Note 6 - Revolving Line of Credit and Long-term Debt

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Debt Disclosure [Text Block]

6. Revolving Line of Credit and Long-term Debt

In connection with the acquisition of the Artegraft biologic graft business, we incurred debt in the amount of $65 million under a senior secured credit facility with a group of banks. This credit arrangement included a $25 million revolving credit line, which was fully drawn at inception, as well as a $40 million five-year term loan. During the year ended December 31, 2020 we made scheduled principal payments on the term loan of $1.0 million, and repaid the revolving line of credit in full. Long term debt as of December 31, 2020 is as follows:

	December 31, 2020
	(in thousands)
Five-year term loan, net of unamortized debt issuance costs of $968	$	38,032
Less current portion		(2,500	)
	$	35,532

The following table summarizes the maturities or our long-term debt under the term loan agreement:

Year ending December 31,
2021	$	2,500
2022		3,000
2023		3,500
2024		4,000
2025		26,000
Total before unamortized issuance costs		39,000
Less unamortized issuance costs		(968	)
Less current portion of long-term bebt		(2,500	)
Total long-term debt	$	35,532

The loans bear interest at a rate per annum of, at our option, either (i) the Base Rate plus an applicable margin of from 1.25% to 1.75% depending on our consolidated leverage ratio, or (ii) the Eurodollar Rate plus an applicable margin of from 2.25% to 2.75% depending on our consolidated leverage ratio. Base Rate is defined in the credit agreement as a fluctuating rate per annum of the Federal Funds rate plus 0.5%, or the prime rate of interest established from time to time by KeyBank National Association. At December 31, 2020 all outstanding borrowings were designated as Eurodollar loans and bore interest of 3.5%. We incurred debt issuance costs in connection with this credit arrangement of approximately $1.8 million. The transaction costs were allocated between the revolving line of credit and the term loan, with the portion related to the revolving line of credit of $0.7 million recorded in other assets on our balance sheet, and the portion allocated to the term loan recorded as a deduction from the amount of the debt. All of these transaction costs are being amortized into interest expense on a straight-line basis as the result is not materially different from using the interest method, over the five-year term. This results in an effective interest rate of approximately 4.2%. Cash paid for interest during the year ended December 31, 2020 was $0.9 million.

The term of the revolving line of credit is five years, and allows re-borrowing up to $25 million during the term, with all outstanding amounts due on June 22, 2025. The term loan is repayable in increasing quarterly installments of $0.5 million to $1.0 million commencing September 30, 2020 through March 31, 2025, with the remaining outstanding balance due on June 22, 2025.

We must comply with various financial and non-financial covenants, which are set forth in the Credit Agreement. The primary financial covenant consists of a maximum consolidated leverage ratio. The lenders are entitled to accelerate repayment of the loans and terminate the revolving credit commitment upon the occurrence of any of various events of default as described in the Credit Agreement. We were in compliance with the covenants as of December 31, 2020.

Borrowings under the secured credit facility are secured by 100% of the stock of our domestic subsidiaries, portions of the stock of certain of our foreign subsidiaries, and substantially all of our and our subsidiaries’ other property and assets, in each case subject to various exceptions.

We are required to make mandatory prepayments of the term loans and any revolving credit loans in various amounts if we have Excess Cash Flow (as defined in the Credit Agreement, and commencing in respect of our fiscal year ending December 31, 2021), if we make certain sales of assets outside the ordinary course of business above certain thresholds or if we suffer certain property loss events above certain thresholds. We may make optional prepayments of the term loans without premium or penalty.