, with principal and interest payable quarterly. We used $45.7 million of the proceeds to repay a term loan in full and recognized a $0.7 million loss on early extinguishment of debt. In connection with entry into this financing, we paid usual and customary commitment and other fees. While the financing involved a sale and leaseback of the aircraft, it did not qualify as a sale for accounting purposes.