Debt

Convertible Notes

On December 16, 2014, the Company issued $125.0 million aggregate principal amount of Convertible 3.75% Senior Notes, due 2019 (the “2019 Notes”). On December 22, 2014, the Company announced the closing of the initial purchasers’ exercise in full of their option to purchase an additional $18.75 million aggregate principal amount of 2019 Notes. The 2019 Notes bear interest at a fixed rate of 3.75% per year, payable semiannually in arrears on June 15 and December 15 of each year, beginning on June 15, 2015, and mature on December 15, 2019, unless earlier repurchased, redeemed or converted. The 2019 Notes are convertible into shares of the Company’s common stock, cash or a combination thereof. On May 20, 2015, the Company received shareholder approval for the increase in the number of shares of common stock authorized and available for issuance upon conversion of the 2019 Notes.

On April 27, 2018, the Company entered into separate exchange agreements with certain holders of the 2019 Notes. The agreements gave the holder the right to exchange in aggregate $75.1 million of the 2019 Notes for $75.1 million of new Convertible 4.75% Senior Notes due 2023 (the “2023 Notes”). The new 2023 Notes bear a fixed interest rate of 4.75% per year, payable semi-annually with the principal payable in May 2023. The 2023 Notes incurred loan issue costs of $1.6 million and a discount of $19.0 million. Consistent with the 2019 Notes, the 2023 Notes are convertible into shares of the Company’s common stock, cash or a combination thereof. The discount is directly related to the convertible feature on the 2023 Notes. The initial conversion rate is $224.71 per share, subject to certain adjustments, related to either the Company's stock price volatility, or the Company's declaration of a stock dividend, stock distribution, share combination or share split expected dividends or other anti-dilutive activities. In addition, holders will be entitled to receive additional shares of common stock for a potential increase of the conversion rate up to $280.90 per share under a make-whole provision in some circumstances. The issue costs and discount are recognized as interest expense over the term of the Notes. The effective interest, inclusive of the debt discounts and issue costs, is 12.10%. The $75.1 million exchange of the 2019 Notes for 2023 Notes is considered an extinguishment under ASC 470, as the present value of the future cash flows has changed greater than 10%. The extinguishment of this portion of the 2019 Notes has been referenced here as "partial extinguishment". The partial extinguishment resulted in the recognition of an additional $10.1 million of non-cash interest expense in the quarter ended June 30, 2018. The $10.1 million is related to an unamortized debt discount of $9.1 million and unamortized debt financing costs of $1.0 million associated with the partial extinguishment of the $75.1 million of the 2019 Notes.

Term Loan

On June 1, 2018, the Company entered into a credit agreement for $25.0 million secured by all Company assets, due June 1, 2021 (“2021 Term Loan”). The 2021 Term Loan has limited financial and non-financial covenants inclusive of a minimum cash carry balance of $5.0 million. The 2019 Notes and 2023 Notes are subordinate to the 2021 Term Loan. The first $15.0 million of loan proceeds was received on June 1, 2018. The remaining loan proceeds of $10.0 million were subject to closing conditions as defined in the agreement and were received on July 16, 2018. The 2021 Term Loan incurred loan issue costs of $0.5 million and a discount of $0.4 million. The discount is due to lender fees paid on the initial drawdown of $15.0 million. The issue costs and discount are recognized as interest expense over the term of the 2021 Term Loan. The 2021 Term Loan bears interest at a rate of LIBOR plus 9%, with a stated floor of 2%. The effective interest, inclusive of the debt discounts and issue costs is 13.56% per year.

At June 30, 2018 and December 31, 2017, the net carrying value of the debt and the remaining unamortized debt discounts and debt issuance costs were as follows (in thousands):



	June 30, 2018		December 31, 2017
	(Unaudited)		(Audited)
Face amount of the 2019 Notes (due December 2019)	$	68,660	$	143,750
Face amount of the 2021 Loan (due June 2021)	15,000		—
Face amount of the 2023 Notes (due May 2023)	75,090		—
	158,750		143,750
Less unamortized discounts and debt issuance costs	29,277		22,773
Total Carrying Value, Net	$	129,473	$	120,977

For the six months ended June 30, 2018 and 2017, the Company recorded the following expenses in relation to the debt (in thousands):



	Three months ended June 30,				Six months ended June 30,
	2018		2017		2018		2017
Interest expense of the 2019 Notes (1)	$	878	$	1,347	$	2,226	$	2,695
Interest expense of the 2021 Loan	141		—		141		—
Interest expense of the 2023 Notes (1)	634		—		634		—
Debt partial extinguishment of 2019 Notes	10,069		—		10,069		—
Debt discount amortization of the 2019 Notes (1)	1,571		2,126		3,910		4,183
Debt discount amortization of the 2021 Loan	17		—		17		—
Debt discount amortization of the 2023 Notes (1)	498		—		498		—
Debt financing amortization of the 2019 Notes (1)	191		232		446		456
Debt financing amortization of the 2021 Loan	14		—		14
Debt financing amortization of the 2023 Notes (1)	42		—		42
Interest expense	$	14,055	$	3,705	$	17,997	$	7,334

(1) Included within "Interest and other expense, net" on the Condensed Consolidated Statements of Operations, offset by interest income and capitalized interest, as disclosed Note 5.