Revolving Credit Agreements

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Revolving Credit Agreements

12. REVOLVING CREDIT AGREEMENTS

Cadence Revolving Credit Agreement

On May 19, 2022, the Company, as borrower, modified its Revolving Credit and Security Agreement and related Promissory Note (together, the “Cadence Revolving Credit Agreement”) with Cadence Bank, N.A., as lender (the “Cadence Lender”). The modified Cadence Revolving Credit Agreement provides the Company with a $25.0 million secured revolving credit facility. Loans under the Cadence Revolving Credit Agreement will bear interest at a rate equal to 1.50% over the screen rate as obtained by Reuter’s, Bloomberg or another commercially available source as may be designated by the Cadence Lender from time to time; provided, however, that in no event shall the applicable rate of interest under the Cadence Revolving Credit Agreement be less than 1.50% per annum. Such loans are secured by all of the cash, securities, securities entitlements and investment property in a certain bank account, as outlined in the Cadence Revolving Credit Agreement, at a maximum loan-to-value ratio of 85% determined by dividing the full commitment amount under the Cadence Revolving Credit Agreement on the date of testing, determined by the Cadence Lender each fiscal quarter, by the market value of the collateral. The Cadence Revolving Credit Agreement matures on November 3, 2022, subject to earlier termination upon the concurrence of certain events of default. The Company entered into the Cadence Revolving Credit Agreement in order to increase the flexibility and management of its short-term liquidity. During the first half of 2022, the Company made draws totaling $18.0 million under the Cadence Revolving Credit Agreement all of which had been repaid as of June 30, 2022. The Company agreed to certain negative covenants that are customary for credit arrangements of this type, including, among other things, restrictions on the Company’s ability to enter into mergers, acquisitions or other business combination transactions, grant liens or suffer a material adverse change in the condition or affairs (financial or otherwise) of the Company. As of June 30, 2022, the Company was in compliance with all contractual requirements under the Cadence Revolving Credit Agreement.

Wells Fargo Revolving Credit Agreement

On April 1, 2022, the Company entered into a Credit Agreement and related Revolving Line of Credit Note (together, the “Wells Revolving Credit Agreement”) in favor of Wells Fargo Bank, National Association, as lender (the “Wells Lender”). The Wells Revolving Credit Agreement provides the Company with a new $25.0 million secured revolving credit facility. The Wells Revolving Credit Agreement matures on April 1, 2023, subject to earlier termination upon the occurrence of certain events of default as set forth in the Wells Revolving Credit Agreement. Loans under the Wells Revolving Credit Agreement will bear interest at a fluctuating rate per annum equal to: (i) the Daily Simple SOFR (as defined herein) plus (ii) an applicable margin, which will equal 1.00%, 1.25%, 1.5% or 2.0% per annum depending on the Company’s senior funded debt to EBITDA ratio. The “Daily Simple SOFR” is calculated based upon the greater of (x) a floor of 0.00% and (b) the Secured Overnight Financing Rate, as established by the Federal Reserve Bank of New York (or a successor thereto) from time to time. Accrued interest is payable on the last day of each quarter, commencing June 30, 2022. Borrowings under the Wells Revolving Credit Agreement may be used solely for issuing letters of credit, financing capital expenditures, and working capital and general corporate purposes. Loans under the Wells Revolving Credit Agreement are secured by a first priority security interest in all of the accounts receivable of the Company and its subsidiary, ADTRAN International, Inc. Specifically, in connection with the Wells Revolving Credit Agreement, the Company entered into a security agreement, dated April 1, 2022, pursuant to which the Company pledged to the Wells Lender all of the rights to payment, accounts, deposit accounts, chattel paper (whether electronic or tangible), instruments, promissory notes, documents, licenses, general intangibles, payment intangibles, software, letter of credit rights and healthcare insurance receivables existing as of the date of execution or arising at any time thereafter. During the first half of 2022, the Company made draws totaling $10.0 million under the Wells Revolving Credit Agreement all of which had been repaid as of June 30, 2022. As of June 30, 2022, the Company was in compliance with all contractual requirements under the Wells Fargo Credit Agreement.