Notes Payable, Long-Term Debt and Other Obligations

3 Months Ended

Mar. 31, 2021

Notes Payable, Long-Term Debt and Other Obligations

NOTES PAYABLE, LONG-TERM DEBT AND OTHER OBLIGATIONS

Notes payable, long-term debt and other obligations consisted of:


	March 31, 2021		December 31, 2020
Vector:
5.75% Senior Secured Notes due 2029	$	875,000	$	—
6.125% Senior Secured Notes due 2025	—		850,000
10.5% Senior Notes due 2026, net of unamortized discount of $2,946 and $3,040	552,054		551,960

Liggett:


Equipment loans	83		89
Other	22,350		25,484
Notes payable, long-term debt and other obligations	1,449,487		1,427,533
Less:
Debt issuance costs	(31,532)		(21,247)
Total notes payable, long-term debt and other obligations	1,417,955		1,406,286
Less:
Current maturities	(12,556)		(12,557)
Amount due after one year	$	1,405,399	$	1,393,729

5.75% Senior Secured Notes due 2029 — Vector:

On January 28, 2021, the Company completed the sale of $875,000 in aggregate principal amount of its 5.75% Senior Secured Notes due 2029 (“5.75% Senior Secured Notes”) to qualified institutional buyers and non-U.S. persons in a private offering pursuant to the exemptions from the registration requirements of the Securities Act contained in Rule 144A and Regulation S under the Securities Act. The aggregate net cash proceeds from the sale of the 5.75% Senior Secured Notes were approximately $855,500 after deducting the initial purchaser’s discount and estimated expenses and fees payable by the Company in connection with the offering. The Company used the net cash proceeds from the 5.75% Senior Secured Notes offering, together with cash on hand, to redeem all of the Company’s outstanding 6.125% Senior Secured Notes due 2025, including accrued interest and premium thereon, and to pay fees and expenses in connection with the offering of the 5.75% Senior Secured Notes and the redemption of the 6.125% Secured Notes due 2025.

The 5.75% Senior Secured Notes pay interest on a semi-annual basis at a rate of 5.75% per year and mature on the earlier of February 1, 2029 and the date that is 91 days before November 1, 2026, the final stated maturity date of the 10.5% Senior Notes due 2026 (“10.5% Senior Notes”) if such 10.5% Senior Notes have not been repurchased and cancelled or refinanced by such date.

The 5.75% Senior Secured Notes are fully and unconditionally guaranteed, subject to certain customary automatic release provisions, on a joint and several basis by all of the wholly-owned domestic subsidiaries of the Company that are engaged in the conduct of the Company’s cigarette businesses, which subsidiaries, as of the issuance date of the 5.75% Senior Secured Notes were also guarantors under the Company’s outstanding 10.5% Senior Notes. The 5.75% Senior Secured Notes are not guaranteed by New Valley LLC, or any of the Company’s subsidiaries engaged in the Company’s real estate business conducted through its subsidiary, New Valley LLC. The guarantees provided by certain of the guarantors are secured by first priority or second priority security interests in certain collateral of such guarantors pursuant to security and pledge agreements, subject to certain permitted liens and exceptions as further described in the indenture and the security documents relating thereto. The Company does not provide any security for the 5.75% Senior Secured Notes.

As of March 31, 2021, the Company was in compliance with all debt covenants.

6.125% Senior Secured Notes due 2025 — Vector:

On February 1, 2021, the 6.125% Senior Secured Notes due 2025 were redeemed in full and the Company recorded a loss on the extinguishment of debt of $21,362 for the three months ended March 31, 2021, including $13,014 of premium and $8,348 of other costs and non-cash interest expense related to the recognition of previously unamortized deferred finance costs.

10.5% Senior Notes due 2026 — Vector:

As of March 31, 2021, the Company was in compliance with all debt covenants related to its 10.5% Senior Notes due 2026.

Revolving Credit Agreement — Liggett:

On March 22, 2021, Liggett, 100 Maple LLC (“Maple”) and Vector Tobacco entered into Amendment No. 4 and Joinder to Third Amended and Restated Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as agent and lender.

The existing credit agreement was amended to, among other things, (i) add Vector Tobacco as a borrower under the Credit Agreement, (ii) extend the maturity of the Credit Agreement to March 22, 2026, and (iii) increase the amount of the maximum credit line thereunder from $60,000 to $90,000.

As of March 31, 2021, there was no outstanding balance due under the Credit Agreement. Availability, as determined under the Credit Agreement, was approximately $90,000 based on eligible collateral at March 31, 2021. As of March 31, 2021, Liggett, Maple, and Vector Tobacco were in compliance with all debt covenants under the Credit Agreement.

Other:

Other notes payable consist primarily of $21,875 of notes payable issued by New Valley as part of the acquisition of the remaining 29.41% interest in Douglas Elliman in December 2018. Interest on the outstanding principal balance of the notes accrues at the then-current mid-term applicable federal rate. Principal and interest is payable in installments through October 1, 2022. $8,125 of principal has been repaid through March 31, 2021 and the remaining principal is due to be repaid as follows: (1) $9,375 in 2021; and (2) $12,500 in 2022.

Non-Cash Interest Expense — Vector:


	Three Months Ended
	March 31,
		2021		2020
Amortization of debt discount, net		$	94	$	4,600
Amortization of debt issuance costs		893		1,158
Loss on extinguishment of 6.125% Senior Secured Notes		8,349		—


		$	9,336	$	5,758

Fair Value of Notes Payable and Long-Term Debt:


	March 31, 2021				December 31, 2020
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Senior Notes	$	1,427,054	$	1,493,436	$	1,401,960	$	1,464,208

Liggett and other	22,433		22,440		25,573		25,581
Notes payable and long-term debt	$	1,449,487	$	1,515,876	$	1,427,533	$	1,489,789

Notes payable and long-term debt are carried on the condensed consolidated balance sheets at amortized cost. The fair value determinations disclosed above are classified as Level 2 under the fair value hierarchy disclosed in Note 12 if such liabilities were recorded on the condensed consolidated balance sheets at fair value. The estimated fair value of the Company’s notes payable and long-term debt has been determined by the Company using available market information and appropriate

valuation methodologies including the evaluation of the Company’s credit risk. The Company used a derived price based upon quoted market prices and trade activity as of March 31, 2021 to determine the fair value of its publicly-traded notes and debentures. The carrying value of the revolving credit facility is equal to fair value. The fair value of the equipment loans and other obligations was determined by calculating the present value of the required future cash flows. However, considerable judgment is required to develop the estimates of fair value and, accordingly, the estimate presented herein is not necessarily indicative of the amount that could be realized in a current market exchange.