Debt

3 Months Ended

Mar. 31, 2022

Debt Disclosure [Abstract]

Debt

Debt

Delayed Draw Note Purchase Agreement

On December 10, 2021, Sonder entered into a note and warrant purchase agreement with certain private placement investors (Purchasers or PIPE Investors) for the sale of Delayed Draw Notes to be available to Sonder following the completion of the Business Combination. The agreement also provided that the Purchasers will be issued warrants to purchase shares of common stock in connection with the transaction.

The Delayed Draw Notes have a maturity of five years from the date issuance and are subject to interest on the unpaid principal amount at a rate per annum equal to the three-month secured overnight financing rate (SOFR rate) plus 0.26161% (subject to a floor of 1%) plus 9.0% payable in cash, or for the first two years, payment in kind at the election of Sonder, quarterly in arrears. The Delayed Draw Notes are secured by substantially all of the assets of Sonder.

The purchasers of Delayed Draw Notes also received warrants (the Delayed Draw Warrants) to purchase an aggregate of 2,475,000 shares of Sonder’s common stock, each with an exercise price of $12.50 per share. The Delayed Draw Warrants have an expiration date of five years after issuance.

The Delayed Draw Note Purchase Agreement also includes customary events of default, including failure to pay the note obligations or other amounts when due, material breach of representations or warranties, breach of negative covenants, failure to perform or comply with obligations under the Delayed Draw Notes or the Delayed Draw Note Purchase Agreement, acceleration of certain other indebtedness, certain judgements against Sonder, legal processes instituted against Sonder or its assets, issues with the enforceability of the Delayed Draw Note Purchase Agreement and ancillary documents, bankruptcy, insolvency or similar proceedings with respect to Sonder, and orders under debtor relief laws.

In January 2022, Sonder drew down $165 million in Delayed Draw Notes and issued warrants to purchase 2,475,000 shares of common stock to the Purchasers. As of March 31, 2022, the total long-term debt on the condensed consolidated balance sheet was $156.7 million, consisting of $168.1 million of unpaid principal balance, which included the $165 million principal amount and payment-in-kind (PIK) interest of $3.1 million that was added to the principal balance , net of $5.8 million in issuance costs and $5.6 million in Delayed Draw Warrant liabilities.

As of December 31, 2021, the total long-term debt on the condensed consolidated balance sheet consisted of $13.1 million of current portion of the long-term debt and $10.7 million of non-current portion of long-term debt, consisting of $24.5 million of unpaid principal balance, net of the $0.6 million of deferred loan issuance costs.

Long term debt, net consisted of the following (in thousands):

	March 31, 2022		December 31 2021
Principal balance	$	168,112	$	24,477
Less: Delayed Draw Warrants liability	(5,598)		—
Less: unamortized deferred issuance costs	(5,792)		(625)
Long term debt, net	$	156,722	$	23,852

2021 Convertible Promissory Notes

In March 2021, pursuant to a note purchase agreement, Sonder issued convertible promissory notes (Convertible Notes) to certain investors for an aggregate principal amount of $165.0 million. The net proceeds from the issuance of the Convertible Notes were approximately $162.4 million after deducting issuance costs of $2.6 million.

The Convertible Notes were scheduled to mature on March 12, 2022, unless converted in accordance with the conversion terms prior to such date. The Convertible Notes were convertible either automatically, at the option of holders, or at the option of Sonder upon the occurrence of certain specified events.

In January 2022, upon the closing of the Business Combination, the outstanding principal and accrued and unpaid interest of the Convertible Notes were automatically converted into 19,017,105 shares of common stock for a value of $159.2 million. Upon the conversion, Sonder recognized a gain on conversion of $29.5 million as a result of a change in the fair value of the share-settled redemption feature and $159.2 million additional-paid-in-capital. Sonder also recognized the change in fair value of the share-settled redemption feature of $30.3 million, expense related to the debt discount of $10.0 million and interest expense of $1.4 million.

2018 Loan and Security Agreement

In December 2018, Legacy Sonder entered into a loan and security agreement (the 2018 Loan and Security Agreement) with certain venture lenders that provided aggregate borrowing capacity of $50.0 million. As of December 31, 2021, the current portion of the long-term debt was $13.1 million on the consolidated balance sheet and the total non-current portion of the long-term debt on the consolidated balance sheet was $10.7 million, consisting of $11.3 million of unpaid principal balance, net of the $0.6 million of deferred loan issuance costs. Unused commitments under the 2018 Loan and Security Agreement as of December 31, 2021 were $25.0 million. Interest expense on the term loans totaled

$4.9 million for the year ended December 31, 2021, and was recorded in interest expense, net in the condensed consolidated statements of operations and comprehensive income (loss).

In January 2022, Sonder paid down $24.5 million in outstanding principal of the 2018 Loan and Security Agreement and $2.5 million in debt extinguishment costs at the closing of the Business Combination. Sonder also recognized $0.6 million of early termination fees, $0.4 million of the write off of deferred financing fees, and $0.2 million of interest expense in connection with the repayment of this 2018 Loan and Security Agreement.

Credit Facility

2020 Credit Facility

In February 2020, Legacy Sonder entered into a revolving credit agreement (the 2020 Credit Facility) that provides an aggregate revolving capacity of $50.0 million, which may be borrowed as revolving loans or used for the issuance of letters of credit. Loans under the 2020 Credit Facility may be base rate loans or Eurodollar rate loans, plus a margin of 2.00% per annum. The 2020 Credit Facility includes (i) a letter of credit fee for each letter of credit equal to 1.50% per annum times amount available to be drawn under such letter of credit and (ii) a non-use fee equal to 0.25% times the actual daily amount by which the aggregate commitments provided by facility exceed the sum of the outstanding amount of loans and letters of credit. All outstanding loan balances are due on February 21, 2023, the maturity date for the 2020 Credit Facility. Outstanding balances may be repaid prior to maturity without penalty.

The extensions of credit under the 2020 Credit Facility are guaranteed by certain of Sonder’s subsidiaries and secured on a senior basis by a lien on substantially all of Sonder’s and certain of its subsidiaries’ assets. The 2020 Credit Facility contains customary affirmative covenants, such as financial statement reporting requirements and maintenance of insurance, as well as customary negative covenants, such as restrictions on Sonder’s ability to incur debt and liens, make investments, dispose of assets, pay dividends and repurchase stock, enter into transactions with affiliates and undergo fundamental changes such as dissolution or disposal of assets except so long as no default exists. The 2020 Credit Facility provides for a minimum EBITDA covenant and a covenant to maintain liquidity at least equal to the amount outstanding under the 2020 Credit Facility; provided that if liquidity is less than the amount outstanding plus $25.0 million, Sonder must provide cash collateral equal to 105% of the amount outstanding.

The 2020 Credit Facility also includes customary events of default, including, among other things, payment defaults, covenant defaults, breach of representations and warranties, cross-defaults to other material debt, bankruptcy and insolvency events of default, judgment defaults and change of control defaults. Upon the occurrence of an event of default under the 2020 Credit Facility, the lender has the right to terminate its commitments to provide additional loans, declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable, increase the applicable interest rates by 2%, and exercise rights and remedies, including by way of initiating foreclosure proceedings against the collateral securing the obligations under the agreement.

As of March 31, 2022, Sonder was in compliance with all financial covenants, there were no borrowings outstanding on the 2020 Credit Facility, and outstanding letters of credit totaled $27.6 million. As of December 31, 2021, Sonder was in compliance with all financial covenants, and there were no borrowings outstanding on the 2020 Credit Facility.

2020 Québec Credit Facility

In December 2020, a Canadian subsidiary of Sonder entered into an agreement (2020 Québec Credit Facility) with Investissement Québec, a Quebecois public investment entity, that provides a loan facility of CAD $25.0 million and an additional loan of CAD $5.0 million referred to as a conditional-refund financial contribution (CRFC), which Sonder is not obligated to repay if it satisfies certain milestones relating to the Project (as defined below). The 2020 Québec Credit Facility provides an incentive for expanding Sonder’s operations in Canada (the Project), including establishing Sonder’s Canadian head office and increasing Sonder’s payroll there starting January 1, 2021. The disbursements of the loan and CRFC are based on a percentage of the increase in the accrued and paid gross payroll. The loan and the CRFC will bear interest at a fixed rate of 6% per year for a period of 10 years starting from the first date of the loan disbursement. The amount of principal and accrued and capitalized interest on the CRFC that Sonder must repay can be reduced up to $5.0 million if Sonder achieves certain milestones, including job creation and preservation and cumulative gross payroll milestones. In the event that Sonder does not complete the Project, the outstanding loan and CRFC and related interest become immediately due. An assessment fee of CAD $0.3 million was paid upon acceptance of the credit facility.

The 2020 Québec Credit Facility is secured by a lien on substantially all of the Canadian subsidiary’s assets and is guaranteed by Sonder. The 2020 Québec Credit Facility contains customary affirmative covenants, such as maintenance

requirement of the Canadian subsidiary’s operations in Québec, maintenance and creation of jobs in Québec, and financial statement reporting requirements, as well as customary negative covenants, such as declaring dividends, voluntary dissolution or liquidation and relocating substantial portion of its assets outside of Québec without prior written approval. As of March 31, 2022, Sonder was in compliance with all financial covenants, and there were no borrowings or CRFC outstanding on the 2020 Québec Credit Facility. As of December 31, 2021, Sonder was in compliance with all financial covenants, and there were no borrowings or CRFC outstanding on the 2020 Québec Credit Facility.

Restricted Cash

Throughout 2022 and 2021, Sonder entered into multiple cash collateral agreements in connection with the issuance of letters of credit and corporate credit cards programs. As of March 31, 2022 and December 31, 2021, Sonder had $0.7 million and $0.2 million, respectively, of cash collateral which was considered to be restricted cash.