Debt

12 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

Debt

16 — Debt

As of the indicated dates, the principal amount of Hagerty's debt consisted of the following:

	December 31,
	2022		2021
	in thousands
Credit Facility	$	105,000	$	135,500
Notes payable	3,280		1,000
Total debt outstanding	$	108,280	$	136,500
Less: current portion	—		(1,000)
Total long-term debt outstanding	$	108,280	$	135,500

Credit Facility — In September 2022 and December 2022, The Hagerty Group entered into the Fourth and Fifth Amendment to Amended and Restated Credit Agreement ("Credit Agreement"), respectively, which amended the terms of its revolving credit facility ("Credit Facility") with JPMorgan Chase Bank, N.A., as administrative agent, and the other financial institutions party thereto from time to time as lenders. The amendments primarily included definition updates, accommodating draws in the British Pound ("GBP") and the Euro ("EUR"), transitioning the pricing terms from LIBOR to Term SOFR and changes to the financial covenants.

The aggregate amount of commitments available to the Company under the Credit Facility is $230.0 million. The Credit Agreement also provides for an uncommitted incremental facility under which the Company may request one or more increases in the amount of the commitments available under the Credit Facility in an aggregate amount not to exceed $50.0 million. Additionally, the Credit Agreement also provides for the issuance of letters of credit of up to $25.0 million and borrowings in GBP and EUR of up to $25.0 million in the aggregate.

The current term of the Credit Agreement expires in October 2026 and may be extended by one year on an annual basis if agreed to by the Company and the lenders party thereto. Any unpaid balance on the Credit Facility is due at maturity.

The Credit Facility accrues interest at the Term SOFR Rate plus an applicable margin determined by the Company's net leverage ratio for the preceding period (as defined in the Credit Agreement). The effective borrowing rate was 6.57% and 1.61% as of December 31, 2022 and 2021, respectively.

The Credit Facility borrowings are collateralized by Company assets, except for the assets of the Company’s U.K., Bermuda and German subsidiaries and the non-wholly owned subsidiaries of MHH.

Under the Credit Agreement, the Company is required, among other things, to meet certain financial covenants (as defined in the Credit Agreement), including a fixed charge coverage ratio and a leverage ratio. As of December 31, 2022, the Company was in compliance with the financial covenants under the Credit Agreement.

Notes Payable

In October and November 2022, the Company entered into notes payable agreements in the U.K., which are used to fund notes receivable within our Marketplace financing operations and are secured by the underlying vehicles. As of December 31, 2022, the outstanding balance on the notes payable was $3.3 million. The notes payable accrue interest at fixed rates ranging from 7.0% to 8.5% and are due in 2024.

The Company had a $2.0 million note payable related to a business combination for the future purchase installment payments, with a fixed interest rate of 3.25%. The note was paid in two equal installments, $1.0 million of which was paid in 2021. The note payable matured March 1, 2022 at which time the second installment of $1.0 million was due.

Letters of Credit — The Company authorized four letters of credit for a total of $11.6 million for operational purposes related to Section 953(d) tax structuring election and lease down payment support.