FINANCING ARRANGEMENTS

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

FINANCING ARRANGEMENTS

FINANCING AGREEMENTS

The Company's long-term debt consisted of the following as of March 31, 2023 and December 31, 2022 (in thousands):

Creditor	Loan Type	Balance at March 31, 2023		Balance at December 31, 2022
Senior Convertible Note	Convertible note	$	95,178	$	95,178
Term Loan 2025	Loan	152,138		165,000
SBA Loan	SBA Loan	—		59
Various institutions	Insurance premiums financed	1,359		5,602
Principal amount of long-term debt		248,675		265,839
Less: unamortized discount and deferred financing costs		(77,596)		(81,918)
Total debt, net of unamortized discount and deferred financing costs		171,079		183,921
Less: current maturities, net of unamortized discount and deferred financing costs		(9,609)		(13,911)
Long-term debt, net of current maturities		$	161,470	$	170,010

Future maturities of long-term debt, excluding financing lease obligations, as of March 31, 2023 are summarized as follows (in thousands):

Period Ended March 31,	Amount Due
2023	$	9,609
2024	6,188
2025	137,700
2026	—
2027	95,178
Total	$	248,675

Insurance Premiums

The Company financed insurance premiums through various financial institutions bearing interest at rates ranging from 3.24% to 5.25% per annum. All such premium finance agreements have maturities of less than one year and have a balance of $1.4 million at March 31, 2023 and $5.6 million at December 31, 2022.

Term Loans

Vertex Refining, the Company, as a guarantor, substantially all of the Company’s direct and indirect subsidiaries, as guarantors, certain funds as lenders (the “Lenders”), and Cantor Fitzgerald Securities, in its capacity as administrative agent and collateral agent for the Lenders (the “Agent”), entered into a Loan and Security Agreement on April 1, 2022 (as amended from time to time, the “Loan and Security Agreement”).

Pursuant to the Loan and Security Agreement, the Lenders agreed to provide a $165 million term loan to Vertex Refining (the “Term Loan”). The Company paid off $12.9 million owed under the term loan during the three months ended March 31, 2023.

On September 30, 2022, the parties entered into a second amendment to the Loan and Security Agreement which (a) extended the date that the Company was required to begin initial commercial production of renewable diesel at the Mobile Refinery, from February 28, 2023 to April 28, 2023 (which date the Lender have since further agreed to extended until July 14, 2023), and provided other corresponding extensions of the milestones required to complete the Company’s capital project designed to modify the Mobile Refinery’s existing hydrocracking unit to produce renewable diesel fuel on a standalone basis, which as previously described, mechanical completion was achieved in March 2023; and (b) waived and extends certain deadlines and time periods for the Company to take other actions in connection with the Loan and Security Agreement.

Warrant Agreement and Derivative Liabilities

In connection with the April 1, 2022 Loan and Security Agreement, and as additional consideration for the Lenders agreeing to loan funds to the Company thereunder, the Company granted warrants to purchase 2.75 million shares of common stock of the Company to the Lenders (and/or their affiliates) (the “Initial Warrants”). The terms of the warrants are set forth in a Warrant Agreement entered into on April 1, 2022, between the Company and Continental Stock Transfer & Trust Company as warrant agent.

In connection with the entry into an Amendment No. One to Loan Agreement, and as a required term and condition thereof, on May 26, 2022, the Company granted warrants (the “Additional Warrants” and together with the Initial Warrants, the “Warrants”) to purchase 250 thousand shares of the Company’s common stock to certain of the Lenders and their affiliates. The terms of the Additional Warrants are set forth in a Warrant Agreement entered into on May 26, 2022, between the Company and Continental Stock Transfer & Trust Company as warrant agent.

Each Warrant holder has a put right to require the Company to repurchase any portion of the Warrants held by such holder concurrently with the consummation of a fundamental transaction, as defined in the Warrant Agreement. The fundamental transaction clause requires the Warrants to be classified as liabilities. The fair value of the Warrants is presented in “Note 19. Fair Value Measurements”, and warrant activities are presented in “Note 17. Equity”.

Indenture and Convertible Senior Notes

On November 1, 2021, we issued $155 million aggregate principal amount at maturity of our 6.25% Convertible Senior Notes due 2027 (the “Convertible Senior Notes”) pursuant to an Indenture (the “Indenture”), dated November 1, 2021, between the Company and U.S. Bank National Association, as trustee (the “Trustee”), in a private offering to persons reasonably believed to be “qualified institutional buyers” and/or to “accredited investors” in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, pursuant to Securities Purchase Agreements. The issue price was 90% of the face amount of each note.

The components of the Convertible Senior Notes are presented as follows (in thousands):

	March 31, 2023		December 31, 2022
Principal amounts at beginning of period	$	95,178	$	155,000
Conversion of principal into common stock	—		(59,822)
Outstanding principal amount	95,178		95,178
Unamortized discount and issuance costs	(49,622)		(51,005)
Net carrying amount at end of period	$	45,556	$	44,173

Our Convertible Senior Notes will mature on October 1, 2027, unless earlier repurchased, redeemed or converted. Interest is payable semiannually in arrears on April 1 and October 1 of each year, beginning on April 1, 2022.