Long-term Debt

12 Months Ended

Dec. 31, 2021

On July 1, 2019, in connection with the acquisition of Zoosk, Spark Networks entered into a Loan Agreement with Zoosk, Spark Networks, Inc., the subsidiary guarantors party thereto, the lenders party thereto, and Blue Torch Finance LLC (“Administrative Agent”), as administrative agent and collateral agent (the "Senior Secured Facilities Agreement") that provides for a four-year $125.0 million Senior Secured Facility, maturing July 1, 2023 ("Maturity Date"). The Senior Secured Facilities Agreement provides for a term loan facility in an aggregate amount equal to $120.0 million (the “Term Loan Facility”) and a revolving credit facility in an aggregate amount equal to $5.0 million (the “Revolving Credit Facility”) and, together with the Term Loan Facility, (the “Facilities”). Substantially all of the Company's assets are pledged as collateral. Borrowings under the Facilities bear interest at a rate equal to LIBOR plus an applicable margin of 8.0% per annum.

Term Loan Facility

The Term Loan Facility was issued at a discount of 3.0% of the aggregate principal amount of the $120.0 million totaling $3.6 million. Transaction costs and commitment fees of $3.1 million and $0.6 million, respectively, were paid at closing. The

initial commitment fee was equal to 0.5% of the aggregate principal amount of the Term Loan Facility. Through the effective interest rate method, the discount and commitment fees on the Term Loan Facility are amortized to interest expense in the Consolidated Statements of Operations and Comprehensive Loss through the Maturity Date. The effective interest rate was 10.7%.

On December 2, 2020, the Company entered into the Second Amendment to Loan Agreement (the "Second Amendment" and together with the Term Loan Facility, the ("Amended Term Loan Facility"), which established an additional $6.0 million of term loan commitment to its existing Term Loan Facility. The additional borrowing was applied to pay the quarterly Term Loan Facility principal and interest payments due on December 31, 2020 and March 31, 2021. The Second Amendment was accounted for as a modification of debt, and as such, the third-party costs incurred in connection with the Second Amendment of approximately $1.3 million were expensed as incurred. The debt issuance costs of $1.3 million that were paid directly to the lender at the closing date were capitalized and will be amortized using the effective interest method over the term of the loan. The effective interest rate on the modified loan is 11.3%. The Second Amendment requires repayment of the principal amount of $0.15 million quarterly, beginning on March 31, 2021, in addition to the $3.0 million quarterly principal repayment of the original Term Loan Facility and the modified interest.

On March 5, 2021, the Company entered into a Limited Waiver under Loan Agreement (the "Limited Waiver") with the Administrative Agent and the lenders pursuant to which certain defaults under the Senior Secured Facilities Agreement were waived. In consideration of the Limited Waiver, the Company agreed to pay the Administrative Agent, for the ratable benefit of the lenders, a fee of $0.5 million upon the execution of the Limited Waiver, plus $0.3 million paid in kind by capitalizing such amount into the principal balance under the Senior Secured Facilities Agreement. The aggregated fees were capitalized and will be amortized using the effective interest rate of 11.8%.

As of December 31, 2021 and 2020, the aggregated outstanding principal balance of the Amended Term Loan Facility is $85.6 million and $104.7 million, respectively, and the amortized cost basis is $82.1 million and $99.1 million, respectively. For the years ended December 31, 2021 and 2020, interest expense on the Amended Term Loan Facility totaled $12.1 million and $12.7 million, respectively, and includes stated interest of $9.2 million and $10.5 million, discount amortization of $1.2 million and $0.9 million, and fee amortization of $1.7 million and $1.2 million, respectively.

In addition, pursuant to the terms of the Amended Term Loan Facility, within 5 days after the annual financial statements are required to be delivered to the lender, the Company is required to make a prepayment of the loan principal in an amount equal to a percentage of the excess cash flow of the most recently completed fiscal year. For the years ended December 31, 2021 and 2020, the Company made a prepayment of $6.8 million and $3.3 million, respectively. Estimated prepayments are included as current borrowings as of the balance sheet dates. As of December 31, 2021, the estimated prepayment is $5.0 million.

Revolving Credit Facility

The $5 million Revolving Credit Facility has a commitment fee of 0.75% per annum on the unutilized commitments thereunder and payable on the Maturity Date. As the Revolving Credit Facility is not expected to be drawn down, transaction costs and upfront fees totaling $0.3 million related to the Revolving Credit Facility were deferred and are being amortized over the term of the agreement. There were no outstanding borrowings under the Revolving Credit Facility as of December 31, 2021.

Covenants

The Facilities contain a number of covenants that, among other things, restrict, subject to certain exceptions, the Company's ability and the ability of its subsidiaries to: incur additional indebtedness, create liens, engage in mergers or consolidations, sell or transfer assets, pay dividends and distributions and make share repurchases, make certain acquisitions, engage in certain transactions with affiliates, and change lines of business.

In addition, the Facilities, as revised by the Second Amendment, require the following financial covenants to be maintained: (i) a fixed charge coverage ratio of no less than 1.10 for the first four quarters of the loan, 1.25 for the second two quarters of the loan, and between 1.20 and 0.70 for the remaining life of the loan, (ii) a net leverage ratio of no greater than 3.00 for the first quarter of the loan, declining steadily from 2.60 to 1.75 for the quarters ended December 31, 2020 through the maturity date of the loan, and (iii) a minimum liquidity threshold of $10.0 million at the end of each month following the closing date of the loan, consisting of available cash funds and availability under the Revolving Credit Facility. The Facilities also contain certain customary affirmative covenants and events of default, including a change of control. The Company is in compliance with all of its financial covenants as of December 31, 2021 and 2020.

Long-term debt maturities:


Years Ended December 31,	(in thousands)
2022	$	17,593
2023	67,959
2024	—



Total	85,552
Less: current portion of long-term debt	(17,593)
Less: unamortized discount	(1,430)
Less: unamortized debt issuance costs	(1,998)
Total long-term debt, net	$	64,531

On March 11, 2022, the Company completed the successful refinancing of its existing term and revolving facility with borrowings under a new term loan facility with MGG Investment Group LP. Refer to Note 15 for additional information.