Debt

12 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Debt

5. Debt

On March 12, 2019 and December 10, 2019, the Company, as guarantor, HWC Wire & Cable Company and Vertex, as borrowers, and Bank of America, N.A., as agent and lender, entered into the Second and Third Amendments, respectively, to the Fourth Amended and Restated Loan and Security Agreement (such agreement, as so amended, the “Loan Agreement”). The Second Amendment extends the expiration date until March 12, 2024 and the Third Amendment increases the revolving credit facility to $115 million. Under certain circumstances the Company may request an increase in the commitment by an additional $50 million.

Portions of the loan may be converted to LIBOR loans in minimum amounts of $1.0 million and integral multiples of $0.1 million. LIBOR loans bear interest at the British Bankers Association LIBOR Rate plus 100 to 150 basis points based on availability, and loans not converted to LIBOR loans bear interest at a fluctuating rate equal to the greatest of the agent’s prime rate, the federal funds rate plus 50 basis points, or 30-day LIBOR plus 150 basis points. The unused commitment fee is 25 basis points. 

Availability under the Loan Agreement is limited to a borrowing base equal to 85% of the value of eligible accounts receivable, plus the lesser of 70% of the value of eligible inventory or 90% of the net orderly liquidation value percentage of the value of eligible inventory, in each case less certain reserves. The Loan Agreement is secured by substantially all of the property of the Company, other than real estate. 

The Loan Agreement includes, among other things, covenants that require the Company to maintain a specified minimum fixed charge coverage ratio, unless certain availability levels exist. Additionally, the Loan Agreement allows for the unlimited payment of dividends and repurchases of stock, subject to the absence of events of default and maintenance of a fixed charge coverage ratio and minimum level of availability. The Loan Agreement contains certain provisions that may cause the debt to be classified as a current liability, in accordance with GAAP, if availability falls below certain thresholds, even though the ultimate maturity date under the Loan Agreement remains March 12, 2024. At December 31, 2019, the Company was in compliance with the availability-based covenant and fixed coverage ratio governing its indebtedness. 

The carrying amount of long term debt approximates fair value as it bears interest at variable rates. The fair value is a Level 2 measurement as defined in ASC Topic 820, “Fair Value Measurement.” 

The Company’s borrowings at December 31, 2019 and 2018 were $83.5 million and $71.3 million, respectively. The weighted average interest rates on outstanding borrowings were 3.4% and 4.1% at December 31, 2019 and 2018, respectively. 

At December 31, 2019, the Company had available borrowing capacity of $22.8 million under the terms of the Loan Agreement. The Company paid $0.1 million for each of the years ended December 31, 2019, 2018, and 2017, for the unused facility. 

Principal repayment obligations for succeeding fiscal years are as follows: 

	(In thousands)
2020	$	—
2021		—
2022		—
2023		—
2024		83,500
Total	$	83,500