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CONVERTIBLE NOTES AND OTHER DEBTS
 12 Months Ended
Dec. 31, 2023
Debt Disclosure [Abstract]  
CONVERTIBLE NOTES AND OTHER DEBTS CONVERTIBLE NOTES AND OTHER DEBTS
4.375% Convertible Senior Notes due 2022 (the “2022 Notes”)
In June 2020, the Company issued the 2022 Notes with an aggregate principal amount of $37.7 million in a non-cash exchange for its 2020 Notes with an equal principal amount pursuant to an indenture, dated June 2, 2020 (the “2022 Notes Indenture”), by and between the Company and U.S. Bank Trust Company, National Association (as successor in interest to U.S. Bank National Association), as trustee. The 2022 Notes bore interest at a rate of 4.375% per year, payable in cash on June 1 and December 1 of each year. The 2022 Notes matured on December 1, 2022.
The 2022 Notes were initially convertible into cash, shares of the Company’s common stock, or a combination thereof, at the Company’s election, at an initial conversion rate of 173.9978 shares of the Company’s common stock per $1,000 principal amount of the 2022 Notes (which is equivalent to an initial conversion price of approximately $5.75 per share). Pursuant to the supplemental indenture entered into by the Company and the trustee during the fourth quarter of fiscal 2021, the Company made an irrevocable election to settle the principal amounts of the 2022 Notes solely with cash and may pay or deliver, as the case may be, any conversion value greater than the principal amount in cash, shares of the Company’s common stock or a combination thereof, at the Company’s election. The conversion rate, and thus the effective conversion price, was adjustable under certain circumstances, including in connection with conversions made following certain fundamental changes and under other circumstances as set forth in the 2022 Notes Indenture.
As discussed in the Note 2. “Recent Accounting Pronouncements”, effective January 1, 2022, the Company adopted ASU 2020-06 using the modified retrospective method and, as a result, accounted for the Convertible debt as a single liability measured at amortized cost.
Prior to maturity date, the entire principal balance of $37.7 million was converted by holders of the 2022 Notes. In accordance with provisions of the 2022 Notes Indenture and the aforementioned supplemental indenture, conversions were settled in a combination of cash and the Company’s common Stock. The principal amount of $37.7 million that matured on December 1, 2022 was paid in cash. The conversion value greater than the principal amount was delivered in 3.9 million shares of the Company’s common stock.
The following table presents interest expense recognized for the 2022 Notes:
(in thousands)Year Ended December 31,
202320222021
Contractual interest expense$— $1,511 $1,648 
Amortization of debt discount— — 685 
Amortization of debt issuance costs— 257 214 
Total interest expense recognized$— $1,768 $2,547 
2.00% Convertible Senior Notes due 2024 (the “2024 Notes”)
In September 2019, the Company issued $115.5 million of the 2024 Notes pursuant to an indenture (the “2024 Notes Indenture”), dated September 13, 2019, by and between the Company and U.S. Bank Trust Company, National Association (as successor in interest to U.S. Bank National Association), as trustee. The 2024 Notes bear interest at a rate of 2.00% per year, payable semi-annually on March 1 and September 1 of each year, beginning March 1, 2020. The 2024 Notes will mature on September 1, 2024, unless earlier repurchased by the Company, redeemed by the Company or converted pursuant to their terms.
The 2024 Notes were initially convertible into cash, shares of the Company’s common stock, or a combination thereof, at the Company’s election, at an initial conversion rate of 115.5001 shares of the Company’s common stock per $1,000 principal amount of the 2024 Notes (which is equivalent to an initial conversion price of approximately $8.66 per share). Pursuant to the supplemental indenture entered into by the Company and the trustee during the fourth quarter of the fiscal year ended December 31, 2021, the Company made an irrevocable election to settle the principal amounts of the 2024 Notes solely with cash and may pay or deliver, as the case may be, any conversion value greater than the principal amount in cash, shares of the Company’s common stock or a combination thereof, at the Company’s election. The conversion rate, and thus the effective conversion price, may be adjusted under certain circumstances, including in connection with conversions made following certain fundamental changes or a notice of redemption and under other circumstances, in each case, as set forth in the 2024 Notes Indenture.
The 2024 Notes will be convertible at certain times and upon the occurrence of certain events in the future, in each case, specified in the 2024 Notes Indenture. Further, on or after June 1, 2024, until the close of business on the scheduled trading day immediately preceding the maturity date, holders of the 2024 Notes may convert all or a portion of their 2024 Notes regardless of these conditions.
The 2024 Notes are recorded at face value less unamortized debt issuance costs. Amortization costs are reported as a component of interest expense and are computed using the effective interest method. As the 2024 Notes mature within the next twelve months, they are classified as “Convertible debt, current” on the Consolidated Balance Sheet as of December 31, 2023.
The following table presents the components of the 2024 Notes:
As of December 31,
(in thousands, except for years and percentages)20232022
Liability:
Principal amount$115,500 $115,500 
Less: Debt issuance costs, net of amortization(620)(1,519)
Carrying amount$114,880 $113,981 
The following table presents interest expense recognized for the 2024 Notes:
Year Ended December 31,
(in thousands)202320222021
Contractual interest expense$2,312 $2,312 $2,312 
Amortization of debt discount— — 4,718 
Amortization of debt issuance costs898 874 641 
Total interest expense recognized$3,210 $3,186 $7,671 
Other Debts
The Company has a variety of debt and credit facilities primarily in France to satisfy the financing requirements of the operations of its French subsidiary. These arrangements are summarized in the table below:
December 31,
(in thousands)20232022
Financing from French government agencies related to various government incentive programs (1)
$11,268 $10,580 
Relief loans (2)
4,145 5,337 
Total debt obligations15,413 15,917 
Less: current portion(4,918)(4,756)
Long-term portion$10,495 $11,161 
(1) These loans bear variable interest rate at EURIBOR 1 month plus 1.9% and mature between 2024 through 2026.
(2) Refer to the below section “Relief Loans” for the description of these loans.
The table below presents the future minimum repayments of other debts as of December 31, 2023 (in thousands):
Year ending December 31,
2024$4,918 
20255,238 
20265,257 
Total$15,413 
Relief Loans
In June 2020, Harmonic France was granted a loan from Société Générale S.A. (the “SG Loan”) in the aggregate amount of 5 million Euros, pursuant to a state guarantee program introduced in March 2020 to provide relief to companies from the financial consequences of the COVID-19 pandemic. The SG Loan was initially maturing in June 2021. During 2021, SG Loan maturity was extended to June 2026. The SG loan bears an effective interest rate of 0.51% per annum payable annually and may be repaid at any time prior to maturity with no repayment penalties. There are no restrictions on the use of funds from the SG Loan. The purpose of the funds from the SG Loan is to allow the preservation of activity and employment in France. As of December 31, 2023, there was $4.1 million outstanding under the loan, of which $1.4 million was recorded in “Other debts, current” and $2.7 million was recorded in “Other debts, non-current” in the Consolidated Balance Sheets.
Line of Credit
On December 21, 2023, the Company entered into a five-year Credit Agreement (the “Credit Agreement”), by and among the Company, certain subsidiaries of the Company from time to time party thereto, the lenders from time to time party thereto, and Citibank, N.A., as administrative agent for the lenders. The Credit Agreement provides for a secured revolving loan facility in an aggregate principal amount of up to $120.0 million (the “Revolving Facility”), with a $10.0 million sublimit for the issuance of letters of credit, and a secured delayed term loan facility in an aggregate principal amount of up to $40.0 million (the “Term Facility”). The Credit Agreement refinances and replaces the Company’s prior credit agreement, dated as of December 19, 2019, as amended, with JPMorgan Chase Bank, N.A., as lender.
The proceeds of the loans under the Revolving Facility may be used for general corporate purposes. To the extent drawn, the proceeds of the loans under the Term Facility must be used to repurchase, redeem, acquire or otherwise settle the 2024 Notes. The Company may borrow term loans under the Term Facility in up to three drawings through September 1, 2024, on which date any undrawn commitments under the Term Facility expire. The Revolving Facility and Term Facility mature on December 21, 2028.
Loans under the Revolving Facility and Term Facility will bear interest, at the Company’s election, at a floating rate per annum equal to either (a) a base rate, defined as the greatest of (i) the prime rate then in effect, (ii) the federal funds rate then in effect, plus 0.50%, or (iii) an adjusted term SOFR rate determined on the basis of a one-month interest period, plus 1.00%, in each case, plus a margin of between 1.00% to 1.75% (“Base Rate Loans”); and (b) an adjusted term SOFR rate (based on one, three or six month interest periods), plus a margin of between 2.00% to 2.75% (“Adjusted Term SOFR Loans”). The applicable margin in each case is determined based on the Company’s consolidated net leverage ratio. Interest is payable quarterly in arrears, in the case of Base Rate Loans, and at the end of the applicable interest period, but at least every three months, in the case of Adjusted Term SOFR Loans. The Company incurred $1.3 million in origination fee related to the Credit Agreement and this origination fee is being amortized over the term of the Credit Agreement. The Company is also obligated to pay other closing fees, commitment fees and letter of credit fees customary for a credit agreement of this size and type.
The obligations under the Credit Agreement are required to be guaranteed by certain of the Company’s material subsidiaries and secured by substantially all of the assets of the Company and such subsidiary guarantors. The Credit Agreement contains customary affirmative and negative covenants, including covenants limiting the ability of the Company and its subsidiaries to, among other things, grant liens, incur debt, make acquisitions and other investments, undergo certain fundamental changes, dispose of assets, make certain restricted payments, enter into transactions with affiliates, and enter into burdensome agreements, in each case, subject to limitations and exceptions set forth in the Credit Agreement. The Company is also required to maintain compliance with a maximum consolidated net leverage ratio and a minimum fixed charge coverage ratio, in each case, determined in accordance with the terms of the Credit Agreement. As of December 31, 2023, the Company was in compliance with the covenants under the Credit Agreement.
As of December 31, 2023, there were no borrowings under the Credit Agreement outstanding and approximately $0.2 million of letters of credit outstanding under the Credit Agreement.