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Long-Term Debt

6 Months Ended

Jun. 30, 2020

8. Long-Term Debt

In March 2019, the Company, and its subsidiaries Emerging Power Inc. and Emergent Power Inc., entered into a loan and security agreement, as amended (the Loan Agreement), with Generate Lending, LLC (Generate Capital), providing for a secured term loan facility in the amount of $100.0 million (the Term Loan Facility). The Company borrowed $85.0 million under the Loan Agreement on the date of closing and borrowed an additional $15.0 million in April 2019 and $20 million in November 2019. A portion of the initial proceeds of the loan was used to pay in full the Company’s long-term debt with NY Green Bank, a Division of the New York State Energy Research & Development Authority, including accrued interest of $17.6 million (the Green Bank Loan), and terminate approximately $50.3 million of certain equipment leases with Generate Plug Power SLB II, LLC and repurchase the associated leased equipment. In connection with this transaction, the Company recognized a loss on extinguishment of debt of approximately $0.5 million during the six months ended June 30, 2019. This loss was recorded in interest and other expenses, net in the Company’s unaudited interim condensed consolidated statement of operations. Additionally, $1.7 million was paid to an escrow account related to additional fees due in connection with the Green Bank Loan if the Company does not meet certain New York State employment and fuel cell deployment targets by March 2021. Amount escrowed is recorded in long-term other assets on the Company’s unaudited interim condensed consolidated balance sheets as of June 30, 2020. The Company presently expects to meet the targets as required under the arrangement.

Additionally, on May 6, 2020, the Company and its subsidiaries, Emerging Power, Inc. and Emergent Power, Inc., entered into a Fifth Amendment (the Amendment) to the Loan Agreement and Security Agreement, dated as of March 29, 2019, as amended (the Loan Agreement) with Generate Lending, LLC (Generate Capital). The Amendment amends the Loan Agreement to, among other things, (i) provide for an incremental term loan in the amount of $50.0 million, (ii) provide for additional, uncommitted incremental term loans in an aggregate amount not to exceed $50.0 million, which may become available to the Company in Generate Capital’s sole discretion, (iii) reduce the interest rate on all loans to 9.50% from 12.00% per annum, and (iv) extend the maturity date to October 31, 2025 from October 6, 2022. The $50 million incremental term loan has been fully funded. In connection with the restructuring, the Company capitalized $1.0 million of origination fees and expensed $300 thousand in legal fees.

On June 30, 2020, the outstanding balance under the Term Loan Facility was $141.2 million with a 9.5% interest rate. On July 10, 2020 the Company borrowed an additional $25.0 million, under the amended Loan Agreement.

The Loan Agreement includes covenants, limitations, and events of default customary for similar facilities. Interest and a portion of the principal amount is payable on a quarterly basis. Principal payments will be funded in part by releases of restricted cash, as described in Note 16, Commitments and Contingencies. Based on the amortization schedule as of June 30, 2020, the outstanding balance of $141.2 million under the Term Loan Facility will be fully paid by March 31, 2024. If addition term loans are funded, the entire then-outstanding principal balance of the Term Loan Facility, together with all accrued and unpaid interest, will be due and payable on the maturity date of October 31, 2025.

All obligations under the Loan Agreement are unconditionally guaranteed by Emerging Power Inc. and Emergent Power Inc. The Term Loan Facility is secured by substantially all of the Company’s and the guarantor subsidiaries’ assets, including, among other assets, all intellectual property, all securities in domestic subsidiaries and 65% of the securities in foreign subsidiaries, subject to certain exceptions and exclusions.

The Loan Agreement contains covenants, including, among others, (i) the provision of annual and quarterly financial statements, management rights and insurance policies and (ii) restrictions on incurring debt, granting liens, making acquisitions, making loans, paying dividends, dissolving, and entering into leases and asset sales and (iii) compliance with a collateral coverage covenant. The Loan Agreement also provides for events of default, including, among others, payment, bankruptcy, covenant, representation and warranty, change of control, judgment and material adverse effect defaults at the discretion of the lender. As of June 30, 2020, the Company was in compliance with all the covenants.

The Loan Agreement provides that if there is an event of default due to the Company’s insolvency or if the Company fails to perform in any material respect the servicing requirements for fuel cell systems under certain customer agreements, which failure would entitle the customer to terminate such customer agreement, replace the Company or withhold the payment of any material amount to the Company under such customer agreement, then Generate Capital has the right to cause Proton Services Inc., a wholly owned subsidiary of the Company, to replace the Company in performing the maintenance services under such customer agreement.

As of June 30, 2020, the Term Loan Facility requires the principal balance at the end of each of the following years amortization not to exceed the following (in thousands):


December 31, 2020	$	125,687
December 31, 2021		89,301
December 31, 2022		51,478
December 31, 2023		16,863
December 31, 2024		—

As of August 10, 2020, the Term Loan Facility, given the incremental borrowing subsequent to June 30, 2020, as described above, requires the principal balance at the end of each of the following years amortization not to exceed the following (in thousands):


December 31, 2020	$	139,017
December 31, 2021		102,317

December 31, 2022		68,321
December 31, 2023		37,920
December 31, 2024		8,692
December 31, 2025		—