Current and Long-Term Debt

3 Months Ended

Mar. 31, 2020

(9) Current and Long-Term Debt

The Company’s carrying value of current and long-term debt consisted of the following:


	March 31, 2020		December 31, 2019
	(In thousands)
Revolving credit facility, including swingline credit facility (weighted average combined interest rate of 2.4% and 2.3% as of March 31, 2020 and December 31, 2019, respectively)	$	746,620	$	167,227
5.50% Senior Notes due May 2025, net of capitalized debt issuance costs	296,707		296,545
1.00% Convertible Senior Notes due December 2020, net of unamortized discount and capitalized debt issuance costs	278,861		275,703
Total Debt	1,322,188		739,475
Less: Current portion	(278,861)		—
Total Long-Term Debt	$	1,043,327	$	739,475

The 5.50% Senior Notes due 2025 (the “2025 Notes”) with a face value of $300.0 million are presented net of capitalized debt issuance costs of $3.3 million and $3.5 million as of March 31, 2020 and December 31, 2019, respectively. The 1.00% Convertible Notes due December 2020 (the "2020 Notes") with a face value of $287.5 million are presented net of unamortized discount and capitalized debt issuance costs of $8.6 million and $11.8 million as of March 31, 2020 and December 31, 2019, respectively. The 2020 Notes are presented in the Current portion of long-term debt line of the Company's Consolidated Balance Sheet as of March 31, 2020.

Revolving Credit Facility

On September 19, 2019, the Company entered into a first amendment to its second amended and restated credit agreement (the “Credit Agreement”). The Credit Agreement provides the Company with a $750 million revolving credit facility maturing on September 19, 2024, and accordion feature allowing the Company to (a) increase the available borrowings under the credit facility to $850 million and (b) incur incremental term loans under the facility. Any term loans will rank equal in right of payment with revolving loans under the credit facility and will not mature earlier than the revolving loans.

The total commitments under the credit facility can be borrowed in U.S. dollars, alternative currencies (including Euros, U.K. pounds sterling, Canadian dollars, Australian dollars and South African rand), or a combination thereof. Borrowings (not including swingline loans) accrue interest, at the Company’s option and based on the type of currency borrowed, at the Alternate Base Rate, the Canadian Prime Rate, the Adjusted LIBO Rate, the Canadian Dealer Offered Rate, the Bank Bill Swap Reference Rate or the Johannesburg Interbank Agreed Rate (each, as defined in the Credit Agreement) plus a margin depending on the Company’s most recent Total Net Leverage Ratio (as defined in the Credit Agreement). The margin for Alternative Base Rate loans and Canadian Prime Rate loans varies between 0% and 0.75%, and the margin for Adjusted LIBO Rate loans, Canadian Dealer Offered Rate loans, Bank Bill Swap Reference Rate loans and Johannesburg Interbank Agreed Rate Loans varies between 1.00% and 1.75%. Swingline loans denominated in U.S. dollars bear interest at the Alternate Base Rate plus a margin as described above, swingline loans denominated in Canadian dollars bear interest at the Canadian Prime Rate plus a margin as described above and swingline loans denominated in other alternative currencies bear interest at the Overnight Foreign Currency Rate (as defined in the Credit Agreement) plus the applicable margin for the Adjusted LIBO Rate, the Bank Bill Swap Reference Rate or the Johannesburg Interbank Agreed Rate, as applicable.

Each of the Credit Facility Guarantors (as defined in the Credit Agreement) has guaranteed the full and punctual payment of the obligations under the revolving credit facility and the obligations under the revolving credit facility are secured by substantially all of the assets of the Credit Facility Guarantors. In addition, Controlled Foreign Corporation (or "CFC"), CFC Borrowers and CFC Guarantors are defined in the Credit Agreement. The obligations of the CFC Borrowers are guaranteed by the CFC Guarantors and secured by substantially all of the assets of the CFC Guarantors.

The Credit Agreement contains representations, warranties and covenants that are customary for similar credit arrangements, including, among other things, covenants relating to: (i) financial reporting and notification, (ii) payment of obligations, (iii) compliance with applicable laws, (iv) notification of certain events, and (v) certain covenants relating to, among other things, the sale or transfer of assets, fundamental changes, incurrence or guarantee of indebtedness, liens,

investments, hedging transactions, transactions with affiliates and sale and leaseback transactions. Financial covenants in the Credit Agreement require the Company to maintain: (i) as of the last day of any fiscal quarter, a Total Net Leverage Ratio (as defined in the Credit Agreement) of no more than 4.25 to 1.00, and (ii) as of the last day of any fiscal quarter, an Interest Coverage Ratio (as defined in the Credit Agreement) of no less than 3.00 to 1.00. Additionally, the Company is limited in its ability to make restricted payments; however, the Company may generally make restricted payments so long as no event of default exists at the time of such payment and the Total Net Leverage Ratio is less 3.75 to 1.00 at the time such restricted payment is made. As of March 31, 2020, the Company’s actual Total Net Leverage Ratio was 2.4 and its Interest Coverage Ratio was 11.7.

In March 2020, in anticipation of the maturity of the Convertible Notes due on December 1, 2020 and for additional liquidity as a precautionary measure given the economic uncertainty caused by the worldwide COVID-19 pandemic, the Company drew all of the borrowing capacity under our credit facility resulting in the Company holding $613.7 million in cash as of March 31, 2020. As of March 31, 2020, the Company had $746.6 million of outstanding borrowings under its $750 million revolving credit facility and was in compliance with all applicable covenants and ratios under the Credit Agreement. The Company also had $10.0 million outstanding in letters of credit. The weighted average interest rates on the Company’s outstanding borrowings under the revolving credit facility were 2.4% and 2.3%, as of March 31, 2020 and December 31, 2019, respectively.

$287.5 million 1.00% Convertible Senior Notes Due 2020 and Related Equity Instruments

On November 19, 2013, Cardtronics, Inc. issued the Convertible Notes at par value. Cardtronics, Inc. received $254.2 million in net proceeds from the offering after deducting underwriting fees paid to the initial purchasers and a repurchase of 665,994 of its outstanding common shares concurrent with the offering. Cardtronics, Inc. used a portion of the net proceeds from the offering to fund the net cost of the convertible note hedge transaction, as described below. The convertible note hedge and warrant transactions were entered into concurrent with the pricing of the Convertible Notes. Interest on the Convertible Notes is payable semi-annually in cash in arrears on June 1st and December 1st of each year. Under U.S. GAAP, certain convertible debt instruments that may be settled in cash (or other assets) upon conversion are required to be separately accounted for as liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s non-convertible debt borrowing rate. The Company, with assistance from a valuation professional, determined that the fair value of the debt component was $215.8 million and the fair value of the embedded option was $71.7 million as of the issuance date. The Company recognizes effective interest expense on the debt component and that interest expense effectively accretes the debt component to the total principal amount due at maturity of $287.5 million. The effective rate of interest to accrete the debt balance is approximately 5.26%, which corresponded to the Company’s estimated conventional debt instrument borrowing rate at the date of issuance.

On July 1, 2016, Cardtronics plc, Cardtronics, Inc., and Wells Fargo Bank, National Association, as trustee, entered into a supplemental indenture (the “Convertible Notes Supplemental Indenture”) with respect to the Convertible Notes. The Convertible Notes Supplemental Indenture provides for the unconditional and irrevocable guarantee by Cardtronics plc of the prompt payment, when due, of any amount owed to the holders of the Convertible Notes. The Convertible Notes Supplemental Indenture also provides that, from and after July 1, 2016, the Convertible Notes will be convertible into shares of Cardtronics plc in lieu of common shares of Cardtronics, Inc.

The Convertible Notes have a conversion price of $52.35 per share, which equals a conversion rate of 19.1022 shares per $1,000 principal amount of Convertible Notes, for a total of approximately 5.5 million shares underlying the debt. The conversion rate, however, is subject to adjustment under certain circumstances. Conversion can occur: (i) any time on or after September 1, 2020, (ii) after March 31, 2014, during any calendar quarter that follows a calendar quarter in which the price of the shares exceeds 135% of the conversion price for at least 20 days during the 30 consecutive trading-day period ending on the last trading day of the quarter, (iii) during the 10 consecutive trading-day period following any five consecutive trading-day period in which the trading price of the Convertible Notes is less than 98% of the closing price of the shares multiplied by the applicable conversion rate on each such trading day, (iv) upon specified distributions to Cardtronics plc’s shareholders upon recapitalizations, reclassifications, or changes in shares, and (v) upon a make-whole fundamental change. A fundamental change is defined as any one of the following: (i) any person or group that acquires 50% or more of the total voting power of all classes of common equity that is entitled to vote generally in the election of Cardtronics plc’s directors, (ii) Cardtronics plc engages in any recapitalization, reclassification, or changes of common shares as a result of which the shares would be converted into or exchanged for, shares, other securities, other assets, or property, (iii) Cardtronics plc engages in any share exchange, consolidation, or merger where the shares converted into cash, securities, or other property, (iv) the Company engages in certain sales, leases, or other transfers of all or substantially all of the consolidated assets, or (v) Cardtronics plc’s shares are not listed for trading on any U.S. national securities exchange.

None of the Convertible Notes were deemed convertible as of March 31, 2020. The Convertible Notes are due December 1, 2020 and are classified as a current liability in the Company's Consolidated Balance Sheets at March 31, 2020, as the Company has drawn its revolver in anticipation of the retirement of the Convertible Notes.

Upon conversion, holders of the Convertible Notes are entitled to receive cash, shares, or a combination of cash and shares, at the Company’s election. In the event of a change in control, as defined in the indenture under which the Convertible Notes have been issued, holders can require Cardtronics to purchase all or a portion of their Convertible Notes for 100% of the notes’ par value plus any accrued and unpaid interest.

The Company’s interest expense related to the Convertible Notes consisted of the following:


		Three Months Ended March 31,
		2020		2019
	(In thousands)
Cash interest per contractual coupon rate		$	719	$	719
Amortization of note discount		2,929		2,780
Amortization of debt issuance costs		228		206
Total interest expense related to Convertible Notes		$	3,876	$	3,705

The Company’s carrying value of the Convertible Notes consisted of the following:


	March 31, 2020		December 31, 2019
	(In thousands)
Principal balance	$	287,500	$	287,500
Unamortized discount and capitalized debt issuance costs	(8,639)		(11,797)
Net carrying amount of Convertible Notes	$	278,861	$	275,703

In connection with the issuance of the Convertible Notes, Cardtronics, Inc. entered into separate convertible note hedge and warrant transactions to reduce the potential dilutive impact upon the conversion of the Convertible Notes. The net effect of these transactions effectively raised the price at which dilution would occur from the $52.35 initial conversion price of the Convertible Notes to $73.29. Pursuant to the convertible note hedge, Cardtronics, Inc. purchased call options granting Cardtronics Inc. the right to acquire up to approximately 5.5 million common shares with an initial strike price of $52.35. The call options automatically become exercisable upon conversion of the Convertible Notes, and will terminate on the second scheduled trading day immediately preceding December 1, 2020. Cardtronics Inc. also sold to the initial purchasers warrants to acquire up to approximately 5.5 million common shares with a strike price of $73.29. The warrants will expire incrementally on a series of expiration dates subsequent to the maturity date of the Convertible Notes through August 30, 2021. If the conversion price of the Convertible Notes remains between the strike prices of the call options and warrants, Cardtronics plc’s shareholders will not experience any dilution in connection with the conversion of the Convertible Notes; however, to the extent that the price of the shares exceeds the strike price of the warrants on any or all of the series of related expiration dates of the warrants, Cardtronics plc would be required to issue additional shares to the warrant holders. The amounts allocated to both the note hedge and warrants were recorded in the Shareholders’ equity section in the accompanying Consolidated Balance Sheets.

$300.0 million 5.50% Senior Notes Due 2025

On April 4, 2017, in a private placement offering, Cardtronics Inc. and Cardtronics USA, Inc. (the “2025 Notes Issuers”) issued $300.0 million in aggregate principal amount of the 2025 Notes pursuant to an indenture dated April 4, 2017 (the “2025 Notes Indenture”) among the 2025 Notes Issuers, Cardtronics plc, and certain of its subsidiaries, as guarantors (each, a “2025 Notes Guarantor”), and Wells Fargo Bank, National Association, as trustee.

Interest on the 2025 Notes accrues from April 4, 2017, the date of issuance, at the rate of 5.50% per annum. Interest on the 2025 Notes is payable semi-annually in cash in arrears on May 1st and November 1st of each year with the initial payment having commenced on November 1, 2017.

The 2025 Notes and the related guarantees (the “2025 Guarantees”) are the general unsecured senior obligations of each of the 2025 Notes Issuers and the 2025 Notes Guarantors, respectively, and rank: (i) equally in right of payment with all of the 2025 Notes Issuers’ and the 2025 Notes Guarantors’ existing and future senior indebtedness and (ii) senior in right of payment to all of the 2025 Notes Issuers’ and the 2025 Notes Guarantors’ future subordinated indebtedness. The 2025 Notes and the 2025 Guarantees are effectively subordinated to any of the 2025 Notes Issuers’ and the 2025 Notes Guarantors’ existing and

future secured debt to the extent of the collateral securing such debt, including all borrowings under the Company’s revolving credit facility. The 2025 Notes are structurally subordinated to all third-party liabilities of any of Cardtronics plc’s subsidiaries (excluding the 2025 Notes Issuers) that do not guarantee the 2025 Notes.

The 2025 Notes contain covenants that, among other things, limit the 2025 Notes Issuers’ ability and the ability of Cardtronics plc and certain of its restricted subsidiaries to incur or guarantee additional indebtedness, make certain investments, or pay dividends or distributions on Cardtronics plc’s common shares or repurchase common shares or make certain other restricted payments, consolidate or merge with or into other companies, conduct asset sales, restrict dividends or other payments by restricted subsidiaries, engage in transactions with affiliates or related persons, and create liens.

Obligations under the 2025 Notes are fully and unconditionally and jointly and severally guaranteed on a senior unsecured basis by Cardtronics plc and certain of its subsidiaries and certain of its future subsidiaries, with the exception of Cardtronics plc’s immaterial subsidiaries and CFC Guarantors. There are no significant restrictions on the ability of Cardtronics plc to obtain funds from Cardtronics Inc., Cardtronics USA, Inc., or the other 2025 Notes Guarantors by dividend or loan. None of the 2025 Notes Guarantors’ assets represent restricted assets pursuant to Rule 4-08(e)(3) of Regulation S-X.

The 2025 Notes are subject to certain automatic customary releases with respect to the 2025 Notes Guarantors (other than Cardtronics plc, Cardtronics Holdings Limited, and CATM Holdings LLC), including the sale, disposition, or transfer of the common shares or substantially all of the assets of such 2025 Notes Guarantor, designation of such 2025 Notes Guarantor as unrestricted in accordance with the 2025 Notes Indenture, exercise of the legal defeasance option or the covenant defeasance option, liquidation, or dissolution of such 2025 Notes Guarantor. The 2025 Notes Guarantors, including Cardtronics plc, may not sell or otherwise dispose of all or substantially all of their properties or assets to, or consolidate with or merge into, another company if such a sale would cause a default under the 2025 Notes Indenture and certain other specified requirements under the 2025 Notes Indenture are not satisfied.