DEBT

6 Months Ended

Jan. 31, 2021

The components of debt and a reconciliation to the carrying amount of long-term debt is presented in the table below:


	January 31, 2021		July 31, 2020
	(In thousands)
Secured
Cerberus Term Loan due December 15, 2022	$	368,972	$	371,972
Unsecured
7.50% Convertible Senior Note due March 1, 2024	14,940		14,940
Credit Facilities
Cerberus Bank Credit Facility	—		—
MidCap Credit Facility	—		—
Less: unamortized discounts and issuance costs	(7,033)		(7,863)
Total debt, net	376,879		379,049
Less: current portion of debt, net	(5,582)		(5,527)
Total long-term debt, net	$	371,297	$	373,522

7.50% Convertible Senior Note

On February 28, 2019, the Company entered into a 7.50% Convertible Senior Note Due 2024 Purchase Agreement (the "SPHG Note Purchase Agreement") with SPH Group Holdings LLC ("SPHG Holdings"), whereby SPHG Holdings agreed to loan the Company $14.9 million in exchange for a 7.50% Convertible Senior Note due 2024 (the "SPHG Note"). SPHG Holdings has the right, at its option, prior to the close of business on the business day immediately preceding the SPHG Note Maturity Date, to convert the SPHG Note or a portion thereof that is $1,000 or an integral multiple thereof, into shares of common stock (if the Company has not received a required stockholder approval) or cash, shares of common stock or a combination of cash and shares of common stock, as applicable (if the Company has received a required stockholder approval), at an initial conversion rate of 421.2655 shares of common stock, which is equivalent to an initial conversion price of approximately $2.37 per share (subject to

adjustment as provided in the SPHG Note) per $1,000 principal amount of the SPHG Note, subject to, and in accordance with, the settlement provisions of the SPHG Note. As of January 31, 2021, the if-converted value of the SPHG Note did not exceed the principal value of the SPHG Note. As of January 31, 2021, the remaining period over which the unamortized discount will be amortized is 37 months. As of January 31, 2021 and July 31, 2020, the net carrying value of the SPHG Note was $8.7 million and $8.1 million, respectively. The effective interest rate on the SPHG Note, including accretion of the discount, is 27.8%. The following tables reflect the components of the SPHG Note:


					January 31, 2021		July 31, 2020
					(In thousands)
Carrying amount of equity component					$	8,200	$	8,200

Principal amount of note					$	14,940	$	14,940
Unamortized debt discount					(6,281)		(6,886)
Net carrying amount					$	8,659	$	8,054

	Three Months Ended January 31,				Six Months Ended January 31,
	2021		2020		2021		2020
	(In thousands)
Interest expense related to contractual interest coupon	$	287	$	280	$	573	$	560
Interest expense related to accretion of the discount	313		421		605		830
	$	600	$	701	$	1,178	$	1,390

Amendment to MidCap Credit Facility

On December 9, 2020, ModusLink entered into a First Amendment to the MidCap credit agreement ("Amendment No. 1") by and among ModusLink, certain of ModusLink's subsidiaries identified on the signature pages thereto, and MidCap as lender and agent.

Amendment No. 1 amends the MidCap credit agreement to permit special cash dividends to be made on or prior to July 31, 2021 in an aggregate amount not to exceed $50.0 million (the "Special Distributions") to Steel Connect, Inc., its parent. Payment of the Special Distributions will eliminate the availability of the general dividend basket for the fiscal year ending July 31, 2021. Special Distributions totaling $40.0 million were made to Steel Connect, Inc. during the quarter ended January 31, 2021. In addition, Amendment No. 1 incorporates a new minimum liquidity financial covenant, which requires that the sum of excess availability under the MidCap credit agreement and the amount of qualified cash and cash equivalents of the borrower is not less than $3.0 million until the earlier of July 31, 2021 or the date on which the borrower has either distributed the maximum amount of the Special Distributions or waived the ability to make further Special Distributions. Among other things, Amendment No. 1 also increases the percentage of eligible accounts included in the borrowing base from 50% to 75% and amends the condition for borrowing of revolving loans after the effective date of Amendment No. 1 to require evidence that specified availability (the sum of excess availability and the difference between the borrowing base and the aggregate revolving loan commitments) is not less than $3.0 million prior to giving effect to any such borrowing.