Debt

12 Months Ended

Dec. 31, 2023

Debt Disclosure [Abstract]

Debt

DEBT

The Company’s borrowings consist of the following:

				As of December 31
(in thousands)	Maturities	Stated Interest Rate	Effective Interest Rate	2023		2022
Unsecured notes (1)	2026	5.75%	5.75%	$	398,266	$	397,548
Revolving credit facility	2027	4.80% - 8.88%	6.23%	97,879		200,236
Term loan (2)	2027	7.17% - 7.25%	7.33%	147,476		—
Real estate term loan (3)	2028	7.07% - 7.09%	7.17%	74,541		—
Capital term loan (4)	2028	7.32% - 7.34%	7.41%	63,097		—
Truist Bank commercial note (5)	2031	6.10% - 7.10%	6.68%	—		23,522
Truist Bank commercial note	2032	6.38% - 7.38%	6.90%	—		66,513
Truist Bank commercial note (6)	2032	6.13% - 7.13%	6.72%	—		26,548
Other indebtedness	2024 - 2030	0.00% - 16.00%		30,574		11,993
Total Debt				811,833		726,360
Less: current portion				(66,751)		(155,813)
Total Long-Term Debt				$	745,082	$	570,547

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(1)    The carrying value is net of $1.7 million and $2.5 million of unamortized debt issuance costs as of December 31, 2023 and 2022, respectively.

(2)    The carrying value is net of $0.6 million of unamortized debt issuance costs as of December 31, 2023.

(3)    The carrying value is net of $0.1 million of unamortized debt issuance costs as of December 31, 2023.

(4)    The carrying value is net of $0.8 million of unamortized debt issuance costs as of December 31, 2023.

(5)    The carrying value is net of $0.1 million of unamortized debt issuance costs as of December 31, 2022.

(6)    The carrying value is net of $0.1 million of unamortized debt issuance costs as of December 31, 2022.

The Company’s $400 million senior unsecured fixed-rate notes (the Notes), due June 1, 2026, are guaranteed, jointly and severally, on a senior unsecured basis, by certain of the Company’s existing and future domestic subsidiaries, as described in the terms of the indenture. The Notes have a coupon rate of 5.75% per annum, payable semi-annually on June 1 and December 1. The Company may redeem the Notes in whole or in part at any time at the respective redemption prices described in the indenture. At December 31, 2023 and 2022, the fair value of the Notes, based on quoted market prices (Level 2 fair value assessment), totaled $400.4 million and $395.1 million, respectively.

On May 3, 2022, the Company amended the revolving credit facility to, among other things, (i) extend the maturity of the facility to May 30, 2027, (ii) eliminate borrowings under separate U.S. dollar and multicurrency tranches, (iii) update certain interest rate benchmarks including replacing USD London Interbank Offered Rate (LIBOR) with SOFR for borrowings denominated in U.S. dollars, (iv) incorporate a sub-facility for the issuance of letters of credit, and (v) allow for applicable margin for borrowings to be determined and adjusted quarterly based on the Company’s Total Net Leverage Ratio. The outstanding balance on the Company’s $300 million unsecured revolving credit facility was $97.9 million as of December 31, 2023, consisting of U.S. dollar borrowings of $34 million with interest payable at SOFR plus 1.375% or prime rate plus 0.375%, and British Pound (GBP) borrowings of £50 million with interest payable at Daily Sterling Overnight Index Average (SONIA) plus 1.375%.

On July 28, 2023, the Company entered into a $150 million term loan with each of the lenders party thereto, Wells Fargo Bank, N.A., JPMorgan Chase Bank N.A., Bank of America, N.A., HSBC Bank USA, N.A., and PNC Bank, N.A. The term loan is payable in quarterly installments of $1.875 million which started in December 2023 with a final payment of the principal balance due on May 30, 2027. The term loan bears interest at variable rates based on SOFR plus 1.75% per annum. The Company may redeem the term loan in whole or in part with no penalty at any time. The existing financial covenants of the credit agreement governing the revolving credit facility are unchanged following the addition of the term loan.

On September 26, 2023, the Company’s automotive subsidiary entered into a credit agreement with Truist Bank, which includes (i) a $75.2 million real estate term loan, (ii) a $65.0 million capital term loan, (iii) a $50.0 million delayed draw term loan, and (iv) establishment of a revolving floor plan credit facility (see Note 5). The real estate term loan is payable in monthly installments of $0.3 million and bears interest at variable rates based on SOFR plus 1.75% per annum, and the capital term loan is payable in monthly installments of $0.5 million and bears interest at variable rates based on SOFR plus 2.00% per annum. The monthly installment payments on the real estate and capital term loans commenced on November 1, 2023, with final payments of the outstanding principal balances due

on September 26, 2028. Subject to terms and conditions set forth in the credit agreement, the automotive subsidiary may also request borrowings of delayed draw term loans for which the proceeds may be used to (i) finance the acquisition of automobile dealerships (delayed draw capital loan) and (ii) finance the acquisition of real estate (delayed draw real estate loan). The delayed draw term loan bears interest at variable rates based on SOFR plus an applicable margin based on the type of delayed draw term loan requested. The delayed draw term loan availability period terminates on September 26, 2025. The automotive subsidiary did not borrow against the delayed draw term loan as of December 31, 2023.

On the same date, the Company’s automotive subsidiary entered into three interest rate swap agreements with a total notional value of $75.2 million and a maturity date of September 26, 2028. The interest rate swap agreements will pay the automotive subsidiary interest on the $75.2 million notional amount based on SOFR and the automotive subsidiary will pay the counterparty a fixed rate of 4.67% per annum. The new interest rate swap agreements were entered into to convert the variable rate borrowing under the real estate term loan into a fixed rate borrowing. Based on the terms of the new interest rate swap agreements and underlying borrowings, the new interest rate swaps were determined to be effective and thus qualify as cash flow hedges. Including a 1.75% applicable margin, the overall interest rate that the Company will pay on the $75.2 million real estate term loan is fixed at 6.42% per annum.

The automotive subsidiary used the net proceeds from the real estate and capital term loans to repay the outstanding balances of the commercial notes maturing in 2031 and 2032. The interest rate swap agreements maturing in 2031 and 2032 were also terminated resulting in realized gains of $4.6 million that reduced interest expense during the third quarter of 2023.

The fair value of the Company’s other debt, which is based on Level 2 inputs, approximates its carrying value as of December 31, 2023 and 2022. The Company is in compliance with all financial covenants of the revolving credit facility and term loans as of December 31, 2023.

During 2023 and 2022, the Company had average borrowings outstanding of approximately $745.0 million and $689.9 million, respectively, at average annual interest rates of approximately 6.1% and 4.8%, respectively. The Company incurred net interest expense of $56.2 million, $51.2 million and $30.5 million during 2023, 2022 and 2021, respectively.

For the years ended December 31, 2023, 2022 and 2021, the Company recorded interest expense of $10.1 million, $16.5 million and $4.1 million, respectively, to adjust the fair value of the mandatorily redeemable noncontrolling interest. The fair value of the mandatorily redeemable noncontrolling interest was based on the fair value of the underlying subsidiaries owned by GHC One and GHC Two, after taking into account any debt and other noncontrolling interests of its subsidiary investments. The fair value of the owned subsidiaries is determined by reference to either a discounted cash flow or EBITDA multiple, which approximates fair value (Level 3 fair value assessment).