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Debt and Finance Lease Obligations

9 Months Ended

Sep. 30, 2020

Note 12. Debt and Finance Lease Obligations

The components of long-term debt and finance lease obligations consisted of the following:

	September 30,			December 31,
(in thousands, except interest rates)	2020			2019
2018 Credit Facility, 4.6% weighted-average interest rate at September 30, 2020 and 3.9% at December 31, 2019, due through 2023⁽¹⁾	$	230,543		$	311,464
FlyOver Iceland Credit Facility, 4.9% weighted-average interest rate at September 30, 2020 and December 31, 2019, due through 2022⁽¹⁾		5,584			5,607
Less unamortized debt issuance costs		(2,953	)		(1,836	)
Total debt ⁽²⁾		233,174			315,235
Finance lease obligations, 7.9% weighted-average interest rate at September 30, 2020 and 7.7% at December 31, 2019, due through 2039		23,018			25,257
Total debt and finance lease obligations ⁽³⁾		256,192			340,492
Current portion ⁽⁴⁾		(4,040	)		(5,330	)
Long-term debt and finance lease obligations	$	252,152		$	335,162

⁽¹⁾	Represents the weighted-average interest rate in effect at the respective periods, including any applicable margin. The interest rates do not include amortization of debt issuance costs or commitment fees.

⁽²⁾

The estimated fair value of total debt and finance leases was $222.0 million as of September 30, 2020 and $339.4 million as of December 31, 2019. The fair value of debt was estimated by discounting the future cash flows using rates currently available for debt of similar terms and maturity, which is a Level 2 measurement. Refer to Note 13 – Fair Value Measurements.

⁽³⁾	Cash paid for interest on debt was $12.1 million for the nine months ended September 30, 2020 and $8.8 million for the nine months ended September 30, 2019.

⁽⁴⁾

Subsequent to the filing of our 2019 Form 10-K, we identified a correction related to the classification of the 2018 Credit Facility (as defined below) from current to long-term given that the 2018 Credit Facility’s contractual maturity was not within 12 months of the balance sheet date, and we were in compliance with all applicable covenants as of December 31, 2019. As a result, we corrected the classification of the debt on the accompanying condensed consolidated balance sheet and the disclosure related to classification of debt in the table above as of December 31, 2019 to present the 2018 Credit Facility as long-term. Except for this change, the correction had no impact upon this Quarterly Report on Form 10-Q. We determined that the error is not material to the previously issued financial statements.

2018 Credit Agreement

Effective October 24, 2018, we entered into a Second Amended and Restated Credit Agreement (the “2018 Credit Agreement”). The 2018 Credit Agreement has a maturity date of October 24, 2023 and provides for a $450 million revolving credit facility (“2018 Credit Facility”). Borrowings and letters of credit can be denominated in U.S. dollars, Euros, Canadian dollars, or British pounds. Under the 2018 Credit Agreement, our lenders have a first perfected security interest in all of our personal property. As of September 30, 2020, we were not in compliance with our financial covenants, however, we obtained financial covenant relief until September 30, 2022 pursuant to the amendment to the 2018 Credit Agreement described below.

Effective August 5, 2020, we entered into an amendment to the 2018 Credit Agreement, which, among other things, (i) waives our financial covenants until September 30, 2022 (the “Covenant Waiver Period”) and (ii) requires us to maintain minimum liquidity of $125 million with a step down to $100 million at December 31, 2020. The Covenant Waiver Period will be in effect until the earlier of September 30, 2022 or the fiscal quarter when our leverage ratio is less than or equal to 4.00 to 1.00. Post Covenant Waiver Period, the maximum leverage ratio will be less than or equal to 4.50 to 1.00 at September 30, 2022 with a step down to less than or equal to 4.00 to 1.00 at December 31, 2022 and thereafter until the maturity date. The minimum interest coverage ratio will be greater than or equal to 2.00 to 1.00 post Covenant Waiver Period and until maturity of the facility. The interest rate on the borrowings is equal to LIBOR plus 350 basis points, with a LIBOR floor of one percent during the Covenant Waiver Period. The LIBOR floor continues until the end of the 2018 Credit Agreement. A revised pricing grid goes into effect after the Covenant Waiver Period ends. Additionally, we are precluded from paying cash dividends, from issuing unsecured debt, and from accessing the $250 million expansion feature during the Covenant Waiver Period. The amendment allows us to make acquisitions under certain conditions. Viad pledged 100% of the capital stock of its wholly-owned domestic subsidiaries and it top-tier foreign subsidiaries (other than Esja). Fees related to the amendment were approximately $1.7 million. Refer to Note 1 – Overview and Basis of Presentation (Impact of COVID-19) for additional information.

During the three months ended September 30, 2020, we repaid approximately $217 million of principal on our outstanding 2018 Credit Facility. As of September 30, 2020, capacity remaining under the 2018 Credit Facility was $209.8 million, reflecting borrowings of $230.5 million and $9.7 million in outstanding letters of credit.

We index borrowings under the 2018 Credit Facility to the prime rate or the LIBOR, plus appropriate spreads tied to our leverage ratio. As LIBOR will be phased out in 2021, our 2018 Credit Facility includes a method for determining an alternative or successor rate of interest that considers the new prevailing market convention. The vast majority of our borrowings under the 2018 Credit Facility are indexed to LIBOR. Commitment fees and letters of credit fees are also tied to our leverage ratio. The fees on the unused portion of the 2018 Credit Facility were 0.50% annually as of September 30, 2020. We index only our borrowings under the 2018 Credit Facility and the discount rates we use to account for some leases to LIBOR. We do not expect the alternative or successor rate to LIBOR to have a material impact on either our 2018 Credit Facility or the accounting for our leases.

FlyOver Iceland Credit Facility

Effective February 15, 2019, FlyOver Iceland ehf., a wholly-owned subsidiary of Esja, entered into a credit agreement with a €5.0 million (approximately $5.6 million U.S. dollars) credit facility (the “FlyOver Iceland Credit Facility”) with a maturity date of March 1, 2022. We used the loan proceeds to complete the development of the FlyOver Iceland attraction. In response to COVID-19, we entered into an addendum to the FlyOver Iceland Credit Facility effective May 14, 2020 wherein the principal and interest payments were deferred for six months beginning June 1, 2020, with the first payment due December 1, 2020. The addendum also extended the maturity date to September 1, 2022. There were no other changes to the terms of the FlyOver Iceland Credit Facility. Effective July 31, 2020, we obtained a waiver of certain covenants to the FlyOver Iceland Credit Facility through 2021.