Long-Term Debt and Obligations

12 Months Ended

Dec. 31, 2018

Debt Disclosure [Abstract]

Long-Term Debt and Obligations

8. Long-Term Debt and Obligations

Long-term debt consists of the following as of December 31, 2018 and 2017:

	As of December 31,
(in thousands)	2018			2017
Coliseum credit agreement (related-party)	$	26,647		$	—
Wells Fargo line of credit		—			8,000
Total long-term debt		26,647			8,000
Less: unamortized debt issuance costs and discounts		(5,236	)		—
Total long-term debt and obligations, net	$	21,411		$	8,000

Long-term obligations consist of the following as of December 31, 2018 and 2017:

	As of December 31,
(in thousands)	2018			2017
Deferred rent expense	$	2,531		$	1,855
Warranty accrual – long term portion		1,116			396
Capital leases		117			146
Total long-term obligations		3,764			2,397
Less: current portion of long-term obligations		(32	)		(29	)
Long-term obligations, net of current portion	$	3,732		$	2,368

Coliseum Credit Agreement (Related-Party)

(in thousands)	Principal Borrowings Outstanding		Unamortized Debt Issuance Costs and Discounts			Net Carrying Value		Interest Rate			Maturity Date
Coliseum credit agreement (related-party)	$	26,647		(5,236	)		21,411		12.0	%	February 2023

On February 2, 2018, Purple LLC entered into a Credit Agreement (the “Credit Agreement”) with Coliseum Capital Partners, L.P. (“CCP”), Blackwell Partners LLC – Series A (“Blackwell”) and Coliseum Debt Fund, L.P. (“CDF” and together with CCP and Blackwell, the “Lenders”), pursuant to which the Lenders agreed to make a loan in an aggregate principal amount of $25.0 million. The Credit Agreement was closed and funded in connection with the Closing on February 2, 2018. As part of the Credit Agreement, Global Partner Sponsor I LLC (the “Sponsor”) agreed to assign to the Lenders an aggregate of 2.5 million warrants to purchase 1.3 million shares of its Class A Stock. The Credit Agreement bears interest at a fixed rate of 12.0% per annum and matures on February 2, 2023. Interest accrues and is payable on the last business day of each fiscal quarter during the term of the Credit Agreement. Any principal pre-payments in the first year are subject to a make-whole payment, while principal pre-payments in years two through four are subject to certain pre-payment penalties. In addition, Purple LLC may elect for interest in excess of 5.0% per annum to be capitalized and added to the principal amounts of the Credit Agreement. The Credit Agreement provides for certain remedies to the Lenders in the event of customary events of default. The Credit Agreement also provides for standard indemnification of the Lenders and contains representations, warranties and certain covenants. While any amounts are outstanding under the Credit Agreement, Purple LLC is subject to a number of affirmative and negative covenants, including covenants regarding dispositions of property, investments, business combinations or acquisitions, incurrence of additional indebtedness and transactions with affiliates, among other customary covenants. In particular, Purple LLC is restricted from (i) making capital expenditures in excess of $20.0 million in any fiscal year, (ii) incurring capital lease obligations in excess of $10.0 million and (iii) incurring asset-based loans in excess of $20.0 million, subject to limited exceptions. Purple LLC is also restricted from making distributions or other payments on its membership interest, subject to limited exceptions. The Company was in compliance with all covenants as of December 31, 2018.

The Company paid debt issuance costs, incurred an original issuance discount and discounts related to the Founder Shares (as defined in Note 11 - Stockholders’ Deficit and Member Deficit) and Sponsor Warrants that were assigned in conjunction with the Credit Agreement. The amount of these reductions collectively allocated to debt at the time of the Business Combination was $6.1 million. As of December 31, 2018, $0.9 million has been expensed with $5.2 million of unamortized costs and discounts to be amortized over the remaining life of the note using the effective interest method.

Interest expense related to the Credit Agreement was $2.8 million for the year ended December 31, 2018. No interest expense under this agreement was incurred in 2017. Of the interest expense incurred in 2018, $1.6 million was paid-in-kind through additions to the principal amount and $1.2 million was paid in cash.

The Credit Agreement is not recorded at fair value on a recurring basis but is carried at cost. At December 31, 2018, the fair value of the Credit Agreement is $24.8 million.

Wells Fargo Line of Credit

In October 2017, the Company entered into an agreement with Wells Fargo Bank for a $10 million revolving line of credit for working capital requirements and general corporate purposes (“LOC”). The LOC had an interest rate equal to 4.56% as of December 31, 2017 and interest was to be paid by the Company on a quarterly basis. All outstanding principal balance of the LOC was due and payable in full on October 8, 2019. The LOC was secured by inventory assets of the Company. The LOC had an unused commitment fee to be paid quarterly commencing January 1, 2018, equal to 0.25% of the daily unused amount of the LOC. The LOC also included certain covenants made by the Company including making payments on time, providing timely audited financial statements, maintaining adequate insurance, maintaining an EBITDA not less than $0.5 million based on a rolling 4-quarter basis, asset coverage ratio not less than 1.5 to 1, no capital expenditures greater than $10 million in any fiscal year and other usual and customary covenants. As of December 31, 2017, the Company had drawn $8 million on the LOC and had an additional borrowing capacity of $2.0 million. As of December 31, 2017, the Company was in breach of terms of the agreement by failing to facilitate collateral audits in accordance with the provisions of the agreement. The Company received a waiver from Wells Fargo Bank of its default rights so long as the Company facilitated collateral audits by January 19, 2018. The Company delivered the collateral audit information to Wells Fargo by the respective deadline. In February 2018, the Company paid off and closed the LOC with Wells Fargo Bank by paying $8.1 million in cash including accrued interest and fees.

Capital Leases

The Company has acquired equipment valued at $0.2 million pursuant to numerous capital lease agreements. The terms of the leases range from 36 to 60 months with interest rates between 4.95 and 17.44 percent and have minimal monthly payments. The obligations are collateralized by the related equipment.

Future Obligations

As of December 31, 2018, the scheduled maturities of long-term debt outstanding and future minimum payments under the capital leases are as follows:

(in thousands)
Year ended December 31,
2019	$	32
2020		32
2021		32
2022		21
2023		26,647
Thereafter		—
Total	$	26,764