FINANCING ARRANGEMENTS

12 Months Ended

Dec. 31, 2023

Debt Disclosure [Abstract]

FINANCING ARRANGEMENTS

FINANCING ARRANGEMENTS

The Company's outstanding debt as of December 31, 2023 and 2022 is summarized as follows (in thousands):

Creditor	Loan Type	2023		2022
Convertible Senior Note	Note	$	15,230	$	95,178
Term loan due April 1, 2025	Loan	195,950		165,000
SBA Loan	SBA Loan	—		59
Various institutions	Short term loan	6,237		5,602
Principal amount of long-term debt		217,417		265,839
Less: unamortized discount and deferred financing costs		(30,354)		(81,918)
Total debt, net of unamortized discount and deferred financing costs		187,063		183,921
Less: current maturities		(16,362)		(13,911)
Long term debt, net of current maturities		$	170,701	$	170,010

Future maturities of long-term debt, excluding financing lease obligations, as of December 31, 2023 are summarized as follows (in thousands):

Period Ended December 31,	Amount Due
2024	$	16,362
2025	185,825
2026	—
2027	15,230
Total	$	217,417

Short Term Loan

The Company financed insurance premiums through various financial institutions bearing interest at rates ranging from 3.24% to 6.25% per annum. All such premium finance agreements have maturities of less than one year and have a balance of $4,893 thousand at December 31, 2023 and $5,602 thousand at December 31, 2022.

The Company has a short-term promissory note for the purchase of assets with an outstanding balance of $1,344 thousand bearing 8.5% interest rate per annum at December 31, 2023.

Term Loan

Vertex Refining, the Company, as a guarantor, substantially all of the Company’s direct and indirect subsidiaries, as guarantors, certain funds as lenders (the “Lenders”), and Cantor Fitzgerald Securities, in its capacity as administrative agent and collateral agent for the Lenders (the “Agent”), entered into a Loan and Security Agreement on April 1, 2022 (as amended from time to time, the “Loan and Security Agreement”).

On September 30, 2022, the parties entered into a second amendment to the Loan and Security Agreement which (a) extended the date that the Company was required to begin initial commercial production of renewable diesel at the Mobile Refinery, from February 28, 2023 to April 28, 2023 (which date the Lender further agreed to extend until July 14, 2023), and provided other corresponding extensions of the milestones required to complete the Company’s capital project designed to modify the Mobile Refinery’s existing hydrocracking unit to produce renewable diesel fuel on a standalone basis, which as previously described, mechanical completion was achieved in connection with in March 2023; and (b) waived and extended certain deadlines and time periods for the Company to take other actions in connection with the Loan and Security Agreement.

On December 28, 2023, the parties entered into a fifth amendment to the Loan and Security Agreement (a) pursuant to which certain of the Lenders (the “Additional Lenders”) agreed to provide an additional term loan in the amount of $50 million (the “Additional Term Loan”, and together with the existing term loans, the “Term Loan”); and (b) the Lender's waived certain technical events of default which had occurred under the Loan and Security Agreement, mainly relating to monetary thresholds for indebtedness and investments; and to include certain other mutually negotiated changes to the Loan and Security Agreement.

Amounts outstanding under the existing Term Loan mature at April 1, 2025, and bear interest at a rate per annum equal to the sum of (i) the greater of (x) the per annum rate publicly quoted from time to time by The Wall Street Journal as the “Prime Rate” in the United States minus 1.50% as in effect on such day and (y) the Federal Funds rate for such day plus 0.50%, subject in the case of this clause (i), to a floor of 1.0%, plus (ii) 10.25%, currently 17.25%. Interest is payable in cash (i) quarterly, in arrears, on the last business day of each calendar quarter, commencing on the last business day of the calendar quarter ending March 28, 2024, (ii) in connection with any payment, prepayment or repayment of the Term Loans, and (iii) at maturity (whether upon demand, by acceleration or otherwise). Pursuant to the Loan and Security Agreement, on the last day of March, June, September and December of each year (or if such day is not a business day, the next succeeding business day), beginning on June 28, 2024 and ending on December 31, 2024, Vertex Refining is required to repay $2,687,500 of the principal amount of the Term Loans, subject to reductions in the event of any prepayment of the Loan and Security Agreement.

Pursuant to the Loan and Security Agreement, the Lenders agreed to provide a $215.0 million term loan to Vertex Refining (the “Term Loan”). The Company paid off $19.1 million owed under the term loan during the year ended December 31, 2023.

Warrant Agreements and Derivative Liabilities

In connection with the Loan and Security Agreement, and as additional consideration for the Lenders agreeing to loan funds to the Company thereunder, the Company granted warrants to purchase 2.75 million shares of common stock of the Company to the Lenders (and/or their affiliates) on April 1, 2022 (the “Initial Warrants”). The terms of the warrants are set forth in a Warrant Agreement (the “April 2022 Warrant Agreement”) entered into on April 1, 2022, between the Company and Continental Stock Transfer & Trust Company as warrant agent.

In connection with the entry into the Amendment No. One to Loan and Security Agreement, and as a required term and condition thereof, on May 26, 2022, the Company granted warrants (the “Additional Warrants” and together with the Initial Warrants, the “Warrants”) to purchase 0.25 million shares of the Company’s common stock to the Additional Lenders and their affiliates. The terms of the Additional Warrants are set forth in a Warrant Agreement (the “May 2022 Warrant Agreement” and together with the April 2022 Warrant Agreement, the “Prior Warrant Agreements”) entered into on May 26, 2022, between the Company and Continental Stock Transfer & Trust Company as warrant agent.

In connection with the entry into Amendment No. Five to Loan and Security Agreement, and as a required term and condition thereof, on December 28, 2023, the Company granted warrants (the “New Warrants”) to purchase 1.0 million shares of the Company’s common stock to the additional lenders and their affiliates. As additional consideration for the Lenders agreeing to Amendment No. Five to Loan Agreement, the Company agreed to reprice the Prior Warrants to have an exercise price of $3.00 per share (the “Warrant Repricing”).

Each Warrant holder has a put right to require the Company to repurchase any portion of the warrants held by such holder concurrently with the consummation of a fundamental transaction, as detailed in the agreement. The fundamental transaction clause requires the warrants to be classified as liabilities. The fair value of the warrants is presented in “Note 20. Fair Value Measurements”, and warrant activities are presented in “Note 18. Stock Based Compensation and Warrants”.

Indenture and Convertible Senior Notes

On November 1, 2021, we issued $155 million aggregate principal amount at maturity of our 6.25% Convertible Senior Notes due 2027 (the “Convertible Senior Notes”) pursuant to an Indenture (the “Indenture”), dated November 1, 2021, between the Company and U.S. Bank National Association, as trustee (the “Trustee”), in a private offering (the “Note Offering”) to persons reasonably believed to be “qualified institutional buyers” and/or to “accredited investors” in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"), pursuant to Securities Purchase Agreements. The issue price was 90% of the face amount of each note. Interest payments on the Notes are paid semiannually on April 1 and October 1 of each year, beginning on April 1, 2022.

On January 20, 2022, our shareholders approved the issuance of shares of our common stock issuable upon conversion of the Convertible Senior Notes, in accordance with Nasdaq Listing Rules 5635 (a) and (d). Accordingly, $79 million of derivative Convertible Senior Note liabilities were reclassified to additional paid in capital.

During the year ended December 31, 2022, holders of an aggregate of $60 million of the Convertible Senior Notes due 2027, converted such notes into 10.2 million shares of common stock of the Company pursuant to the terms of the Indenture. Upon the conversion, the Company recognized $33.9 million unamortized deferred loan cost and discount as interest expense.

On June 12, 2023, pursuant to the terms of certain separate, privately negotiated exchange agreements, the holders of $79.9 million principal amount of the Convertible Senior Notes due 2027, exchanged such principal amount of notes for an aggregate of 17.2 million newly issued shares of common stock. The Company also paid an aggregate of $1.0 million in cash to satisfy accrued and unpaid interest on the converted notes through the closing date of the exchanges. Upon the exchange, the Company recognized $40.7 million unamortized deferred loan cost and discount and $21.2 million in inducement cost as interest expense.

The components of the Convertible Senior Notes are presented as follows (in thousands):

	2023		2022
Principal balance at beginning of period	$	95,178	$	155,000
Conversion of principal into common stock	(79,948)		(59,822)
Principal balance at the end of period	15,230		95,178
Unamortized discount and issuance costs	(7,157)		(51,005)
Net carrying amount at the end of period	$	8,073	$	44,173

Our Convertible Senior Notes will mature on October 1, 2027, unless earlier repurchased, redeemed or converted. Interest is payable semiannually in arrears on April 1 and October 1 of each year, beginning on April 1, 2022.