Debt

6 Months Ended

Jun. 30, 2020

Debt

Debt

(9)          Debt

The following is a summary of long term-debt as of June 30, 2020 and December 31, 2019 (in thousands):

	June 30,		December 31,
	2020		2019
Secured term loans	$	295,625	$	246,250
Revolving credit facility		12,000		12,000
Note payable		143,500		143,500
Other		709		1,725
Unamortized deferred financing fees		(6,002)		(6,642)
		445,832		396,833
Current portion		(2,584)		(1,721)
Long-term portion	$	443,248	$	395,112

In March 2019, the Company entered into several agreements, amendments and new credit facilities (herein after referred to as the March 2019 Recapitalization Transactions). The March 2019 Recapitalization Transactions included $425 million in new credit facilities, which consisted of a $300 million Initial Term Loan (Credit Facility Term Loan), $50 million Delayed Draw Term Loan (Delayed Draw), and $75 million Revolving Credit Facility (New Revolver), all with maturities in March 2024. In November 2019, the Company amended its credit agreement primarily to (i) increase the amount available under the Delayed Draw to $100 million, and (ii) revise the Consolidated Total Leverage Ratio thresholds and lower the applicable margin to determine the variable quarterly interest rate under the credit agreement. Amounts borrowed under the Credit Facility Term Loan and Delayed Draw bore interest quarterly at variable rates based upon the sum of (a) the LIBOR Rate for such interest period, plus (b) an applicable margin based upon the Company’s Consolidated Total Leverage Ratio. The Delayed Draw carried 0.5% of unused fee per annum, and the New Revolver carried 0.5% of unused line fee per annum. Under the credit facility, the Company was subject to various agreements that contained a number of restrictive covenants that, among other things, imposed operating and financial restrictions on the Company. Financial covenants included a Consolidated Total Leverage Ratio and a Fixed Charges Coverage Ratio, as defined in the agreement.

The proceeds from the March 2019 Recapitalization Transactions were used to (1) repay existing amounts outstanding under the Company’s credit facility of $151.9 million, (2) pay transaction costs, fees and expenses related to the consummation of the transactions contemplated under the agreement (see Note and Unit Purchase Agreement discussed below), (3) pay a $250 million distribution to AdaptHealth Holdings’ members, and (4) redeem certain

members’ interests, including the cumulative preferred dividends, for $3.7 million. In addition, the Company paid deferred financing costs of $9.0 million; amortization of such costs is included in interest expense, net in the accompanying consolidated statements of operations. Further, the Company wrote off deferred financing costs of $2.1 million, which is included in loss on extinguishment of debt in the accompanying consolidated statements of operations for the six months ended June 30, 2019.

Secured Term Loans

The Credit Facility Term Loan required quarterly principal repayments beginning June 30, 2019 through December 31, 2023, and the unpaid principal balance was due at maturity in March 2024. In November 2019, the Company repaid $50 million under the Credit Facility Term Loan; such repayment satisfied the required principal repayments through September 2023. At June 30, 2020, there was $246.3 million outstanding under the Credit Facility Term Loan. The interest rate under the Credit Facility Term Loan was 2.67% at June 30, 2020.

The Delayed Draw had an availability period from the first business day immediately following the closing date (March 2019) to the earliest of (a) the Credit Facility Term Loan maturity date, (b) twenty-four months following the closing date, or (c) the date of the termination of the commitment. During the six months ended June 30, 2020, the Company borrowed $50 million under the Delayed Draw. The borrowing under the Delayed Draw required quarterly principal repayments of $0.3 million beginning March 31, 2020 through December 31, 2020, quarterly principal repayments of $0.6 million beginning March 31, 2021 through December 31, 2023, and the unpaid principal balance was due at maturity in March 2024. At June 30, 2020, there was $49.4 million outstanding under the Delayed Draw. The interest rate under the Delayed Draw was 2.67% at June 30, 2020.

Revolving Credit Facility

In March 2020, the Company borrowed $20 million under the New Revolver; such amount was repaid in April 2020. At June 30, 2020, there was $12 million outstanding under the New Revolver. The interest rate under the New Revolver was 2.67% at June 30, 2020. After consideration of stand-by letters of credit outstanding of $2.5 million, the remaining maximum borrowings available pursuant to the New Revolver were $60.5 million at June 30, 2020.

Debt Refinancing

On July 29, 2020, the Company refinanced its debt borrowings and repaid all amounts outstanding under its existing credit facility, including the outstanding balances due under the Credit Facility Term Loan, the Delayed Draw and the New Revolver. In connection with the debt refinancing the Company entered into a new credit agreement. Refer to Note 16, Subsequent Events, for additional disclosures related to such debt refinancing.

Note Payable

In connection with the March 2019 Recapitalization Transactions, the Company signed a Note and Unit Purchase Agreement with an investor. Pursuant to the agreement, the Company signed a promissory note agreement with a principal amount of $100 million (the Promissory Note) and the Company also received proceeds of $20 million for the purchase of members’ interests. In connection with the transactions completed as part of the Business Combination, the Promissory Note was replaced with a new amended and restated promissory note with a principal amount of $100 million, and the investor converted certain of its members’ interests to a $43.5 million promissory note. The new $100 million promissory note, together with the $43.5 million promissory note, are collectively referred to herein as the New Promissory Note. The outstanding principal balance under the New Promissory Note is due on the tenth anniversary of the closing date of the Business Combination and bears interest at the following rates (a) for the period starting on the closing date and ending on the seventh anniversary, a rate of 12% per annum, and (b) for the period starting on the day after the seventh anniversary of the closing date and ending on the maturity date, a rate equal to the greater of (i) 15% per annum or (ii) the twelve-month LIBOR plus 12% per annum. Under the New Promissory Note, the Company had the option to pay 6% of the interest in cash and 6% Payment in Kind (PIK), and the Company elected to pay the PIK interest

in cash during all periods through June 30, 2020. If the Company elects to prepay the New Promissory Note prior to the third anniversary of the Closing of the Business Combination, then such prepayment of the outstanding principal and accrued interest will be subject to a make-whole premium equal to 10% of the total amount of outstanding principal and accrued interest through the date of such prepayment. If the Company elects to prepay the New Promissory Note prior to the fourth anniversary but after the third anniversary of the Closing of the Business Combination, then such prepayment of outstanding principal and accrued interest will be subject to a make-whole premium equal to 5% of the total amount of outstanding principal and accrued interest through the date of such prepayment.

In connection with the Business Combination, the investor generated taxable income and a current federal and state income tax liability of $5.9 million on the exchange of its members’ interests. Under the terms of the Merger Agreement, all investors indemnified the Company for all taxes attributable to periods prior to or on the closing date of the Business Combination. Accordingly, the Company recorded an indemnification asset of such amount, included in Prepaid and other current assets, and a corresponding current liability included in Other liabilities, in the accompanying consolidated balance sheets as of and December 31, 2019. This amount is no longer outstanding as of June 30, 2020.

In May 2020, the Company and the investor entered into a Put/Call Option and Consent Agreement (the Put/Call Agreement), pursuant to which certain put and call rights were granted to the parties with respect to shares of Class A Common Stock, shares of Class B Common Stock, and common units of AdaptHealth Holdings (each such common unit, together with one share of Class B Common Stock, a Consideration Unit) held by the investor. Pursuant to the Put/Call Agreement, during the period from the closing of the Company’s acquisition of Solara Medical Supplies LLC, which occurred on July 1, 2020 (the Solara Acquisition), until October 31, 2020 (the Option Period), the investor may require the Company to purchase up to 1,898,967 shares of Class A Common Stock and/or Consideration Units held by the investor (such shares of Class A Common Stock and Consideration Units, collectively, Interests) at a price per share of Class A Common Stock or per Consideration Unit equal to the greater of (x) $14.50 and (y) 85% of the 30-day volume-weighted average price per share of the Company’s Class A Common Stock on the date the exercise notice is delivered. During the Option Period, the Company may also require the investor to sell up to 1,898,967 of the Interests held by the investor to the Company at a price per share of Class A Common Stock or per Consideration Unit of $15.76. In addition, under the Put/Call Agreement, the investor waived certain consent rights under New Promissory Note, and the Company irrevocably agreed to pay all PIK interest payable under the New Promissory Note following the closing of the Solara Acquisition in cash rather than through an increase in the principal amount of the notes.