Debt

9 Months Ended

Sep. 30, 2023

Debt Disclosure [Abstract]

Debt

Debt

The Company’s debt as of September 30, 2023, and December 31, 2022, consisted of the following (in thousands):

	September 30, 2023		December 31, 2022
Senior Secured Credit Facility:
Revolving credit facility	$	8,000	$	121,000
Term Loan	315,000		328,125
Delayed Draw Term Loan	192,500		96,250
Total debt on credit facility	515,500		545,375
Add: Interest rate caplet liability	2,302		3,025
Less: Debt issuance costs	(5,319)		(6,368)
Total debt, net of debt issuance costs	512,483		542,032
Less: Current maturities	(28,479)		(23,466)
Total debt, net of current maturities	$	484,004	$	518,566

On August 23, 2023, in order to extend the termination date to draw on the delayed draw term loan under the Company’s existing credit agreement (as amended, the “Credit Agreement”) to October 22, 2024, the Company and the other parties thereto entered into Amendment No. 4 to the Credit Agreement (“Amendment No. 4”). The other terms of the Credit Agreement remained unchanged. The Company incurred $0.3 million in debt issuance costs related to Amendment No. 4, which are being amortized over the remaining life of the Credit Facility.

On June 7, 2023, in order to replace the referenced LIBOR interest rate in the Company’s Credit Agreement with SOFR, the Company and the other parties thereto entered into Amendment No. 3 to the Credit Agreement (“Amendment No. 3”). Under Amendment No. 3, borrowings under the Credit Agreement beginning on June 14, 2023 will bear interest, at the Company’s option, at a rate per annum equal to either (a) the Adjusted Term SOFR (which cannot be less than 0.5%) for interest periods of 1, 2, 3 or 6 months (or if consented to by (i) each applicable lender, 12 months or any period shorter than 1 month or (ii) the administrative agent, a shorter period necessary to ensure that the end of the relevant interest period would coincide with any required amortization payment) plus the applicable SOFR margin or (b) the alternative base rate (“ABR”) plus the applicable ABR margin. ABR is a fluctuating rate per annum equal to the highest of (i) the Federal Funds Effective Rate plus 1/2 of 1.0%, (ii) the prime rate announced from time to time by Capital One, National Association or (iii) SOFR for a 1-month interest period on such day plus 1.0%. As of September 30, 2023, the weighted-average interest rate was approximately 7.2%.

Interest is payable quarterly in arrears for ABR loans, at the end of the applicable interest period for SOFR loans (but not less frequently than quarterly) and upon the prepayment or maturity of the underlying loans. The Company is required to pay a commitment fee quarterly in arrears in respect of unused commitments under the revolving credit facility and the delayed draw term loan facility.

The applicable SOFR and ABR margins and the commitment fee rate are calculated based upon the first lien net leverage ratio of the Company and its restricted subsidiaries on a consolidated basis, as defined in the Credit Agreement. The revolving loans and term loans bear interest at either (a) ABR (150 bps floor) plus a margin up to 1.75% or (b) SOFR (50 bps floor) plus a margin up to 2.75%, at the option of the Company.

The term loans and the additional term loans will amortize at an annual rate equal to 5.00% per annum. Upon the consummation of certain non-ordinary course asset sales, the Company may be required to apply the net cash proceeds thereof to prepay outstanding term loans and additional term loans. The loans under the Credit Agreement may be prepaid without premium or penalty, subject to customary SOFR “breakage” costs.

The Credit Agreement contains certain customary affirmative and negative covenants and events of default and requires the Company and certain of its affiliates obligated under the Credit Agreement to make customary representations and warranties in connection with credit extensions thereunder.

Interest rate caplets

The Company manages its exposure to some of its interest rate risk through the use of interest rate caplets, which are derivative financial instruments. On January 12, 2022, the Company hedged the variability of the cash flows attributable to changes in interest rates on the first $300 million of the term loan under the Credit Agreement by entering into a 4-year series of 48 deferred premium caplets (“caplets”). In connection with the entry into Amendment No. 3, the referenced rate in the caplets was simultaneously changed from LIBOR to SOFR.

The Company recognized an unrealized gain on the change in fair value of the caplets of $0.1 million and an unrealized loss of less than $0.1 million, net of taxes, for the three and nine months ended September 30, 2023, respectively. In comparison, the Company recognized an unrealized gain on the change in fair value of the caplets of $5.9 million and $12.7 million, net of taxes, for the three and nine months ended September 30, 2022, respectively. For more information on how the Company determines the fair value of the caplets, see Note 12. Further, the 1-month LIBOR/SOFR interest rate exceeded 2% beginning in the second half of 2022. As such, the Company recognized interest income on the caplets of $2.5 million and $6.7 million for the three and nine months ended September 30, 2023, respectively, and $0.2 million for both the three and nine months ended September 30, 2022, which are reflected in interest expense, net in the condensed consolidated statements of operations and other comprehensive income.