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Convertible Debt
 12 Months Ended
Dec. 31, 2021
Debt Disclosure [Abstract]  
Convertible Debt Senior Secured Credit Facility Long term debt consisted of the following (in thousands):
December 31,
20212020
Term loan facility$326,775 $460,000 
Revolving credit facility— — 
326,775 460,000 
Less discount and issuance costs
(23,291)(31,717)
Long term debt, net of debt discount and financing costs303,484 428,283 
Less current portion of long-term debt(4,300)(4,313)
Long-term Senior Secured Credit Facility debt, net of current portion, debt discount and financing costs$299,184 $423,970 

Senior Secured Credit Facility
On October 14, 2020, the Company entered into a senior secured credit facility which was amended on February 23, 2021 by the first amendment and on February 26, 2021 by the second amendment. The senior secured facility consisted originally of (i) a $575 million senior secured seven-year term loan facility (the “Term Loan Facility”) and (ii) a $150 million senior secured 5-year revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Senior Secured Credit Facility”). On February 23, 2021, the Company entered into the first amendment (“First Amendment”) to our Senior Secured Credit Facility. The First Amendment, in the case of Eurocurrency borrowings, lowers the London interbank offered rate floor to 50 basis points from 100 basis points and lowers the applicable margin to 325 basis points from 400 basis points per annum. This results in our current rate on the Term Loan Facility decreasing to 3.75% down from 5% prior to the First Amendment. On February 26, 2021, the Company entered into the incremental facility amendment No. 2 (the “Second Amendment”) to the Senior Secured Credit Facility. The Second Amendment increases the $150.0 million Revolving Credit Facility from $150.0 million to $200.0 million.

Revolving Credit Facility
Under the Revolving Credit Facility, the Company had a zero outstanding balance as of December 31, 2021 and 2020, $13.6 million and $46.6 million in standby letters of credit as of December 31, 2021 and 2020, and availability of $186.4 and $103.4 million at December 31, 2021 and 2020.

Term Loan Facility
The Term Loan Facility had a balance of $326.8 million and $460.0 million as of December 31, 2021 and 2020, respectively. The Company made unscheduled payoffs of the Term Loan Facility during the year in the aggregate of $130.0 million which resulted in the write-off of capitalized fees in the aggregate of $9.6 million. The Term Loan Facility accrued interest equal to applicable margin of 1% plus base rate (2.75% and 4.00% at December 31, 2021 and 2020, respectively). The balance of the Term Loan Facility is presented in the accompanying consolidated balance sheets net of debt discount and issuance costs of $23.3 million and $31.7 million at December 31, 2021 and 2020, respectively. The debt discount and issuance costs are being amortized using the effective interest method. The rate was 4.9% and 6.08% at December 31, 2021 and 2020, respectively. The Term Loan Facility has an annual excess cash flow calculation, for which the prescribed formula did not result in requiring the Company to make any advance principal payments for the year ended December 31, 2021.
Interest Rate
The interest rates applicable to the loans under the Term Loan Facility equal, at our option, either, (i) in the case of ABR borrowings, the highest of (a) the Federal Funds Rate as of such day plus 50 basis points, (b) the prime rate and (c) the adjusted LIBOR rate as of such day for a deposit in U.S. dollars with a maturity of one month plus 100 basis points, provided that in no event shall the ABR be less than 150 basis points, plus, in each case, the applicable margin of 300 basis points per annum; or (ii) in the case of Eurocurrency borrowings, the greater of (a) the London interbank offered rate for the relevant currency, adjusted for statutory reserve requirements, and (b) 100 basis points, plus, in each case, the applicable margin of 400 basis points per annum.

The interest rates applicable to the loans under the Revolving Facility equal, at our option, either, (i) in the case of ABR borrowings, the highest of (a) the Federal Funds Rate as of such day plus 50 basis points, (b) the prime rate and (c) the adjusted LIBOR rate as of such day for a deposit in U.S. dollars with a maturity of one month plus 100 basis points, provided that in no event shall the ABR be less than 150 basis points, plus, in each case, the applicable margin of 225 basis points per annum; or (ii) in the case of Eurocurrency borrowings, the greater of (a) the London interbank offered rate for the relevant currency, adjusted for statutory reserve requirements, and (b) 50 basis points, plus, in each case, the applicable margin of 325 basis points per annum.

The Term Loan Facility amortizes in equal quarterly installments in aggregate annual amounts equal to 1.00% per annum of the original principal amount of the loans funded thereunder. There is no scheduled amortization under the Revolving Credit Facility.

Guarantees and Security
The obligations under the Senior Secured Credit Facility are guaranteed by ATI Investment Sub, Inc. and its wholly owned domestic subsidiaries other than certain immaterial subsidiaries and other excluded subsidiaries. The obligations under the Senior Secured Credit Facility are secured by a first priority security interest in substantially all of Array Tech, Inc.’s and the guarantors’ existing and future property and assets, including accounts receivable, inventory, equipment, general intangibles, intellectual property, investment property, other personal property, material owned real property, cash and proceeds of the foregoing.

Prepayments and Amortization
Loans under the Revolving Credit Facility may be voluntarily prepaid in whole, or in part, in each case without premium or penalty. Loans under the Term Loan Facility may be voluntarily prepaid in whole, or in part, in each case without premium or penalty (other than a 1% premium with respect to prepayments on account of certain “repricing events,” subject to exceptions, occurring within 12 months of the closing date of the Senior Secured Credit Facility).

The Senior Secured Credit Facility requires mandatory prepayments, but not permanent reductions of commitments thereunder, for excess cash flow, asset sales, subject to a right of reinvestment, and refinancing facilities.

The Term Loan Facility amortizes in equal quarterly installments in aggregate annual amounts equal to 1.00% per annum of the original principal amount of the loans funded thereunder. There is no scheduled amortization under the Revolving Credit Facility.

Restrictive Covenants and Other Matters
The Senior Secured Credit Facility contains affirmative and negative covenants including covenants that restrict our incurrence of indebtedness, incurrence of liens, dispositions, investments, acquisitions, restricted payments, transactions with affiliates, as well as other negative covenants customary for financings of this type.

The Revolving Credit Facility also includes a springing financial maintenance covenant that is tested on the last day of each fiscal quarter if the outstanding loans and certain other credit extensions under the Revolving Credit Facility exceed 35% of the aggregate amount of commitments thereunder, subject to customary exclusions and conditions. If the financial maintenance covenant is triggered, the first lien net leverage ratio will be tested for compliance not to exceed 7.10 to 1.00.

The Senior Secured Credit Facility also includes customary events of default, including the occurrence of a change of control. As of December 31, 2021, the Company was in compliance with all the required covenants.

Future maturities of the Senior Secured Credit Facility (in thousands):
Amount
2022$4,300 
20234,300 
20244,300 
20254,300 
20264,300 
Thereafter305,275 
$326,775 

For the years ended December 31, 2021, 2020 and 2019, interest expense related to all long-term debt totaled $35.7 million, $11.3 million and $11.5 million, respectively, which consisted of cash interest, and amortization of the debt discount and financing costs.
Convertible Debt
December 31,
20212020
1% Senior unsecured convertible notes$425,000 $— 
Less: unamortized discount and issuance costs(13,137)— 
1% Senior unsecured convertible notes, net (1)
$411,863 $— 
(1) Effective interest rate for the Notes for the year ended December 31, 2021 was 1.5%.

On December 3, 2021 and December 9, 2021, the Company completed a private offering of $375 million and $50 million over allotment, respectively, in aggregate principal amount of 1.00% Convertible Senior Notes due 2028 (the “Notes”) resulting in proceeds of $364.7 million and $48.6 million, respectively, after deducting the original issue discount of 2.75%. The Notes were issued pursuant to an indenture, dated December 3, 2021 (the “Indenture”), between the Company and U.S. Bank National Association, as trustee.
The Notes are senior unsecured obligations of the Company and will mature on December 1, 2028, unless earlier converted redeemed or repurchased. The Notes bear interest at a rate of 1.00% per year, payable semiannually in arrears on June 1 and December 1 of each year, beginning on June 1, 2022.

The Notes were not convertible during the quarter ended December 31, 2021 and none have been converted to date. Also given the average market price of the common stock has not exceeded the exercise price since inception, there was no dilutive impact for the year ended December 31, 2021.

Redemption

At any time prior to the close of business on the business day immediately preceding June 1, 2028, the Notes are convertible at the option of the holders only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2022 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price then in effect on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate for the Notes on each such trading day; (3) if the Company calls such Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date, but only with respect to the Notes called (or deemed called) for redemption; or (4) upon the occurrence of specified corporate events as described in the Indenture. On or after June 1, 2028 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Notes may convert all or any portion of their Notes at any time regardless of the foregoing circumstances. Upon conversion of the Notes, the Company will pay cash up to the aggregate principal amount of the Notes to be converted and pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election, in respect of the remainder, if any, of the Company’s conversion obligation in excess of the aggregate principal amount of the Notes being converted.

The Company may redeem (an “Optional Redemption”) for cash all or any portion of the Notes, at its option, on or after December 6, 2025, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If the Company redeems less than all the outstanding Notes, at least $100 million aggregate principal amount of Notes must be outstanding and not subject to redemption as of the date of the relevant notice of redemption. No sinking fund is provided for the Notes.

The conversion rate for the Notes was initially 41.9054 shares of the Company’s common stock per $1,000 principal amount of Notes, which was equivalent to an initial conversion price of approximately $23.86 per share of common stock or 10.1 million shares of common stock. The initial conversion price of the Notes represented a premium of approximately 32.5% to the last reported sale price of the Company’s common stock on the Nasdaq Global Market on November 30, 2021. The conversion rate for the Notes is subject to adjustment under certain circumstances in accordance with the terms of the Indenture. In addition, following
certain corporate events that occur prior to the maturity date of the Notes or if the Company delivers a notice of redemption in respect of the Notes, the Company will, under certain circumstances, increase the conversion rate of the Notes for a holder who elects to convert its Notes (or any portion thereof) in connection with such a corporate event or convert its Notes called (or deemed called) for redemption during the related Redemption Period (as defined in the Indenture), as the case may be.

If the Company undergoes a Fundamental Change (as defined in the Indenture), holders may require, subject to certain conditions and exceptions, the Company to repurchase for cash all or any portion of their Notes at a Fundamental Change Repurchase Price (as defined in the Indenture) equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, to, but excluding, the Fundamental Change Repurchase Date (as defined in the Indenture).

The Indenture includes customary covenants and sets forth certain events of default after which the Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving the Company or its Significant Subsidiaries after which the Notes become automatically due and payable.

The Convertible Notes were evaluated for embedded derivatives noting there were none that needed to be bifurcated and accounted for separately.

Interest expense on the convertible debt of $0.4 million was recognized for the Notes included contractual interest expense of $0.3 million and the amortization of debt discount and issuance cost of $0.1 million for the year ended December 31, 2021. The discount and issuance costs will be amortized over the life of the debt using the effective interest rate of 1.5%.

Capped Call

On November 30, 2021, concurrently with the pricing of the Notes, the Company also entered into privately negotiated capped call transactions (the “Capped Calls”) with Morgan Stanley & Co. LLC, Credit Suisse Capital LLC, through its agent, Credit Suisse Securities (USA) LLC and JPMorgan Chase Bank, N.A., New York Branch (collectively, the “Counterparties”). The Capped Calls each have an initial strike price of $23.8633 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Notes. The Capped Calls have initial cap prices of $36.0200 per share, subject to certain adjustments. The Capped Calls cover, subject to anti-dilution adjustments, approximately 17.8 million shares of the Company’s common stock. The Capped Calls are expected generally to reduce potential dilution to the common stock upon conversion of any Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price. The Company paid $52.9 million from the net proceeds from the issuance and sale of the Notes to purchase the Capped Calls. The Capped Calls are subject to either adjustment or termination upon the occurrence of specified extraordinary events affecting the Company, including a merger event; a tender offer; and a nationalization, insolvency or delisting involving the Company. In addition, the Capped Calls are subject to certain specified additional disruption events that may give rise to terminations of the Capped Calls, including changes in law; failures to deliver; and hedging disruptions.

Certain Initial Purchasers under the Array Technologies, Inc. 1.00% Convertible Senior Notes due 2028 Purchase Agreement and Counterparties under the confirmations entered into in connection with the Capped Calls, or their affiliates, have engaged in, and may in the future engage in, other commercial dealings with the
Company or its affiliates in the ordinary course of business. They have received, or may in the future receive, customary fees and commissions for those transactions.

The Capped Calls meet the criteria in ASC 815-40 to be classified within Stockholders' Equity, and therefore was recorded to additional paid in capital at the fair value on issuance which was equal to the premium paid. Due to the instrument being classified in equity, it is not remeasured after issuance.

The Company made a tax election to integrate the Notes and the Capped Calls. The accounting impact of this tax election makes the Capped Calls deductible as original issue discount interest for tax purposes over the term of the note, and results in a $12.4 million deferred tax asset recorded as an adjustment to Additional paid-in capital on our Balance Sheet as of December 31, 2021.