SENIOR CONVERTIBLE NOTES

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

SENIOR CONVERTIBLE NOTES

SENIOR CONVERTIBLE NOTES

On August 7, 2018, the Company issued $100.0 million of senior unsecured convertible notes (the “Notes”), which mature on August 1, 2023. The Notes bear interest at 4.0% payable semi-annually on February 1 and August 1 of each year beginning on February 1, 2019.

Note holders have the option, under certain conditions, to redeem the Notes prior to maturity.

If the Notes are redeemed by the holder, the Company shall have the option to settle the conversion obligation in cash, ordinary shares of the Company, or a combination thereof pursuant to the terms of the indenture governing the Notes. The Company has therefore bifurcated the Notes into liability and equity components.

At September 30, 2020, the Company’s share price was lower than the conversion price of $17.19 per share.

The Company’s effective borrowing rate for non-convertible debt at the time of issuance of the Notes was estimated to be 6.0%, which equated to an $8.2 million discount. As of September 30, 2020 and December 31, 2019, the unamortized debt discount was $4.7 million and $5.9 million, respectively, and is expected to be amortized through the maturity date. The debt discount also represents the portion of the Note’s principal amount allocated to the equity component.

The Company incurred issuance costs in connection with the issuance of the Notes. As of September 30, 2020, the unamortized portion of these costs attributed to the debt component was $1.8 million (December 31, 2019: $2.3 million), which are expected to be amortized through the maturity date. The portion of these issuance costs attributed to the equity component was netted against the gross proceeds allocated to equity, resulting in $7.9 million being included in the caption “Additional paid-in capital” in the Company’s condensed consolidated balance sheets.

The carrying value of the Notes as of September 30, 2020, including accrued interest of $0.7 million, was $94.2 million (December 31, 2019: $93.5 million). As of September 30, 2020, the fair value of the Notes was estimated to be $80.1 million (December 31, 2019: $94.9 million) (see Note 4 Financial Instruments).

For the three and nine months ended September 30, 2020, the Company recognized interest expense of $1.6 million and $4.7 million (2019: $1.6 million and $4.7 million) in connection with the interest coupon, amortization of issuance costs and amortization of the discount.

The Company was in compliance with all covenants relating to the Notes as of September 30, 2020 and December 31, 2019.