Debt and Interest
|3 Months Ended|
Mar. 31, 2021
|Debt and Interest|
|Debt and Interest||
9. Debt and Interest
Total debt consists of the following as of March 31, 2021 and December 31, 2020:
The following table shows the details of interest expense for all debt arrangements during the periods presented. Interest expense includes contractual interest; fees include amortization of the debt discount and amortization of fees associated with loan transaction costs, amortized over the life of the loan:
Note 2: In August 2020, the Company used certain proceeds from the Oaktree Note to pay off the $28.4 million balance previously outstanding under the 2017 Subordinated Note Financing.
Note 3: August 2020, the Company used certain proceeds from the Oaktree Note to pay off the $9.0 million balance previously outstanding under the 2019 Notes.
Note 4: In August 2020, the Company used certain proceeds from the Oaktree Note to pay off the $21.7 million balance previously outstanding under the 2018 Venture Notes.
Note 5: In September 2020, Mustang repaid the amount outstanding under the Horizon Notes in full, which was comprised of $15.0 million face value of the outstanding notes, $0.1 million in accrued and unpaid interest, a $0.8 million final payment fee and prepayment penalties of $0.6 million.
Note 6: Imputed interest expense related to Journey’s agreements for Ximino and Accutane.
On August 27, 2020 (the “Closing Date”), Fortress, as borrower, entered into a $60.0 million senior secured credit agreement (the “Agreement”) with Oaktree. The Oaktree Note bears interest at a fixed annual rate of 11.0%, payable quarterly and maturing on the fifth anniversary of the Closing Date, August 27, 2025, the (“Maturity Date”). The Company is required to make quarterly interest-only payments until the Maturity Date, at which point the outstanding principal amount is due. The Company may voluntarily prepay the Oaktree Note at any time subject to a Prepayment Fee as defined in the Terms section. The Company is required to make mandatory prepayments of the Oaktree Note under various circumstances as defined in the Terms section. No amounts paid or prepaid may be reborrowed without Oaktree consent.
Pursuant to the terms of the Agreement on the Closing Date the Company paid Oaktree an upfront commitment fee equal to 3% of the $60.0 million, or $1.8 million. In addition, the Company paid a $35,000 Agency fee to the Agent which was due on the Closing Date and will be due annually, together with fees of $2.5 million, directly to third parties involved in the transaction.
In connection with the Oaktree Note, the Company issued warrants to Oaktree and certain of its affiliates to purchase up to 1,749,450 shares of common stock (see Note 14) with a relative fair value of $4.4 million.
The Company recorded the fees totaling $8.7 million ($1.8 million to Oaktree, $2.5 million of expenses paid to third-parties and $4.4 million representing the relative fair value of the Oaktree Warrants) to debt discount. These costs are being amortized over the term of the Oaktree Note.
Journey Working Capital Line of Credit
On March 31, 2021 (the “Closing Date”), Journey entered into a Loan and Security Agreement with East West Bank (“EWB Loan”) under which Journey may request advances in aggregate not exceeding the lesser of: (i) the Revolving Line of $7.5 million and (ii) a Borrowing Base representing approximately 85% of Journey’s eligible accounts receivable. Advances bear interest on the outstanding daily balance, at a floating rate of 1.0% above the Prime Rate set by EWB. Interest is due and payable on the last day of the month. The EWB Loan matures on March 31, 2024.
Journey paid an origination fee of $56,250 on the Closing Date in connection with the issuance of the EWB Loan. In addition, Journey agreed to pay certain third party fees incurred by EWB, as well as legal fees incurred by Journey in connection with the EWB Loan totaling approximately $0.1 million. As of March 31, 2021 fees totaling approximately $0.1 million were recorded as a deferred asset on the Condensed Consolidated Balance Sheet.
As of March 31, 2021 Journey had no outstanding advances under the EWB Loan.
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef