DEBT

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

DEBT

DEBT

For the period ended June 30, 2022 debt with original maturities greater than one year are classified as current due to the Trigger Date provision. This provision did not impact classification of debt for the period ended December 31, 2021. Refer to Note 1 - Summary of Significant Accounting Policies and Practices for additional liquidity and going concern discussion. Team’s current and long-term debt obligations consisted of the following (in thousands):

	June 30, 2022		December 31, 2021
	(unaudited)
ABL Facilities	$	128,053	$	62,000
Atlantic Park Term Loan	224,473		214,191
Subordinated Term Loan	41,845		36,358
Total	$	394,371	$	312,549
Notes1	92,178		87,662
Finance lease obligations	5,311		5,649
Total debt and finance lease obligations	$	491,860	$	405,860
Current portion of long-term debt and finance lease obligations	(487,204)		(669)
Total long-term debt and finance lease obligations, less current portion	4,656		405,191

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1        Comprised of principal amount outstanding, less unamortized discount and issuance costs. See Convertible Debt section below for additional information.

On August 15, 2022, Team announced it has executed a definitive purchase and sale agreement with Baker Hughes to sell Quest Integrity for $280.0 million, before customary post-closing adjustments. Post-closing of this transaction Team’s expects its liquidity and debt profile to be significantly improved, refer to Note 20 - Subsequent Events for additional details regarding this transaction.

ABL Facilities

On February 11, 2022, we entered into a new credit agreement with the lender parties thereto, and Eclipse Business Capital, LLC, a Delaware limited liability company, as agent, (“Eclipse”) (such agreement, the “ABL Credit Agreement”). Available funding commitments to us under the ABL Credit Agreement, subject to certain conditions, include a revolving credit line in an amount of up to $130.0 million to be provided by certain affiliates of Eclipse (the “Revolving Credit Loans”), with a $35.0 million sublimit for swingline borrowings and a $26.0 million sublimit for issuances of letters of credit, and an incremental delayed draw term loan of up to $35.0 million (the “Corre Delayed Draw Term Loans”) to be provided by Corre Partners Management, LLC and certain of its affiliates (“Corre”) (collectively, the “ABL Credit Facility”). The proceeds of the loans under the ABL Credit Facility were used to, among other things, pay off the amounts owed under that certain asset-based credit agreement (such agreement, as amended, restated, supplemented or otherwise modified from time to time, the “Citi Credit Agreement”) led by Citibank, N.A. (“Citibank”), as agent, which was repaid and terminated in full on February 11, 2022. The ABL Credit Facility matures, and all outstanding amounts become due and payable on February 11, 2025. However, the ABL Credit Facility is subject to the Trigger Date as noted above in Note 1 - Summary of Significant Accounting Policies and Practices.

Borrowings under the ABL Facility bear interest through maturity at a variable rate based upon, at our option, an annual rate of either a base rate (“Base Rate”) or a LIBOR rate, plus an applicable margin, as defined in the ABL Credit Agreement. The interest rate at June 30, 2022 was 5.71% for Eclipse and 11.06% for the Corre Delayed Draw Term Loans.

Direct and incremental costs associated with the issuance of the ABL Credit Facility were approximately $8.3 million and were capitalized as deferred financing costs. These costs are being amortized on a straight-line basis over the term of the ABL Credit Facility. Unamortized deferred financing cost amounted to $6.6 million and $2.9 million at June 30, 2022 and December 31, 2021, respectively. Additionally, the amortization period for deferred financing costs and debt discounts and issuance cost was updated to reflect the revised maturity date associated with the Trigger date provision and the related reclassification of debt as current. Refer to Note 1 - Summary of Significant Accounting Policies and Practices for additional liquidity and going concern discussion.

At June 30, 2022, Team had $103.1 million outstanding under the Revolving Credit Loans and $25.0 million outstanding under the Corre Delayed Draw Term Loans. As of June 30, 2022, subject to the applicable sublimit and other terms and conditions, the remaining $4.5 million of available commitments under the ABL Credit Facility was available for loans or for issuance of new letters of credit.

Amendments in 2022. On May 6, 2022, we entered into the ABL Credit Agreement Amendment No. 1 which, among other things, modified the Maturity Reserve Trigger Date (as defined in the ABL Credit Agreement and Note 1 - Summary of Significant Accounting Policies and Practices) such that the date on which a reserve must, subject to certain conditions, be put into place with respect to the outstanding principal amount of the 5.00% Convertible Senior Notes due 2023 (the “Notes”) is 75 days prior to their maturity date rather than 120 days. Under the terms of our amended financing arrangements the “Trigger Date” is now May 18, 2023, by which date, the Notes balance must be paid down to $10.0 million, or the Company must have equivalent cash on hand to pay down the Notes to $10.0 million.

Atlantic Park Term Loan

On December 18, 2020, we entered into certain Term Loan Credit Agreement (the “Term Loan Credit Agreement”) with Atlantic Park Strategic Capital Fund, L.P., as agent (“APSC”), as lender (the “Term Loan Credit Agreement”), pursuant to which we borrowed a $250.0 million term loan (the “Term Loan”). The Term Loan was issued with a 3% original issuance discount, such that total proceeds received were $242.5 million. As set forth in the Term Loan Credit Agreement, the Term Loan is secured by substantially all assets, other than those secured on a first lien basis by the ABL Credit Facility, and we may under certain conditions, increase the Term Loan by an amount not to exceed $100.0 million. The Term Loan bears an interest through maturity at a variable rate based upon, at our option, an annual rate of either a Base rate or a LIBOR rate, plus an applicable margin. The effective interest rate on the Term Loan at June 30, 2022 and December 31, 2021 was 23.85% and 20.90%, respectively. The increase in the effective interest rate of 2.95% for the six months ended June 30, 2022 is due to the acceleration of the debt issuance costs triggered by the reclassification of the long term debt to current. The unamortized balances of debt discounts, warrant discount and debt issuance cost amounted to $31.7 million and $35.8 million at June 30, 2022 and December 31, 2021, respectively.

The Term Loan matures, and all outstanding amounts become due and payable on December 18, 2026. However, certain conditions could result in an earlier maturity, including if the Notes have an aggregate principal amount outstanding of

$10.0 million or more on the Trigger Date, in which case the Term Loan will terminate on the Trigger Date. The debt is classified as current due to the Trigger Date noted above.

Amendments in 2022. On February 11, 2022, we entered into Amendment No. 6 (the “Sixth Amendment”) to the Term Loan Credit Agreement. The Sixth Amendment, among other things and subject to the terms thereof, (i) permitted the entry into the ABL Credit Agreement, (ii) permitted certain interest payments due under the Term Loan Credit Agreement to be paid in kind, (iii) permitted certain asset sales and required certain related mandatory prepayments, subject to an applicable prepayment premium, and (iv) amended the financial covenants such that the maximum net leverage ratio of 7.00 to 1.00 would not be tested until the fiscal quarter ending March 31, 2023, and the Company is not permitted to exceed $20.0 million in unfinanced capital expenditures in any calendar year; provided, that such unfinanced capital expenditures limitation will not apply if the Company maintains a net leverage ratio of less than or equal to 4.00 to 1.00 as of the end of the second and fourth fiscal quarter of each calendar year.

On May 6, 2022, we entered into Amendment No. 7 (the “Seventh Amendment”) to the Term Loan Credit Agreement. The Seventh Amendment, among other things and subject to the terms thereof, (i) modified the Maturity Trigger Date (as defined in the Term Loan Credit Agreement) such that the date on which the maturity of the Term Loan Credit Agreement is triggered as a result of there being an aggregate principal amount of more than $10.0 million outstanding under the Notes is 75 days prior to their maturity date instead of 120 days prior to their maturity date, and (ii) amends the financial covenants such that the maximum net leverage ratio to be tested for the fiscal quarter ending March 31, 2023 is increased from 7.00 to 1.00 to 12.00 to 1.00.

Subordinated Term Loan

On November 9, 2021, we entered into a credit agreement the (“Subordinated Term Loan Credit Agreement”) with Corre Credit Fund, LLC (“Corre Fund”), as agent, and the lenders party thereto providing for an unsecured $50.0 million delayed draw subordinated term loan facility (the “Subordinated Term Loan”). The Subordinated Term Loan matures, and all outstanding amounts become due and payable, on the earlier of December 31, 2026 and the date that is two weeks later than the maturity or full repayment of the Term Loan. The stated interest rate on the Subordinated Term Loan is 12%. Effective interest rate at June 30, 2022 and December 31, 2021 was 46.79% and 19.73%, respectively. The increase in the effective interest rate of 27.06% for the six months ended June 30, 2022 is due to the acceleration of the debt issuance costs triggered by the reclassification of the long term debt to current. The unamortized debt issuance cost amounted to $11.6 million and $13.9 million at June 30, 2022 and December 31, 2021, respectively.

Amendments in 2022. On February 11, 2022, we entered into Amendment No. 5 to the Subordinated Term Loan Credit Agreement with the lenders from time to time party thereto (including Corre), and Cantor Fitzgerald Securities, as agent, that, among other things, provided for an additional commitment of $10.0 million in subordinated delayed draw term loans to be available for borrowing by the Company until October 31, 2022 (as amended by Amendment No. 7 as described further below).

On May 6, 2022, we entered into Amendment No. 6 to the Subordinated Term Loan Credit Agreement (the “Corre Amendment 6”) with the lenders from time to time party thereto (including Corre), and Cantor Fitzgerald Securities, as agent. The Corre Amendment 6, among other things, amends the financial covenants, such that the maximum net leverage ratio to be tested for the fiscal quarters ending March 31, 2023 will be increased from 7.00 to 1.00 to 12.00 to 1.00.

On June 27, 2022, we entered into Amendment No. 7 to the Subordinated Term Loan Credit Agreement with the lenders from time to time party thereto (including Corre), and Cantor Fitzgerald Securities, as agent, that, among other things, extended availability date for additional commitment of $10.0 million in subordinated delayed draw term loans from July 1, 2022 to October 31, 2022.

Warrants

On December 18, 2020, in connection with the execution of the Term Loan, we issued to APSC warrants to purchase up to 3,582,949 shares of our common stock, which was initially exercisable at the holder’s option at any time, in whole or in part, until June 14, 2028, at an exercise price of $7.75 per share (the “Existing Warrant”). In connection with execution of the Subordinated Term Loan Credit Agreement and Third Amendment, on November 9, 2021, we entered into an Amended and Restated Common Stock Purchase Warrant (the “A&R Warrant”) with APSC Holdco II, L.P. (“APSC Holdco”) pursuant to which the Existing Warrant was amended and restated to provide for the purchase of up to 4,082,949 shares of our common stock (which includes 500,000 of the shares of common stock issuable pursuant to warrants issued to APSC on November 8,

2021, providing for the purchase of an aggregate of 1,417,051 shares of our common stock) and to reduce the exercise price to $1.50 per share. As of June 30, 2022 no warrants have been exercised.

Subscription Agreement

In connection with the transactions contemplated by the ABL Credit Agreement, Corre Partners Management, LLC and certain of its affiliates (collectively, “Corre”), agreed to provide the Company with incremental financing (the “Incremental Financing”), totaling approximately $55.0 million, consisting of (i) $35.0 million Delayed Draw Term Loans under the ABL Credit Facility as discussed above; (ii) $10.0 million from Corre in the form of the February 2022 Delayed Draw Term Loan (as defined in the Subordinated Term Loan Credit Agreement) on a pari passu basis with the existing loans issued pursuant to the Subordinated Term Loan Credit Agreement; and (iii) $10.0 million through an issuance of 11,904,762 shares (the “PIPE Shares”) of our common stock to Corre Opportunities Qualified Master Fund, LP, Corre Horizon Fund, LP and Corre Horizon II Fund, LP (collectively, the “Corre Holders”) at a price of $0.84 per share (the “Equity Issuance”). In connection with the Incremental Financing and Equity Issuance, on February 11, 2022, we entered into a common stock subscription agreement (the “Subscription Agreement”) with the Corre Holders, pursuant to which the Company issued and sold the PIPE Shares to the Corre Holders on February 11, 2022.

Pursuant to and subject to the terms and conditions of the Subscription Agreement, our Board of Directors (the “Board”) is required to create a vacancy for one qualified nominee of the Corre Holders to the Board, who shall be designated by the Corre Holders and qualify as an independent director (a “Board Nominee”), and the Board is required to appoint such initial Board Nominee as a Class II director within seven business days of the date of the Subscription Agreement. This nominee has been appointed to the Board and this condition will remain active as long as the Subscription Agreements remains outstanding.

Notes

Amendments in 2022. On January 13, 2022, we entered into a supplemental indenture with Truist Bank, as trustee, (the “Supplemental Indenture”) to the indenture (the “Indenture”) governing the Notes to effect certain amendments (the “Amendments”) to the Indenture and to modify the Notes held by consenting holders (the “Consenting Holders”) of $52.0 million in aggregate principal amount of the Notes (such modified Notes, the “PIK Securities”). The Supplemental Indenture amends the Indenture to, among other things, allow for interest payable on the PIK Securities on February 1, 2022 to be paid in PIK Interest (as defined in the Supplemental Indenture) and on subsequent interest payment dates to be payable, at the Company’s option, at a rate of 5.00% per annum entirely in cash or at a rate of 8.00% per annum in PIK Interest.

In December 2020, we retired $136.9 million par value of our Notes, and as of June 30, 2022, the principal amount outstanding was $95.2 million. As of June 30, 2022 and December 31, 2021, the Notes were recorded in our condensed consolidated balance sheets as follows (in thousands):

	June 30, 2022		December 31, 2021
	(unaudited)
Liability component:
Principal	$	95,208	$	93,130
Unamortized issuance costs	(1,170)		(916)
Unamortized discount	(1,860)		(4,552)
Net carrying amount of the liability component1	$	92,178	$	87,662
Equity component:
Carrying amount of the equity component, net of issuance costs2	$	—	$	7,969
Carrying amount of the equity component, net of issuance costs3	$	37,276	$	37,276

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1        Included in the “Current portion of long-term debt and finance lease obligations” line of the condensed consolidated balance sheets.

2        Relates to the portion of the Notes accounted for under ASC 470-20 (defined below) and is included in the “Additional paid-in capital” line of the condensed consolidated balance sheets.

3        Relates to the portion of the Notes accounted for under ASC 815-15 (defined below) and is included in the “Additional paid-in capital” line of the condensed consolidated balance sheets.

The following table sets forth interest expense information related to the Notes (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Coupon interest	$	1,595		$	1,164		$	3,177		$	2,328
Amortization of debt discount and issuance costs	693			768			1,320			1,534
Total interest expense	$	2,288		$	1,932		$	4,497		$	3,862
Effective interest rate	10.24		%	9.12		%	10.24		%	9.12		%

ASU 2020-06 Adoption. In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU simplifies the accounting for convertible instruments by removing certain separation models in ASC 470-20, Debt—Debt with Conversion and Other Options, for convertible instruments. The ASU updates the guidance on certain embedded conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital, such that those features are no longer required to be separated from the host contract. The convertible debt instruments will be accounted for as a single liability measured at amortized cost. This will also result in the interest expense recognized for convertible debt instruments to be typically closer to the coupon interest rate when applying the guidance in Topic 835, Interest. Further, the ASU made amendments to the EPS guidance in Topic 260 for convertible debt instruments, the most significant impact of which is requiring the use of the if-converted method for diluted EPS calculation, and no longer allowing the net share settlement method. The ASU also made revisions to Topic 815-40, which provides guidance on how an entity must determine whether a contract qualifies for a scope exception from derivative accounting. The amendments to Topic 815-40 change the scope of contracts that are recognized as assets or liabilities. The ASU is effective for interim and annual periods beginning after December 15, 2021, with early adoption permitted for periods beginning after December 15, 2020. Adoption of the ASU can either be on a modified retrospective or full retrospective basis. On January 1, 2022, we adopted the ASU using the modified retrospective method. We recognized a cumulative effect of initially applying the ASU as an adjustment to the January 1, 2022 opening balance of accumulated deficit. The prior period consolidated financial statements have not been retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods.

Accordingly, the cumulative effect of the changes made on our January 1, 2022 condensed consolidated balance sheet for the adoption of the ASU was as follows (in thousands):

	Balances at December 31, 2021		Adjustments from Adoption of ASU 2020-06		Balances at January 1, 2022
Liabilities
Long-term debt and finance lease obligations	$	405,191	$	1,827	$	407,018
Equity
Additional paid-in capital	$	444,824	$	(5,651)	$	439,173
Accumulated deficit	$	(375,584)	$	3,824	$	(371,760)

The impact of adoption on our consolidated statements of operations for the six months ended June 30, 2022 was primarily to decrease net interest expense by $0.6 million. This had the effect of decreasing our basic and diluted net loss per share of common stock attributable to common stockholders for the six months ended June 30, 2022 by $0.01. The change in methodology by requiring the use of the if-converted method to determine the denominator used in the calculation of diluted net income per share of common stock attributable to common stockholders did not have an impact on the diluted EPS as the shares of common stock issuable upon conversion were not included in the denominator because of the antidilutive effect.

Deferred Financing Costs, Debt and Warrant Discounts and Debt Issuance Cost

As referenced above, all debt with original maturities greater than one year are classified as current as of June 30, 2022 due to the Trigger Date provisions.

As of June 30, 2022 and December 31, 2021, capitalized deferred financing costs, inclusive of debt issuance costs and discounts, net of accumulated amortization, related to Team’s outstanding debt were $53.0 million and $58.0 million. Due to the Trigger Date provisions, the amortization period for deferred financing costs, debt and warrant discounts and debt issuance costs was updated to reflect the accelerated maturity dates. This resulted in additional amortization charges of $4.6 million during the six months ended June 30, 2022. Refer to Note 1 - Summary of Significant Accounting Policies and Practices for additional liquidity and going concern discussion.

Liquidity

At June 30, 2022, we had $41.1 million of unrestricted cash and cash equivalents and $26.3 million of restricted cash held as collateral for letters of credit and commercial card programs. International cash balance at June 30, 2022 was $21.8 million, and approximately $1.5 million of cash is located in countries where currency restrictions exist. We had approximately $24.5 million in additional borrowing capacity, consisting of $4.5 million of available under the ABL Credit Facility, $10.0 million available under the incremental delayed draw term loan (the “Delayed Draw Term Loans”), and $10.0 million available under the Subordinated Term Loan. Internationally we have letters of credit outstanding in the amount of $0.3 million. Additionally, we have $1.5 million in Surety bonds outstanding and an additional $1.2 million in miscellaneous cash deposits securing leases or other required obligations. Refer to Note 1 - Summary of Significant Accounting Policies and Practices for additional liquidity and going concern discussion. Refer to Note 20 - Subsequent Events for draw activity occurring subsequent to the period ended June 30, 2022.