Long-Term Debt

9 Months Ended

Sep. 30, 2024

Long-Term Debt.

Long-Term Debt

8. Long-Term Debt

As of September 30, 2024, and December 31, 2023, long-term debt consisted of the following:

	September 30,		December 31,
	2024		2023
2029 Senior Notes	$	285,000	$	—
2026 Senior Notes		—		267,897
Unamortized deferred financing costs		(4,848)		(2,900)
Total long-term debt		280,152		264,997
Less current maturities		—		—
Long-term debt, net of current maturities	$	280,152	$	264,997

2029 Senior Notes

On July 11, 2024 (the “Closing Date”), the Company completed a private offering by its wholly-owned subsidiary, CPI CG Inc. (the “Issuer”), of $285.0 million aggregate principal amount of 10.000% Senior Secured Notes due 2029 (the “2029 Senior Notes”) and related guarantees at an issue price of 100%. The notes and related guarantees were offered and sold in a private transaction exempt from the registration requirements of the Securities Act of 1933, as amended, to persons reasonably believed to be qualified institutional buyers in accordance with Rule 144A under the Securities Act and outside the United States to certain non-U.S. persons in compliance with Regulation S under the Securities Act.

Net proceeds from the 2029 Senior Notes, together with cash on hand, were used to redeem the entire principal balance of $267.9 million of 8.625% Senior Secured Notes due 2026 (the “2026 Senior Notes”) as of the Closing Date, and to pay related fees, an early redemption premium of 2.156%, and other expenses. The early redemption premium paid is recorded in “Interest, net” on the condensed consolidated statement of operations and comprehensive income for the three and nine months ended September 30, 2024.

The 2029 Senior Notes mature on July 15, 2029. Interest is payable on the 2029 Senior Notes on January 15 and July 15 of each year, beginning on January 15, 2025. The 2029 Senior Notes are guaranteed by the Company and its domestic subsidiaries (other than the Issuer), and are secured by substantially all of the assets of the Issuer and the guarantors, subject to customary exceptions. The Company may be required to make an offer to repurchase the 2029 Senior Notes, upon the occurrence of certain events including a change of control or certain asset sales. The 2029 Senior Notes also require the Company to comply with certain covenants limiting the ability of the Company and the Company’s restricted subsidiaries to, among other things, incur or guarantee additional debt or issue disqualified stock or certain preferred stock; create or incur liens; pay dividends, redeem stock or make other distributions; make certain investments; create restrictions on the ability of our restricted subsidiaries to pay dividends to the Company or make other intercompany transfers; transfer or sell assets; merge or consolidate; and enter into certain transactions with affiliates.

2029 ABL Revolver

On the Closing Date, the Company and CPI CG Inc. as borrower (the “Borrower”), entered into a credit agreement (the “ABL Credit Agreement”) with JPMorgan Chase Bank, N.A., as lender, administrative agent and collateral agent, providing for an asset-based, senior secured revolving credit facility (the “2029 ABL Revolver”) of up to $75.0 million (the “Maximum Revolver Amount”). The 2029 ABL Revolver is guaranteed by the Company and its subsidiaries (other than certain excluded subsidiaries), and is secured by substantially all of the assets of the Company, the Borrower and the subsidiary guarantors, subject to customary exceptions.

The 2029 ABL Revolver consists of revolving loans, letters of credit and swing line loans provided by lenders, with a sublimit on letters of credit outstanding at any time of $10.0 million. The 2029 ABL Revolver also includes an uncommitted accordion feature whereby the Borrower may increase the 2029 ABL Revolver commitment by an aggregate amount not to exceed $25.0 million, subject to certain conditions. The 2029 ABL Revolver matures on the earliest to occur of July 11, 2029 and the date that is 91 days prior to the maturity of the 2029 Senior Notes.

As of the Closing Date, the Borrower had $4.0 million of outstanding borrowings under a prior Credit Agreement with Wells Fargo Bank, N.A. entered into in March 2021 (the “2026 ABL Revolver”). The Company used

initial borrowings under the 2029 ABL Revolver, together with cash on hand and proceeds under the notes, to repay in full and terminate the 2026 ABL Revolver and to pay related fees and expenses, and will use future borrowings for general corporate purposes.

Borrowings under the 2029 ABL Revolver bear interest at a rate per annum that ranges based on the applicable term secured overnight financing rate (“SOFR”) as administered by the Federal Reserve Bank of New York plus 1.50% to 1.75%, (subject, in each case, to a credit spread adjustment of 0.10%) based on the average daily borrowing capacity under the 2029 ABL Revolver over the most recently completed month. The unused portion of the 2029 ABL Revolver commitment accrues a commitment fee, which ranges from 0.375% to 0.50% per annum, based on the average daily excess availability under the 2029 ABL Revolver over the immediately preceding month.

The 2029 ABL Revolver includes limitations on the Borrower’s ability to borrow in certain situations, including limitations based on the calculation of borrowing capacity and further limitations that are triggered if the amount available to borrow under the ABL Revolver is less than the greater of $7.5 million and 10% of the Maximum Revolver Amount. The borrowing capacity represents the net availability under the ABL Revolver and is calculated as the lesser of a) the total of certain eligible assets, including cash, accounts receivable and inventories, further reduced by stated contribution percentages and adjustments (the “Borrowing Base”) and b) the Maximum Revolver Amount. The Borrowing Base is further reduced by credit line reserves and letters of credit, as well as the loan ledger balance outstanding on the ABL Revolver. Additionally, commencing with the month immediately following a date on which borrowing capacity is below the greater of $7.5 million and 10% of the Maximum Revolver Amount and until such time that borrowing capacity equals or exceeds the greater of $7.5 million and 10% of the Maximum Revolver Amount for 30 consecutive days, the Company must maintain a fixed charge coverage ratio (as defined in the Credit Agreement for the ABL Revolver) of at least 1.00 to 1.00, calculated for the trailing 12 months, in order to borrow under the ABL Revolver.

The 2029 ABL Revolver contains covenants limiting the ability of the Company, the Borrower and the Company’s restricted subsidiaries to, among other things, incur or guarantee additional debt or issue disqualified stock or certain preferred stock; create or incur liens; pay dividends, redeem stock or make other distributions; make certain investments; create restrictions on the ability of the Borrower and its restricted subsidiaries to pay dividends to the Company or make other intercompany transfers; transfer or sell assets; merge or consolidate; and enter into certain transactions with affiliates, subject to a number of important exceptions and qualifications as set forth in the respective agreements.

Deferred Financing Costs

Certain costs incurred with borrowings are reflected as a reduction to the long-term debt balance. These costs are amortized as an adjustment to interest expense over the life of the borrowing using the effective-interest rate method. As of September 30, 2024, the remaining unamortized debt issuance costs recorded on the 2029 Senior Notes were $4.8 million and are reported as a reduction to the long-term debt balance. The remaining unamortized debt issuance costs on the 2029 ABL Revolver were $1.5 million and are recorded as other assets (current and long-term) on the consolidated balance sheet as of September 30, 2024.

During the three months ended September 30, 2024, the Company recorded a $3.0 million loss on debt extinguishment relating to the unamortized deferred financing costs in connection with the redemption of the 2026 Senior Notes and the termination of the 2026 ABL Revolver.