Debt

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

Debt Disclosure

DEBT

Credit Agreement

On June 21, 2023 (the "Closing Date"), the Company closed an amended and restated $740.0 million Credit Agreement (the "Credit Agreement") with JPMorgan Chase Bank, N.A., as Administrative Agent and as Collateral Agent. The Credit Agreement amends and restates the Company's previously existing credit facility in its entirety to, among other things: (i) extend the maturity date to June 21, 2028; (ii) reduce the aggregate amount of revolving commitments from $800.0 million to $740.0 million; (iii) modify the financial covenants set forth in Article 6 of the previously existing credit facility; and (iv) effectuate certain additional modifications set forth in the previously existing facility, including its pricing. Capitalized terms used but not defined within this discussion of the Credit Agreement have the meanings ascribed thereto in the Credit Agreement, which with amendments is included as Exhibit 10.5 in this Quarterly Report on Form 10-Q.

12. DEBT (CONTINUED)

Credit Agreement - continued

The financial covenants associated with the Credit Agreement require that (i) the Consolidated Total Net Leverage Ratio, as defined by the Credit Agreement, cannot be greater than 5.00 to 1.00 for any quarter ending on or after the Closing Date through the third quarter of 2023, 4.75 to 1.00 for each quarter ending thereafter through the third quarter of 2024, 4.50 to 1.00 for each quarter ending thereafter through the third quarter of 2025 and 4.00 to 1.00 for each quarter ending thereafter. The Company may elect to increase the Consolidated Total Net Leverage Ratio by 0.50 to 1.00 if the Company consummates a Material Permitted Investment, which shall not exceed 5.00 to 1.00 for each of the four consecutive quarters that included the fiscal quarter in which the Material Permitted Investment is consummated. As of June 30, 2023, the Consolidated Total Net Leverage Ratio was 3.70, as calculated in accordance with the Credit Agreement.

In addition to the Consolidated Total Net Leverage Ratio, as defined in the Credit Agreement and discussed above, the financial covenants associated with the Credit Agreement also include a requirement that (i) the Interest Coverage Ratio cannot be less than 3.00 to 1.00; and (ii) Liquidity cannot be less than (a) an amount equal to 50% of the aggregate principal amount of the Convertible Notes as of the last day of the third quarter of 2023 and (b) an amount equal to 100% of the aggregate principal of the 2024 Convertible Notes in the fourth quarter of 2023 and the first quarter of 2024. The Company was in compliance with these financial covenants as of and for the quarter ended June 30, 2023, and management does not anticipate noncompliance in the foreseeable future.

Interest rates on amounts outstanding under the Credit Agreement are variable based on the SOFR. The interest rate at June 30, 2023 was 6.80%. We are required to pay a quarterly commitment fee on the unused revolving loan commitment amount at a rate ranging from 0.200% to 0.350% per annum, based on the Senior Secured Net Leverage Ratio. Fees for outstanding letters of credit range from 1.375% to 2.250%, based on the Senior Secured Net Leverage Ratio. At June 30, 2023, $384.0 million was outstanding under the revolving credit facility and total average bank borrowings were $393.8 million during the six-month fiscal period ended June 30, 2023. Total average bank borrowings were $120.7 million during the year ended December 31, 2022.

The following table shows the amounts available for borrowing under the Company's revolving credit facility:

	June 30, 2023		December 31, 2022
In thousands
Total facility	$	740,000	$	800,000
Amounts outstanding, excluding letters of credit	384,000		363,000
Amounts available for borrowing, excluding letters of credit	356,000		437,000
Letters of credit under the credit facility(1)(2)	52,693		51,630
Amounts available for borrowing	$	303,307	$	385,370
Amounts available for borrowing subject to EBITDA, as defined by the Credit Agreement(3)	$	151,126	$	199,106

(1) The Company has entered into standby letters of credit issued on the Company's behalf by financial institutions, and directly issued guarantees to third parties primarily related to advances received from customers and the guarantee of future performance on certain contracts. Letters of credit generally are available for draw down in the event the Company does not perform its obligations.

(2) Of these amounts, $47.3 million and $46.1 million in letters of credit relate to a JPF DCS contract in the periods ended June 30, 2023 and December 31, 2022, respectively.

(3) The Company's Convertible Notes will mature in 2024. The Company is currently assessing potential options for the refinancing of these instruments prior to their scheduled maturity. With the extension of the Credit Agreement, the Company maintained sufficient capacity to use proceeds from this facility to repay the Convertible Notes. The amounts available for borrowing subject to EBITDA represents amounts available for borrowing after considering the Company's total debt obligations including its Credit Agreement and Convertible Notes.

Debt issuance costs in connection with the Credit Agreement have been capitalized. The Company incurred $4.8 million of debt issuance costs in connection with the amendment of the Credit Agreement in 2023, which are being amortized over the term of the agreement with the debt issuance costs associated with the previous existing credit facility for lenders that remained in the Credit Agreement. In the second quarter of 2023, the Company recorded a write-off of debt issuance costs of $0.6 million related to lenders that are no longer participating in the Credit Agreement. Total amortization expense for the three-month fiscal periods ended June 30, 2023 and July 1, 2022 was $0.6 million and $0.3 million, respectively. Total amortization expense for the six-month fiscal periods ended June 30, 2023 and July 1, 2022 was $1.2 million and $0.5 million, respectively.