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FINANCING ARRANGEMENTS
 9 Months Ended
Sep. 30, 2024
Debt Disclosure [Abstract]  
FINANCING ARRANGEMENTS FINANCING ARRANGEMENTS
Convertible Senior Notes due 2026
The 2026 Notes bear interest at a rate of 1.125% per annum, payable semiannually in arrears on March 15 and September 15 of each year, with an annual effective interest rate of 1.83%. The 2026 Notes will mature on March 15, 2026, subject to earlier repurchase, redemption or conversion.
The carrying amount of the 2026 Notes consisted of the following as of September 30, 2024 and December 31, 2023 (in thousands):
September 30, 2024December 31, 2023
Principal amount$230,000 $230,000 
Less: debt discount(2,350)(3,530)
Net carrying amount of liability$227,650 $226,470 
We classified the fair value of the 2026 Notes as a Level 3 measurement due to the lack of observable market data over fair value inputs such as our stock price volatility over the term of the 2026 Notes and our cost of debt. The estimated fair value of the 2026 Notes as of September 30, 2024 and December 31, 2023 was $206.2 million and $141.9 million and was determined using a lattice model.
During the three and nine months ended September 30, 2024 and 2023, we recognized interest costs on the 2026 Notes as follows (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2024202320242023
Contractual interest$539 $647 $1,916 $1,941 
Amortization of debt discount395 388 1,180 1,158 
Total $934 $1,035 $3,096 $3,099 
Capped Call Transactions
In connection with the 2026 Notes, we entered into privately-negotiated capped call transactions. The capped call transactions cover, subject to customary adjustments, the number of shares of Common Stock initially underlying the 2026 Notes. The capped call transactions are expected generally to reduce potential dilution to our Common Stock upon any conversion of the 2026 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted notes, with such reduction and/or offset subject to a cap initially equal to $104.80 (which represents a premium of 100% over the last reported sale price of our Common Stock on The Nasdaq Global Select Market on March 22, 2021), subject to certain adjustments under the terms of the capped call transactions.
Convertible Senior Notes due 2027

On November 12, 2024, the Company entered into privately-negotiated agreements (the “Exchange and Subscription Agreements”) with a limited number of existing holders of the Company’s currently outstanding 2026 Notes (such existing holders, the “Offering Participants”). The Offering Participants are institutional “accredited investors” (within the meaning of Rule 501(a)(1), (2), (3) or (7) promulgated under the Securities Act of 1933, as amended (the “Securities Act”)) and/or “qualified institutional buyers” (as defined in Rule 144A under the Securities Act).
Pursuant to the Exchange and Subscription Agreements, the Company will (i) exchange $176.3 million aggregate principal amount of 2026 Notes held by the Offering Participants for $176.3 million aggregate principal amount of the Company’s newly-issued 6.25% Convertible Senior Secured Notes due 2027 (the “2027 Notes”) (the “Exchange”) and (ii) issue and sell to certain Offering Participants $21.0 million aggregate principal amount of 2027 Notes for gross cash proceeds of $20.0 million (representing an issue price of 95%) (the “Subscription Transactions” and together with the Exchange, the “Transactions”). The 2027 Notes are expected to be issued to
the Offering Participants in a private placement exempt from registration in reliance on Section 4(a)(2) of the Securities Act. The Company is relying on this exemption from registration based in part on representations made by the Offering Participants in the Exchange and Subscription Agreements.
The initial conversion rate of the 2027 Notes will be 33.333 shares of Company common stock, par value $0.0001 per share (“Common Stock”), per $1,000 principal amount of 2027 Notes (equivalent to an initial conversion price of approximately $30 per share), subject to customary adjustments. The 2027 Notes will be convertible into Common Stock or a combination of cash and Common Stock, at the Company’s election. The Company may be required to pay additional interest of 2.5% per annum of the 2027 Notes in the event that it fails to pledge certain of its assets as part of the collateral for the 2027 Notes, unless such assets are sold.
The Transactions are expected to close on or around November 12, 2024, subject to customary closing conditions.
Revolving Credit Agreement
In February 2024, we prepaid $43.1 million to terminate all commitments to access further credit under the Credit Agreement using a portion of the $80.0 million in proceeds received from the Rights Offering. The Payoff Amount included $42.8 million in principal, $0.1 million in interest and $0.2 million in fees. The terms of the Rights Offering permit the Company to use the proceeds for general corporate purposes, including the repayment of debt. We were not subject to any early termination penalties under the Credit Agreement. The payment of the Payoff Amount terminated our obligations under the Credit Agreement, except for ordinary and customary survival terms. In addition, we retained access to letters of credit, originally available under the Credit Agreement, pursuant to our pre-existing Cash Collateral Agreement.
Amounts committed to letters of credit and outstanding borrowings under the Cash Collateral Agreement and Credit Agreement, respectively, as of September 30, 2024 and December 31, 2023 were as follows (in thousands):
September 30, 2024December 31, 2023
Letters of credit(1)
$26,456 $25,200 
Borrowings
— 42,776 

(1) Pursuant to the Cash Collateral Agreement, cash collateral is required for all letters of credit and treated as restricted cash on the Condensed Consolidated Balance Sheets. See Note 4, Supplemental Condensed Consolidated Balance Sheets and Statements of Operations Information, for additional information.