Quarterly report pursuant to Section 13 or 15(d)

Long-Term Debt

v3.22.2.2
Long-Term Debt
 9 Months Ended
Sep. 30, 2022
Debt Disclosure [Abstract]  
Long-Term Debt
NOTE 11. LONG-TERM DEBT
Long-term debt consists of the following:
 
 
 
 
 
 
 
 
 
 
     December 31, 2021     
September 30, 2022
  
               
    
(Dollars in thousands)
  
2028 Notes
   
$
114,731
 
   
$
114,731
 
Less unamortized discount and debt issuance costs based on imputed interest rate of 7.64%
   
 
(3,844
) 
   
 
(3,401
) 
    
 
 
     
 
 
  
2028 Notes, net carrying value
   
 
110,887
 
   
 
111,330
 
    
 
 
     
 
 
  
2024 Notes
   
 
60,174
 
   
 
44,685
 
Less unamortized debt issuance costs based on imputed interest rate of 7.10%
   
 
(480
) 
   
 
(237
) 
    
 
 
     
 
 
  
2024 Notes, net carrying value
   
 
59,694
 
   
 
44,448
 
    
 
 
     
 
 
  
Asset-Based Revolving Credit Facility principal outstanding (1)
   
 
—  
 
   
 
—  
 
    
 
 
     
 
 
  
Long-term debt less unamortized discount and debt issuance costs
   
$
170,581
 
   
$
155,778
 
    
 
 
     
 
 
  
Less current portion
   
 
—  
 
   
 
—  
 
    
 
 
     
 
 
  
Long-term debt less unamortized discount and debt issuance costs, net of current portion
   
$
170,581
 
   
$
155,778
 
    
 
 
     
 
 
  
 
(1)
As of September 30, 2022, the Asset-Based Revolving Credit Facility (“ABL”), had a borrowing base of $24.1 million, no outstanding borrowings and $0.3 million of outstanding letters of credit, resulting in a $23.8 million borrowing base availability.
Our weighted average interest rate was 7.01% and 6.99% at September 30, 2022 and December 31, 2021, respectively.
In addition to the outstanding amounts listed above, we also have interest payments related to our long-term debt as follows as of September 30, 2022:
 
 
•
  
$114.7 million aggregate principal amount of 2028 Notes with semi-annual interest payments at an annual rate of 7.125%;
 
 
•
  
$44.7 million aggregate principal amount of 2024 Notes with semi-annual interest payments at an annual rate of 6.75%;
 
 
•
  
Commitment fee of 0.25% to 0.375% per annum on the unused portion of the ABL Facility; and
 
 
•
  
Delayed Draw of up to $50.0 million in additional 2028 Notes.
2028 Notes
On September 10, 2021, we refinanced $112.8 million of the 2024 Notes for $114.7 million (reflecting a call premium of 1.688%) of newly issued 7.125% Senior Secured Notes due 2028 (“2028 Notes”). Contemporaneously with the refinancing, we obtained commitments from the holders of the 2028 Notes to purchase up to $50 million in additional 2028 Notes (“Delayed Draw 2028 Notes”), contingent upon satisfying certain performance benchmarks, the proceeds of which are to be used exclusively to repurchase or repay the remaining balance outstanding of the 2024 Notes.
 
We used the cash proceeds from 2028 Notes to fund the repurchase of a portion of our 2024 Notes. The 2028 Notes and the related guarantees were sold to certain holders of the 2024 Notes, whom we believe to be qualified institutional buyers, in a private placement. The 2028 Notes and the related guarantees have not been and will not be registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the United States or to U.S. persons absent registration or an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act or any state securities laws. The transaction was assessed on a lender-specific level and was accounted for as a debt modification in accordance with FASB ASC Topic 470.
The 2028 Notes are guaranteed on a senior secured basis. We may redeem the 2028 Notes, in whole or in part, at any time prior to June 1, 2024, at a price equal to 100% of the principal amount of the 2028 Notes plus a “make-whole” premium and accrued and unpaid interest, if any, up to, but not including, the redemption date. At any time on or after June 1, 2024, we may redeem some or all of the 2028 Notes at the redemption prices (expressed as percentages of the principal amount to be redeemed) set forth in the 2028 Notes indenture, plus accrued and unpaid interest, if any, up to, but not including the redemption date. In addition, we may redeem up to 35% of the aggregate principal amount of the 2028 Notes before June 1, 2024, with the net cash proceeds from certain equity offerings at a redemption price of 107.125% of the principal amount plus accrued and unpaid interest, if any, up to, but not including the redemption date. We may also redeem up to 10% of the aggregate original principal amount of the 2028 Notes per twelve-month period, in connection with up to two redemptions in such twelve-month period, at a redemption price of 101% of the principal amount plus accrued and unpaid interest up to, but not including, the redemption date.
The 2028 Notes mature on June 1, 2028, unless earlier redeemed or repurchased. Interest accrues on the 2028 Notes from September 10, 2021, and is payable semi-annually, in cash in arrears, on June 1 and December 1 of each year, commencing December 1, 2021. Based on the balance of the 2028 Notes outstanding, we are required to pay $8.2 million per year in interest. At September 30, 2022 accrued interest on the 2028 Notes was $2.7 million.
The indenture to the 2028 Notes contains covenants that, among other things and subject in each case to certain specified exceptions, limit the ability to: (i) incur additional debt; (ii) declare or pay dividends, redeem stock or make other distributions to stockholders; (iii) make investments; (iv) create liens or use assets as security in other transactions; (v) merge or consolidate, or sell, transfer, lease or dispose of substantially all assets; (vi) engage in transactions with affiliates; and (vii) sell or transfer assets. At September 30, 2022, we were, and we remain, in compliance with all of the covenants under the indenture.
We recorded debt issuance costs of $4.7 million, of which third-party costs of $2.5 million were expensed during 2021 and $0.3 million were expensed during 2022, $0.8 million was deferred with the Delayed Draw 2028 Notes, and $1.1 million, along with $3.0 million from the exchanged 2024 Notes, is being amortized as part of the effective yield on the 2028 Notes. During the three and nine months ended September 30, 2022, $0.2 million and $0.5 million, respectively, of debt issuance costs and delayed draw fees associated with the Notes were amortized to interest expense. During the three months ended September 30, 2021, $0.1 million of debt issuance costs and delayed draw fees associated with the Notes were amortized to interest expense.
SBA PPP Loans
We received $11.2 million in aggregate principal amount of PPP loans through the SBA during the first quarter of 2021 based on the eligibility of our radio stations and networks as determined on a
per-location
basis. The PPP loans were accounted for as debt in accordance with FASB ASC Topic 470. The loan balances and accrued interest were forgivable provided that the proceeds were used for eligible purposes, including payroll, benefits, rent, and utilities within the covered period. We used the PPP loan proceeds according to the terms and filed timely applications for forgiveness. During July 2021, the SBA forgave all but $20,000 of the PPP loans resulting in a
pre-tax
gain on the forgiveness of $11.2 million. The remaining PPP loan was repaid in July 2021.
2024 Notes
On May 19, 2017, we issued 6.75% Senior Secured Notes (“2024 Notes”) in a private placement. The 2024 Notes are guaranteed on a senior secured basis by our existing subsidiaries (“Subsidiary Guarantors”). The 2024 Notes bear interest at a rate of 6.75% per year and mature on June 1, 2024, unless they are earlier redeemed or repurchased. Interest is payable semi-annually, in cash in arrears, on June 1 and December 1 of each year.
The 2024 Notes are secured by a first-priority lien on substantially all assets of ours and the Subsidiary Guarantors other than the ABL Facility Priority Collateral as described below. There is no direct lien on our FCC licenses to the extent prohibited by law or regulation other than the economic value and proceeds thereof.
The indenture relating to the 2024 Notes contains covenants that, among other things and subject in each case to certain specified exceptions, limit our ability and the ability of our restricted subsidiaries to: (i) incur additional debt; (ii) declare or pay dividends, redeem stock or make other distributions to stockholders; (iii) make investments; (iv) create liens or use assets as security in other transactions; (v) merge or consolidate, or sell, transfer, lease or dispose of substantially all of our assets; (vi) engage in transactions with affiliates; and (vii) sell or transfer assets. At September 30, 2022, we were, and we remain, in compliance with all of the covenants under the indenture.
We recorded debt issuance costs of $6.3 million as a reduction of the debt proceeds being amortized to
non-cash
interest expense over the life of the Notes using the effective interest method. During the three and nine months ended September 30, 2022, $35,000 and $0.1 million, respectively, of debt issuance costs associated with the Notes was amortized to interest expense. During the three and nine months ended September 30, 2021, $0.2 million and $0.5 million, respectively, of debt issuance costs associated with the Notes was amortized to interest expense.
Based on the balance of the 2024 Notes outstanding of $44.7 million, we are required to pay $3.0 million per year in interest on the 2024 Notes. At September 30, 2022, accrued interest on the 2024 Notes was $1.0 million.
We may from time to time, depending on market conditions and prices, contractual restrictions, our financial liquidity, and other factors, seek to repurchase the 2024 Notes in open market transactions, privately negotiated transactions, by tender offer or otherwise, as market conditions warrant. As described above within the 2028 Notes, on September 10, 2021, we exchanged $112.8 million of the 2024 Notes for $114.7 million of newly issued 2028 Notes, reflecting a call premium of 1.688%. Bond issuance costs of $1.1 million associated with the $112.8 million of the 2024 Notes are being amortized as part of the effective yield on the 2028 Notes.
Based on the then existing market conditions, we also completed repurchases of our 2024 Notes as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Date
   
Principal
Repurchased
     
Cash
Paid
     
% of Face
Value
    
Bond Issue
Costs
     
Net Gain
(Loss)
  
    
(Dollars in thousands)
  
June 13, 2022
   
$
5,000
 
   
$
4,947
 
   
 
98.95
% 
  
$
35
 
   
$
18
 
June 10, 2022
   
 
3,000
 
   
 
2,970
 
   
 
99.00
% 
  
 
21
 
   
 
9
 
June 7, 2022
   
 
2,464
 
   
 
2,446
 
   
 
99.25
% 
  
 
17
 
   
 
1
 
May 17, 2022
   
 
2,525
 
   
 
2,500
 
   
 
99.00
% 
  
 
18
 
   
 
7
 
January 12, 2022
   
 
2,500
 
   
 
2,531
 
   
 
101.26
% 
  
 
22
 
   
 
(53
) 
December 10, 2021
   
 
35,000
 
   
 
35,591
 
   
 
101.69
% 
  
 
321
 
   
 
(912
) 
October 25, 2021
   
 
2,000
 
   
 
2,020
 
   
 
101.00
% 
  
 
19
 
   
 
(39
) 
October 12, 2021
   
 
250
 
   
 
251
 
   
 
100.38
% 
  
 
2
 
   
 
(3
) 
October 5, 2021
   
 
763
 
   
 
766
 
   
 
100.38
% 
  
 
7
 
   
 
(10
) 
October 4, 2021
   
 
628
 
   
 
629
 
   
 
100.13
% 
  
 
6
 
   
 
(7
) 
September 24, 2021
   
 
4,700
 
   
 
4,712
 
   
 
100.25
% 
  
 
44
 
   
 
(56
) 
January 30, 2020
   
 
2,250
 
   
 
2,194
 
   
 
97.50
% 
  
 
34
 
   
 
22
 
January 27, 2020
   
 
1,245
 
   
 
1,198
 
   
 
96.25
% 
  
 
20
 
   
 
27
 
December 27, 2019
   
 
3,090
 
   
 
2,874
 
   
 
93.00
% 
  
 
48
 
   
 
167
 
November 27, 2019
   
 
5,183
 
   
 
4,548
 
   
 
87.75
% 
  
 
82
 
   
 
553
 
November 15, 2019
   
 
3,791
 
   
 
3,206
 
   
 
84.58
% 
  
 
61
 
   
 
524
 
March 28, 2019
   
 
2,000
 
   
 
1,830
 
   
 
91.50
% 
  
 
37
 
   
 
134
 
March 28, 2019
   
 
2,300
 
   
 
2,125
 
   
 
92.38
% 
  
 
42
 
   
 
133
 
February 20, 2019
   
 
125
 
   
 
114
 
   
 
91.25
% 
  
 
2
 
   
 
9
 
February 19, 2019
   
 
350
 
   
 
319
 
   
 
91.25
% 
  
 
7
 
   
 
24
 
February 12, 2019
   
 
1,325
 
   
 
1,209
 
   
 
91.25
% 
  
 
25
 
   
 
91
 
January 10, 2019
   
 
570
 
   
 
526
 
   
 
92.25
% 
  
 
9
 
   
 
35
 
December 21, 2018
   
 
2,000
 
   
 
1,835
 
   
 
91.75
% 
  
 
38
 
   
 
127
 
December 21, 2018
   
 
1,850
 
   
 
1,702
 
   
 
92.00
% 
  
 
35
 
   
 
113
 
December 21, 2018
   
 
1,080
 
   
 
999
 
   
 
92.50
% 
  
 
21
 
   
 
60
 
November 17, 2018
   
 
1,500
 
   
 
1,357
 
   
 
90.50
% 
  
 
29
 
   
 
114
 
May 4, 2018
   
 
4,000
 
   
 
3,770
 
   
 
94.25
% 
  
 
86
 
   
 
144
 
April 10, 2018
   
 
4,000
 
   
 
3,850
 
   
 
96.25
% 
  
 
87
 
   
 
63
 
April 9, 2018
   
 
2,000
 
   
 
1,930
 
   
 
96.50
% 
  
 
43
 
   
 
27
 
    
 
 
     
 
 
             
 
 
     
 
 
  
    
$
97,489
 
   
$
94,949
 
           
$
1,218
 
   
$
1,322
 
    
 
 
     
 
 
             
 
 
     
 
 
  
Asset-Based Revolving Credit Facility
On May 19, 2017, we entered into the ABL Facility pursuant to a Credit Agreement (“Credit Agreement”) by and among us and our subsidiaries party thereto as borrowers, Wells Fargo Bank, National Association, as administrative agent and lead arranger, and the lenders that are parties thereto. We used the proceeds of the ABL Facility, together with the net proceeds from the Notes offering, to repay outstanding borrowings under our previously existing senior credit facilities and related fees and expenses. Current proceeds from the ABL Facility are used to provide ongoing working capital and for other general corporate purposes, including permitted acquisitions.
The ABL Facility is $30.0 million revolving credit facility due March 1, 2024, which includes a $5.0 million subfacility for standby letters of credit and a $7.5 million subfacility for swingline loans. All borrowings under the ABL Facility accrue interest at a rate equal to a base rate or LIBOR plus a spread. The spread, which is based on an availability-based measure, ranges from 0.50% to 1.00% for base rate borrowings and 1.50% to 2.00% for LIBOR borrowings. If an event of default occurs, the interest rate may increase by 2.00% per annum. Amounts outstanding under the ABL Facility may be paid and then reborrowed at our discretion without penalty or premium. Additionally, we pay a commitment fee on the unused balance from 0.25% to 0.375% per year based on the level of borrowings.
On April 7, 2020, we entered into a third amendment to ABL Facility that increased the advance rate on eligible accounts receivable from 85% to 90% and extended the maturity date from May 19, 2022 to March 1, 2024. The April 7, 2020 amendment also allows for an alternative benchmark rate that may include SOFR due to LIBOR scheduled to be discontinued at the end of calendar year 2021.
 
On October 20, 2020, we entered into a fourth amendment to our ABL Facility that provides a
one-time
waiver with respect to the current covenant testing period allowing the covenant trigger event date be the first day after the availability on the ABL Facility had equaled or exceeded (1) 15% of the maximum revolver amount and (2) $4.5 million and a waiver permitting our July 2020 financial statements to be issued on or before September 30, 2020 due to delays that were caused by a ransomware attack.

Availability under the ABL Facility is subject to a borrowing base consisting of (a) 90% of the eligible accounts receivable plus (b) a calculated amount based on the value of certain real property. As of September 30, 2022, the amount available under the ABL Facility was $23.8 million of which nil was outstanding. The ABL Facility has a first-priority lien on our and the Subsidiary Guarantors’ accounts receivable, inventory, deposit and securities accounts, certain real estate and related assets, and by a second-priority lien on the Notes Priority Collateral. There is no direct lien on our FCC licenses to the extent prohibited by law or regulation other than the economic value and proceeds thereof.
The Credit Agreement includes a springing fixed charge coverage ratio of 1.0 to 1.0, which is tested during the period commencing on the last day of the fiscal month most recently ended prior to the date on which Availability (as defined in the Credit Agreement) is less than the greater of 15% of the Maximum Revolver Amount (as defined in the Credit Agreement) and $4.5 million and continuing for a period of 60 consecutive days after the first day on which Availability exceeds such threshold amount. The Credit Agreement also includes other negative covenants that are customary for credit facilities of this type, including covenants that, subject to exceptions described in the Credit Agreement, restrict or limit our ability and the ability of our subsidiaries to (i) incur additional indebtedness; (ii) make investments; (iii) make distributions, loans or transfers of assets; (iv) enter into, create, incur, assume or suffer to exist any liens, (v) sell assets; (vi) enter into transactions with affiliates; (vii) merge or consolidate with, or dispose of all assets to a third party, except as permitted thereby; (viii) prepay indebtedness (which does not include bond repurchases); and (ix) pay dividends.
The Credit Agreement provides for the following events of default:
(i) non-payment
of any principal or letter of credit reimbursement when due or any
interest, fees, or other amounts within five days of the due date; (ii) the failure by any borrower or any subsidiary to comply with any covenant or
agreement contained in the Credit Agreement or any other loan document, in certain cases subject to applicable notice and lapse of time; (iii) any
representation or warranty made pursuant to the Credit Agreement or any other loan document is incorrect in any material respect when made;
(iv) certain defaults of other indebtedness of any borrower or any subsidiary of indebtedness of at least $10 million; (v) certain events of bankruptcy or
 
insolvency with respect to any borrower or any subsidiary; (vi) certain judgments for the payment of money of $10 million or more; (vii) a change of
 
control; and (viii) certain defaults relating to the loss of FCC licenses, cessation of broadcasting and termination of material station contracts. If an event
 
of default occurs and is continuing, the Administrative Agent and the Lenders may accelerate the amounts outstanding under the ABL Facility and may
 
exercise remedies in respect of the collateral. At September 30, 2022, we were, and we remain, in compliance with all of the covenants under Credit
 
Agreement.
We recorded debt issue costs of $0.9 million as an asset being amortized to
non-cash
interest expense over the term of the ABL Facility using the effective interest method. During the three and nine months ended September 30, 2022, $25,000 and $0.1 million, respectively, of debt issuance costs associated with the ABL Facility was amortized to interest expense. During the three and nine months ended September 30, 2021, $27,000 and $0.1 million, respectively, of debt issuance costs associated with the ABL Facility was amortized to interest expense. At September 30, 2022, the blended interest rate on amounts outstanding under the ABL Facility was 0.0%.
We report outstanding balances on the ABL Facility as short-term regardless of the maturity date based on use of the ABL Facility to fund ordinary and customary operating cash needs with frequent repayments. We believe that our borrowing capacity under the ABL Facility allows us to meet our ongoing operating requirements, fund capital expenditures and satisfy our debt service requirements for at least the next twelve months.
 
Maturities of Long-Term Debt
Principal repayment requirements under all long-term debt agreements outstanding at September 30, 2022 for each of the next five years and thereafter are as follows:
 
 
 
 
 
 
    
Amount
  
For the Year Ended September 30,
   
(Dollars in thousands)
  
2023
   
$
—  
 
2024
   
 
44,685
 
2025
   
 
—  
 
2026
   
 
—  
 
2027
   
 
—  
 
Thereafter
   
 
114,731
 
    
 
 
  
    
$
159,416