Note 6 - Long-term Debt

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Debt Disclosure [Text Block]

NOTE 6 – LONG-TERM DEBT

At December 31, 2020 and 2019, the carrying amount of the Company’s outstanding debt is summarized as follows (dollars in thousands):

	December 31,
	2020			2019
Senior secured debt due May 25, 2021	$	78,861		$	72,341
Interest accrues at 8% per annum
Convertible note instrument due March 5, 2020
Interest accrues at 7% per annum		-			65,514
Other loans		152			45
Debt discount and debt issuance costs, net of accumulated accretion		(366	)		(304	)
Total outstanding long-term debt		78,647			137,596
Less current portion		51			31
Total outstanding debt	$	78,596		$	137,565

The carrying value of the Company’s Senior Secured Debt approximates fair value. The fair value of the Company’s Senior Secured Debt (Level 2) is determined based on an estimation of discounted future cash flows of the debt at rates currently quoted or offered to the Company by its lenders for similar debt instruments of comparable maturities by its lenders.

Pursuant to the Company’s loan agreements, annual maturities of long-term debt outstanding on December 31, 2020, are as follows:

Year Ending December 31	($ in thousands)
2021	$	51
2022		78,898	(1)
2023		38
2024		26
2025+		-
Total	$	79,013

⁽¹⁾ The Company has options to extend the contractual May 2021 maturity of its Senior Secured Debt until November 2022.  Accordingly, the Company has no short-term debt portion of long-term debt obligations coming due subject to the exercise of this option which is entirely in the Company’s control.

Credit Agreement

On May 25, 2017 (“Closing Date”), the Company entered into a $60 million credit agreement with funds affiliated with Apollo Global Management, LLC (“Apollo”) that replaced and refinanced the Company’s then existing $45 million senior secured mortgage debt and provided $15 million of new senior debt to fund immediate construction related expenditures.

Interest on the Senior Secured Debt is due quarterly on each March 31, June 30, September 30 and December 31 (each an “Interest Date”).  Interest on the Senior Secured Debt will (i) accrete to the outstanding principal amount at a rate per annum equal to 6% (the “PIK Rate”) compounded quarterly on each Interest Date and (ii) accrue on the outstanding principal amount at a rate per annum equal to 2% (the “Cash Rate”). The Company, in its discretion, may make any quarterly interest payment in cash on the applicable Interest Date at the PIK Rate, in lieu of accretion of such interest to the principal amount at the PIK Rate.

In addition to the interest expense discussed above, the Company will also owe an additional premium upon maturity of the debt.  The Accreted Loan Value plus the Applicable Prepayment Premium will be due and payable on the Maturity Date. “Accreted Loan Value” means, as of the date of determination, the outstanding principal amount of the applicable Loan, plus all accreted interest as of the calendar day immediately prior to such date of determination. “Applicable Prepayment Premium” means with respect to any repayment of the Senior Secured Debt (a) the Accreted Loan Value of the Senior Secured Debt being prepaid or repaid, as applicable, multiplied by (b) 7.00%.  The premium has been recorded to interest expense over the term of the Senior Secured Debt consistent with the terms of the debt agreement. 

On March 5, 2020, the Company entered into an agreement with Apollo in which the Company acquired the option to extend the current May 2021 maturity date of its loan to May 2022 (“Extension Option”).  The fee to acquire the Extension Option included the repricing of 362,500 warrants held by Apollo to $6.75 and the extension of their expiration date from May 2022 to May 2025 (“Warrant Modification”), together with an increase in the applicable prepayment premium of up to 7% of the accreted value of the loan.  Additionally, if the Company exercises the Extension Option, the exercise price of the warrants automatically decreases to $0.01 per share and the expiration date of the warrants will automatically be extended by an additional 12 months. 

On March 24, 2021, the Company entered into an agreement with Apollo in which the Company acquired the option to further extend, in its sole discretion, the current May 2021 maturity date of its loan to November 2022 from May 2022 (“Second Extension Option”).  The fee to acquire the Second Extension Option was the adjustment of the exercise price of 362,500 warrants held by Apollo from $6.75 to $0.01. 

At the time of the Warrant Modification, the Company recorded a warrant liability in the amount of $2.0 million, which was the carrying value of the warrant prior to modification in the amount of $0.9 million combined with the increase in fair value of the warrant in the amount of $1.1 million. This increase in fair value of the warrant at the time of the Warrant Modification was recorded to debt issuance costs and will be amortized over the remaining life of the Senior Secured Debt. The fair value of the warrant liability is remeasured each reporting period using an option pricing model, and the change in fair value is recorded as an adjustment to the warrant liability with the unrealized gains or losses reflected in interest expense.

Total unrealized gains of $139 thousand for warrant liabilities accounted for as derivatives have been recorded in interest expense for the year ended December 31, 2020.

Convertible Notes

On March 5, 2020, the Company entered into Conversion and Exchange Agreements (the “Exchange Agreements”) with certain holders (the “Holders”) of the Company’s 7% Convertible Senior Notes due 2020 (the “Convertible Notes”) having an aggregate original principal amount of $27.4 million. Pursuant to the terms of the Exchange Agreements, the Holders exchanged an aggregate amount payable of $27.3 million under the Convertible Notes for an aggregate of 10,000 shares of Series 1 Preferred Stock and the Holders converted the remaining aggregate amount payable of $17.5 million of Convertible Notes into 2.6 million shares of common stock in accordance with the terms of the existing Indenture. Each preferred share is convertible at any time at the option of the Holder into 405.05 shares of Common Stock. Following the transactions, all of the Convertible Notes held by the Holders, as well as all the remaining Convertible Notes held by others that were converted in accordance with the existing Indenture at maturity have been satisfied in full and cancelled. Pursuant to applicable guidance, the Series 1 Preferred Stock was recorded in Stockholders’ Equity at fair value, which was determined using an option pricing model. A loss of $12.4 million was recorded in the Condensed Consolidated Statement of Operations and Comprehensive Income, representing the excess of the fair value of the Series 1 Preferred Stock over the historical book value of the related Convertible Notes. As of December 31, 2020, Holders of Series 1 Preferred Stock exercised their option to convert 2,469 shares of Series 1 Preferred Stock into 1,000,068 shares of Common Stock.   

The Company’s Senior Secured Debt contain representations, warranties and covenants that are typical for agreements of this type, including restrictions that would limit the Company’s ability to incur additional indebtedness, incur liens, pay dividends or make restricted payments, dispose of assets, make investments and merge or consolidate with another person.  However, while there are affirmative covenants, there are no financial maintenance covenants and no restrictions on the Company’s ability to issue additional common stock to fund future working capital needs.  The debt covenants associated with the Senior Secured Debt were negotiated by the parties with a view towards the Company’s operating and financial condition as it existed at the time the agreements were executed.  At December 31, 2020, the Company was in compliance with its debt covenants.