Note 5 – Debt

A&R Credit Agreement

In connection with the Perrigo Animal Health Acquisition described in Note 2 – Business Combination, above, the Company amended and restated its existing revolving credit agreement (the “A&R Credit Agreement”) on July 8, 2019. The A&R Credit Agreement provides for a secured revolving credit facility of $110 million, with an accordion feature allowing an additional increase up to $125 million and extends the maturity date of the revolving facility to July 8, 2024. In addition, the A&R Credit Agreement reduces the interest rate on Eurodollar rate loans and modifies certain financial covenants, including eliminating the maximum first lien net coverage ratio. The Company incurs fees between 0.375% and 0.50% as unused facility fees, dependent on the amount borrowed.

All obligations under the A&R Credit Agreement are unconditionally guaranteed by Holdco and each of its domestic wholly-owned subsidiaries and, subject to certain exceptions, each of its material current and future domestic wholly-owned subsidiaries. All obligations under the A&R Credit Agreement, and the guarantees of those obligations, are secured by substantially all of the assets of each borrower and guarantor under the A&R Credit Agreement, subject to certain exceptions.

As of September 30, 2019, $17.5 million was outstanding under the A&R Credit Agreement. The weighted average interest rate on the A&R Credit Agreement was 4.3% at September 30, 2019.

A&R Term Loan Credit Agreement

Also in connection with the closing of the Perrigo Animal Health Acquisition, the Company amended and restated its existing term loan credit agreement (the “A&R Term Loan Credit Agreement”) on July 8, 2019. The A&R Term Loan Credit Agreement was increased from $74.1 million to $220.0 million at an interest rate of 6.5% as a LIBOR rate loan, the proceeds of which were used to refinance the existing term loan facility and consummate the acquisition.

All obligations under the A&R Term Loan Credit Agreement are unconditionally guaranteed by PetIQ Holdings, LLC and each of its domestic wholly-owned subsidiaries and, subject to certain exceptions, each of its material current and future domestic wholly-owned subsidiaries. All obligations under the A&R Term Loan Credit Agreement, and the guarantees of those obligations, are secured by substantially all of the assets of the Company and each guarantor under the A&R Term Loan Credit Agreement, subject to certain exceptions.

The A&R Term Loan Credit Agreement contains a number of covenants that, among other things, restrict the Company’s ability to (subject to certain exceptions): (i) make investments, loans or advances; (ii) incur additional indebtedness; (iii) create liens on assets; (iv) engage in mergers or consolidations and/or sell assets; (v) pay dividends and distributions or repurchase our equity interests; (vi) repay subordinated indebtedness; (vii) make certain acquisitions; and (viii) other restrictions typical for a credit agreement of this type. As of September 30, 2019, the Company was in compliance with these covenants.

The A&R Term Loan Credit Agreement also contains certain customary affirmative covenants and events of default (including change of control). In addition, the A&R Term Loan Credit Agreement includes a maintenance covenants that requires compliance a maximum first lien net leverage ratio. The availability of certain baskets and the ability to enter into certain transactions (including our ability to pay dividends) may also be subject to compliance with secured leverage ratios. As of September 30, 2019, the Company was in compliance with these covenants.

As of September 30, 2019, $220.0 million was outstanding under the A&R Term Loan Credit Agreement. The A&R Credit Agreement and A&R Term Loan Credit Agreement contain certain covenants and restrictions including a fixed charge coverage ratio and a minimum EBITDA target and is secured by collateral consisting of a percentage of eligible accounts receivable, inventories, and machinery and equipment. As of September 30, 2019, the Company was in compliance with these covenants.

General Other Debt

The Company entered into a mortgage with a local bank to finance $1.9 million of the purchase price of a commercial building in Eagle, Idaho, in July 2017. The mortgage bears interest at a fixed rate of 4.35% and utilizes a 25 year amortization schedule with a 10 year balloon payment of the balance due at that time.

In connection with the VIP Acquisition, the Company entered into a guarantee note of $10.0 million. As of December 31, 2018, $7.5 million was payable pursuant to the 2018 Contingent Note and up to $10 million may be payable pursuant to the 2019 Contingent Note. The guarantee note and the 2018 Contingent Note, collectively, “Notes Payable – VIP Acquisition” of $17.5 million require quarterly interest payments of 6.75% with the balance payable July 17, 2023. The following represents the Company’s long-term debt as of:


$'s in 000's	September 30, 2019		December 31, 2018
Term loans	$	220,000	$	74,625
Revolving credit facility		17,514		13,452
Mortgage		1,824		1,859
2019 Contingent note		5,770		2,680
Notes Payable - VIP Acquisition		17,500		17,500
Net discount on debt and deferred financing fees		(5,616)		(1,902)
	$	256,992	$	108,214
Less current maturities of long-term debt		(2,247)		(796)
Total long-term debt	$	254,745	$	107,418

Future maturities of long-term debt, excluding the 2019 Contingent note and net discount on debt and deferred financing fees, as of September 30, 2019, are as follows:


($'s in 000's)
Remainder of 2019	$	561
2020		2,248
2021		2,250
2022		2,252
2023		19,755
Thereafter		229,772

The Company incurred debt issuance costs of $0.7 million during the three and nine months ended September 30, 2019, respectively, related to the A&R Credit Agreement and $4.7 million during the three and nine months ended September 30, 2019, respectively, related to the A&R Term Loan Credit Agreement.