Notes Payable

3 Months Ended

Mar. 31, 2020

As of December 31, 2019 and March 31, 2020, notes payable, net of original issue discounts and deferred financing costs, consisted of the following:



	December 31, 2019		March 31, 2020
			(unaudited)
	(in thousands)
Term Loan	$	1,347,056	$	1,341,188
Notes	334,417		332,356
Revolving credit facilities	—		—
Total notes payable	1,681,473		1,673,544
Current portion of notes payable	31,606		31,606
Notes payable - long term	$	1,649,867	$	1,641,938

First Lien Term Loan Facility

The First Lien Term Loan (the "Term Loan") was issued at par and automatically bears interest at an alternate base rate unless the Company gives notice to opt for the LIBOR-based interest rate. The LIBOR-based interest rate for the Term Loan is 3.75% per annum plus the greater of an adjusted LIBOR and 1.00%. The alternate base rate for the Term Loan is 2.75% per

annum plus the greatest of the prime rate, the federal funds effective rate plus 0.50%, an adjusted LIBOR for a one-month interest period plus 1.00%, and 2.00%.

The Term Loan has a maturity date of February 9, 2023 and requires quarterly mandatory repayments of principal. During the three months ended March 31, 2020, the Company made one mandatory repayment of $7.9 million.

Interest is payable on maturity of the elected interest period for a term loan with a LIBOR-based interest rate, which interest period can be one, two, three or six months. Interest is payable at the end of each fiscal quarter for a term loan with an alternate base rate.

As of December 31, 2019 and March 31, 2020, the Term Loan had an outstanding balance of:



	December 31, 2019			March 31, 2020
				(unaudited)
	(in thousands)
Term Loan	$	1,374,022		$	1,366,121
Unamortized deferred financing costs	(14,331		)	(13,251		)
Unamortized original issue discount	(12,635		)	(11,682		)
Net Term Loan	1,347,056			1,341,188
Current portion of Term Loan	31,606			31,606
Term Loan - long term	$	1,315,450		$	1,309,582

Revolving Credit Facility

The Company has a revolving credit facility (the “Revolver”), which has an aggregate available amount of $165.0 million. As of December 31, 2019 and March 31, 2020, the Company did not have any balances outstanding under the Revolver and the full amount of the facility was unused and available.

The Revolver consists of a non-extended tranche of approximately $58.8 million and an extended tranche of approximately $106.2 million. The non-extended tranche has a maturity date of February 9, 2021. The extended tranche has a maturity date of June 20, 2023, with a "springing" maturity date of November 10, 2022 if the Term Loan has not been repaid in full or otherwise extended to September 19, 2023 or later prior to November 10, 2022.

The Company has the ability to draw down against the Revolver using a LIBOR-based interest rate or an alternate base rate. The LIBOR-based interest rate for a non-extended revolving loan is 4.00% per annum (subject to a leverage-based step-down) and for an extended revolving loan is 3.25% per annum (subject to a leverage-based step-down), in each case plus an adjusted LIBOR for a selected interest period. The alternate base rate for a non-extended revolving loan is 3.00% per annum (subject to a leverage-based step-down) and for an extended revolving loan is 2.25% per annum (subject to a leverage-based step-down), in each case plus the greatest of the prime rate, the federal funds rate plus 0.50% and an adjusted LIBOR for a one-month interest period plus 1.00%. There is also a non-refundable commitment fee, equal to 0.50% per annum (subject to a leverage-based step-down) of the average daily unused principal amount of the Revolver, which is payable in arrears on the last day of each fiscal quarter. Interest is payable on maturity of the elected interest period for a revolver loan with a LIBOR-based interest rate, which interest period can be one, two, three or six months. Interest is payable at the end of each fiscal quarter for a revolver loan with an alternate base rate.

Senior Notes

In connection with the acquisition of Constant Contact, Inc. ("Constant Contact") in February 2016, EIG Investors issued $350.0 million aggregate principal amount of senior notes (the "Senior Notes") with a maturity date of February 1, 2024. The Senior Notes were issued at a price of 98.065% of par and bear interest at the rate of 10.875% per annum. The Senior Notes have been fully and unconditionally guaranteed, on a senior unsecured basis, by Holdings and its subsidiaries that guarantee the Term Loan and the Revolver (including Constant Contact and certain of its subsidiaries). The Company has the right to redeem all or a part of the Senior Notes at any time for a discount or premium which is based on the applicable redemption date. The Company may, at any time and from time to time, seek to retire or purchase its outstanding Senior Notes through cash purchases, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will be upon such terms and at such prices as the Company may determine, and will depend on prevailing market conditions, the Company's liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. During the three months ended March 31, 2020, the Company made two voluntary, privately negotiated redemptions of $1.3 million and $1.7 million, respectively, for a total redemption of $3.0 million. The redemptions were made at a discount of 98.5% and 93.0%, respectively, for an immaterial net gain on redemption of $0.0 million, after recording a charge of $0.1 million, included in interest expense, to write off original issue discounts and deferred financing costs relating to the redemption.

As of December 31, 2019 and March 31, 2020, the Senior Notes had an outstanding balance of:



	December 31, 2019			March 31, 2020
				(unaudited)
	(in thousands)
Senior Notes	$	350,000		$	347,025
Unamortized deferred financing costs	(11,359		)	(10,711		)
Unamortized original issue discount	(4,224		)	(3,958		)
Net Senior Notes	334,417			332,356
Current portion of Senior Notes	—			—
Senior Notes - long term	$	334,417		$	332,356

Interest on the Senior Notes is payable twice a year, on August 1^st and February 1^st.

Maturity of Notes Payable

The maturity of the notes payable at March 31, 2020 is as follows:



Amounts maturing in:	Amounts
	(unaudited)
	(in thousands)
Remainder of 2020	$	23,705
2021	31,606
2022	31,606
2023	1,279,204
2024	347,025
Thereafter	—
Total	$	1,713,146

Interest

The Company recorded $37.2 million and $32.7 million in interest expense for the three months ended March 31, 2019 and 2020, respectively.

The following table provides a summary of interest rates and interest expense for the three months ended March 31, 2019 and 2020:



	Three Months Ended March 31, 2019			Three Months Ended March 31, 2020
	(unaudited)
	(percentage per annum)
Interest rate—LIBOR	6.23%-6.44%			5.36%-5.67%
Interest rate—alternate base rate	*			*
Interest rate—Senior Notes	10.875		%	10.875		%
Non-refundable fee—unused facility	0.50		%	0.50		%
	(in thousands)
Interest expense and service fees	$	34,224		$	29,519
Amortization of deferred financing fees	1,733			1,853
Amortization of original issue discounts	1,087			1,184
Amortization of net present value of deferred consideration	61			24
Gain on extinguishment of debt	—			(11		)
Other interest expense	109			165
Total interest expense	$	37,214		$	32,734

* The Company did not have debt-bearing interest based on the alternate base rate for the three months ended March 31, 2019 and 2020.

Debt Covenants

The Term Loan and Revolver (together, the "Senior Credit Facilities") require that the Company complies with a financial covenant to maintain a maximum ratio of consolidated senior secured net indebtedness to an adjusted consolidated EBITDA measure.

The Senior Credit Facilities also contain covenants that limit the Company's ability to, among other things, incur additional debt or issue certain preferred shares; pay dividends on or make other distributions in respect of capital stock; make other restricted payments; make certain investments; sell or transfer certain assets; create liens on certain assets to secure debt; consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; and enter into certain transactions with affiliates. These covenants are subject to a number of important limitations and exceptions.

Additionally, the Senior Credit Facilities require the Company to comply with certain negative covenants and specify certain events of default that could result in amounts becoming payable, in whole or in part, prior to their maturity dates.

With the exception of certain equity interests and other excluded assets under the terms of the Senior Credit Facilities, substantially all of the Company's assets are pledged as collateral for the obligations under the Senior Credit Facilities.

The indenture with respect to the Senior Notes contains covenants that limit the Company's ability to, among other things, incur additional debt or issue certain preferred shares; pay dividends on or make other distributions in respect of capital stock; make other restricted payments; make certain investments; sell or transfer certain assets; create liens on certain assets to secure debt; consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; and enter into certain transactions with affiliates. Upon a change of control as defined in the indenture, the Company must offer to repurchase the Senior Notes at 101% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, up to, but not including, the repurchase date. These covenants are subject to a number of important limitations and exceptions.

The indenture also provides for events of default, which, if any of them occurs, may permit or, in certain circumstances, require the principal, premium, if any, interest and any other monetary obligations on all the then outstanding Senior Notes to be due and payable immediately.

The Company was in compliance with all covenants at March 31, 2020.