FINANCING ARRANGEMENTS

6 Months Ended

Jun. 30, 2024

Debt Disclosure [Abstract]

FINANCING ARRANGEMENTS

FINANCING AGREEMENTS

The Company's long-term debt consisted of the following as of June 30, 2024 and December 31, 2023 (in thousands):

Creditor	Loan Type	As of June 30, 2024		As of December 31, 2023
Senior Convertible Note	Convertible note	$	15,230	$	15,230
Term Loan 2025	Loan	207,169		195,950
Komatsu Note	Loan	335		—
Citizens National Bank - Promissory Note	Loan	4,079		—
Various institutions	Short-term note	9,500		6,237
Principal amount of long-term debt		236,313		217,417
Less: unamortized discount and deferred financing costs		(24,548)		(30,354)
Total debt, net of unamortized discount and deferred financing costs		211,765		187,063
Less: current maturities, net of unamortized discount and deferred financing costs		(197,235)		(16,362)
Long-term debt, net of current maturities		$	14,530	$	170,701

Future maturities of long-term debt, excluding financing lease obligations, as of June 30, 2024 are summarized as follows (in thousands):

Period Ended June 30,	Amount Due
2025	$	216,669
2026	—
2027	—
2028	15,230
2029	4,414
Total	$	236,313

Short-Term Loan

The Company financed insurance premiums through various financial institutions bearing interest at rates ranging from 7.89% to 8.89% per annum. All such premium finance agreements have maturities of less than one year and have a balance of $8.9 million at June 30, 2024 and $4.9 million at December 31, 2023.

The Company has a short-term promissory note for the purchase of assets bearing 8.5% interest per annum, with an outstanding balance of $0.6 million at June 30, 2024 and $1.3 million at December 31, 2023.

Promissory Note

The Company has two long-term promissory notes for the purchase of assets with an outstanding balance of $4.1 million and $0.3 million bearing an interest rate of 7.83% and 7.50%, respectively, per annum at June 30, 2024.

Term Loan

Vertex Refining, the Company, as a guarantor, substantially all of the Company’s direct and indirect subsidiaries, as guarantors (collectively with the Company, the “Loan Parties”), 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”).

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 Lenders subsequently further agreed to extend until July 14, 2023, which date was subsequently met), 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 mechanical completion was achieved in March 2023; and (b) waived and extended certain deadlines and time periods for the Company to take other actions in connection with the Loan and Security Agreement.

On December 28, 2023, the parties entered into a fifth amendment to the Loan and Security Agreement (a) pursuant to which certain of the Lenders agreed to provide an additional term loan in the amount of $50 million; and (b) the Lenders waived certain technical events of default which had occurred under the Loan and Security Agreement, mainly relating to monetary thresholds for indebtedness and investments; and to include certain other mutually negotiated changes to the Loan and Security Agreement.

On June 25, 2024, the parties entered into a sixth amendment to the Loan and Security Agreement (a) pursuant to which certain of the Lenders agreed to provide an additional term loan in the amount of $15 million (the “Additional Term Loan”, and together with the existing term loans, the “Term Loan”); (b) the Lenders consented to permitting consolidated liquidity of the Loan Parties to be less than $25,000,000, but not less than $15,000,000, in each case, for any period of more than three consecutive business days prior to July 24, 2024; and (c) the Lenders consented to certain other amendments to the Loan and Security Agreement and the parties agreed to certain other mutually negotiated changes to the Loan and Security Agreement, including requiring Vertex Refining to provide the Lenders a weekly cash flow forecast and budget, and upon request of the Lenders, an aging report; to include a $10 million maximum expenditure cap in connection with catalyst assets; and to remove certain references to the RD Supply and Offtake Agreement, which has been terminated (see Note 10. Inventory Financing Arrangements for further details.)

The proceeds of the Additional Term Loan can be used by the Company (i) for general corporate purposes, (ii) to pay certain fees and expenses associated with the closing of the transactions contemplated by the Additional Term Loan (the “Fees and Expenses”), and (iii) to satisfy the interest and principal payments with respect to the Term Loan which prior to the effective date of Amendment No. Six to Loan Agreement would have been due on June 28, 2024, totaling approximately $11.2 million (the “June 28 Payment”).

The Lenders advanced Vertex Refining the Additional Term Loan (less the Fees and Expenses and June 28 Payment) on June 27, 2024.

Amounts outstanding under the existing Term Loan mature at April 1, 2025, and bear interest at a rate per annum equal to the sum of (i) the greater of (x) the per annum rate publicly quoted from time to time by The Wall Street Journal as the “Prime Rate” in the United States minus 1.50% as in effect on such day and (y) the Federal Funds rate for such day plus 0.50%, subject in the case of this clause (i), to a floor of 1.0%, plus (ii) 10.25%, currently 17.25%. Interest is payable in cash (i) quarterly, in arrears, on the last business day of each calendar quarter, commencing on the last business day of the calendar quarter ending March 28, 2024, (ii) in connection with any payment, prepayment or repayment of the Term Loans, and (iii) at maturity (whether upon demand, by acceleration or otherwise). Pursuant to the Loan and Security Agreement, on the last day of March, June, September and December of each year (or if such day is not a business day, the next succeeding business day), beginning on June 28, 2024 and ending on December 31, 2024, Vertex Refining is required to repay $2,687,500 of the principal amount of the Term Loans (increasing to $2,887,118 on September 30, 2024), subject to reductions in the event of any prepayment of the Loan and Security Agreement.

Pursuant to the Loan and Security Agreement, the Lenders agreed to provide a $230.0 million term loan to Vertex Refining.

On March 22, 2024, the Lenders entered into a limited consent with all of the parties to the Term Loan, and consented to the Company selling certain real property (land) located at the Mobile Refinery for $4.1 million to build out a rail spur at the refinery site. The payment of $1.5 million of this total amount is contingent upon the completion of the Company's infrastructure such that the railroad can access the Mobile Refinery.     

Warrant Agreement and Derivative Liabilities

In connection with the 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 with an exercise price of $4.50 per share, to the Lenders (and/or their affiliates) on April 1, 2022 (the “April 2022 Warrants”). The terms of the warrants are set forth in a Warrant Agreement (the “April 2022 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 Amendment No. One to Loan and Security Agreement, and as a required term and condition thereof, on May 26, 2022, the Company granted warrants (the “May 2022 Warrants” and together with the April 2022 Warrants, the “2022 Warrants”) to purchase 0.25 million shares of the Company’s common stock with an exercise price of $9.25 per share, to certain of the lenders and their affiliates. The terms of the May 2022 Warrants are set forth in a Warrant Agreement (the “May 2022 Warrant Agreement”) entered into on May 26, 2022, between the Company and Continental Stock Transfer & Trust Company as warrant agent.

In connection with the entry into Amendment No. Five to Loan and Security Agreement, and as a required term and condition thereof, on December 28, 2023, the Company granted warrants (the “December 2023 Warrants”) to purchase 1.0 million shares of the Company’s common stock with an exercise price of $3.00 per share, to certain lenders and their affiliates. As additional consideration for the Lenders agreeing to Amendment No. Five to Loan Agreement, the Company agreed to reprice the 2022 Warrants to have an exercise price of $3.00 per share (the “Warrant Repricing”). The terms of the December 2023 Warrants are set forth in a Warrant Agreement (the “December 2023 Warrant Agreement”) entered into on December 28, 2023, between the Company and Continental Stock Transfer & Trust Company as warrant agent.

In connection with the entry into Amendment No. Six to Loan and Security Agreement, and as a required term and condition thereof, on June 25, 2024, the Company granted warrants (the “June 2024 Warrants”, and collectively with the 2022 Warrants and December 2023 Warrants, the “Warrants”) to purchase 0.5 million shares of the Company’s common stock with an exercise price of $1.23 per share, to certain lenders and their affiliates. The terms of the June 2024 Warrants are set forth in a Warrant Agreement (the “June 2024 Warrant Agreement”) entered into on June 25, 2024, 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 detailed in the applicable 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. Interest payments on the Notes are paid semiannually on April 1 and October 1 of each year, beginning on April 1, 2022.

During the year ended December 31, 2022, holders of an aggregate of $60 million of the Convertible Senior Notes due 2027, converted such notes into 10.2 million shares of common stock of the Company pursuant to the terms of the Indenture. Upon the conversion, the Company recognized $33.9 million of unamortized deferred loan cost and discount as interest expense.

On June 12, 2023, pursuant to the terms of certain separate, privately negotiated exchange agreements, the holders of $79.9 million principal amount of the Convertible Senior Notes due 2027, exchanged such principal amount of notes for an aggregate of 17.2 million newly issued shares of common stock. The Company also paid an aggregate of $1.0 million in cash to satisfy accrued and unpaid interest on the converted notes through the closing date of the exchanges. Upon the exchange, the Company recognized $40.7 million unamortized deferred loan cost and discount and $21.2 million in inducement cost as interest expense.

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

	As of June 30, 2024		As of December 31, 2023
Principal amounts at beginning of period	$	15,230	$	95,178
Conversion of principal into common stock	—		(79,948)
Principal amounts at end of period	15,230		15,230
Unamortized discount and issuance costs	(6,553)		(7,157)
Net carrying amount at end of period	$	8,677	$	8,073

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.