Annual report pursuant to Section 13 and 15(d)

Debt

v3.20.4
Debt
12 Months Ended
Dec. 31, 2020
Debt Disclosure [Abstract]  
Debt

NOTE 9 – DEBT

 

Long-term debt consisted of the following:

 

 

 

As of December 31,

 

 

 

2020

 

 

2019

 

Senior Secured Term Loan

 

$

246,250

 

 

$

250,000

 

ABL Credit Facility

 

 

23,710

 

 

 

40,090

 

PPP Loan

 

 

10,000

 

 

 

-

 

USDA Loan

 

 

21,996

 

 

 

-

 

Equipment financing

 

 

12,866

 

 

 

16,065

 

Capital leases

 

 

229

 

 

 

10,474

 

Total debt principal balance

 

 

315,051

 

 

 

316,629

 

Unamortized discount on debt and debt

   issuance costs

 

 

(17,576

)

 

 

(9,449

)

Current maturities

 

 

(13,573

)

 

 

(22,288

)

   Net Long-term debt

 

$

283,902

 

 

$

284,892

 

 

Senior Secured Term Loan

 

On May 7, 2019, the Company, USWS LLC, as the borrower, and all the other subsidiaries of the Company entered into a $250,000 Senior Secured Term Loan Credit Agreement (as amended, the “Senior Secured Term Loan”) with CLMG Corp., as administrative and collateral agent, and the lenders party thereto. The Company is required to make quarterly principal payments of 2.0% per annum of the initial principal balance, commencing on January 15, 2020, with final payment due at maturity on May 7, 2024. The Company recorded the related debt discount and debt issuance costs amounting to $5,000 and $5,758, respectively, as a direct deduction to the face amount of the Senior Secured Term Loan and records the amortization of debt discount and debt issue costs to interest expense based on the effective interest rate method over the term of the Senior Secured Term Loan.

 

The Senior Secured Term Loan bears interest at a variable rate per annum equal to the applicable LIBOR rate, subject to a 2.0% floor, plus 8.25%.

 

The Senior Secured Term Loan is not subject to financial covenants but is subject to certain non-financial covenants, including

but not limited to, reporting, insurance, notice and collateral maintenance covenants as well as limitations on the incurrence of indebtedness, permitted investments, liens on assets, dispositions of assets, paying dividends, transactions with affiliates, mergers and consolidations.

 

The Senior Secured Term Loan requires mandatory prepayments upon certain dispositions of property or issuance of other indebtedness, as defined, and quarterly a percentage of excess cash flow, if any, equal to 100% (depending on total debt outstanding) commencing in September 2019. Certain mandatory prepayments (excluding excess cash flows sweep) and optional prepayments are subject to a yield maintenance fee for the first two years and prepayment premium of 2% in year three and 1% in year four. Upon the final payment and termination of the Senior Secured Term Loan, we are subject to an exit fee equal to 2.0% of the principal amount of loans then outstanding and the aggregate optional prepayment of principal amounts repaid during the 120 days that occurred prior to such final payment.

  

On April 1, 2020, the Company, USWS LLC, as the borrower, and all the other subsidiaries of the Company entered into a Second Amendment (the “Second Term Loan Amendment”) to the Senior Secured Term Loan with CLMG Corp., as administrative and collateral agent, and the lenders party thereto.

 

Pursuant to the Second Term Loan Amendment, the interest rate on amounts outstanding under the Senior Secured Term Loan was reduced to 0.0% and scheduled principal amortization payments were suspended for the period beginning April 1, 2020 and ending March 31, 2022. Beginning April 1, 2022, the Senior Secured Term Loan, as amended by the Second Term Loan Amendment, will resume incurring interest at the applicable LIBOR rate, subject to a 2.0% floor, plus 8.25%, and scheduled principal amortization payments equal to 0.5% of the initial principal balance of the term loans will resume on a quarterly basis commencing June 30, 2022. Additionally, pursuant to the Second Term Loan Amendment, certain other covenants were amended including, but not limited to, covenants relating to collateral inspections and excess cash flow, and the maturity date of the Senior Secured Term Loan was extended to December 5, 2025.

 

In exchange for entering into the Second Term Loan Amendment, the lenders under the Senior Secured Term Loan received an extension fee comprised of a $20,000 cash payment, 1,050 shares of Series B preferred stock valued at $1,050 based on the stated liquidation preference of $1,000 per share, and 5,529,622 shares of Class A common stock valued at $1,438 based on the closing price of the Class A common stock at the date of issuance. The Series B preferred stock issued to the lenders under the Senior Secured Term Loan had the same terms as the Series B preferred stock issued to certain institutional investors as described in “Note 10 – Mezzanine Equity”.

 

The total fair value of cash and non-cash consideration transferred to the lenders under the Senior Secured Term Loan were accounted for as discount on debt issuance and amortized to interest expense using the effective interest method over the remaining term of the Senior Secured Term Loan.

 

On July 30, 2020, the Company, USWS LLC, as the borrower, and all the other subsidiaries of the Company entered into a Third Amendment (the “Third Term Loan Amendment”) to the Senior Secured Term Loan with CLMG Corp., as administrative and collateral agent, and the lenders party thereto.

 

Pursuant to the Third Term Loan Amendment, the agents and the lenders agreed to make certain modifications and amendments to the Senior Secured Term Loan to, among other things, consent to the entry into the PPP Loan (described within this section), subject to the amended terms and conditions specified for the same in the Third Term Loan Amendment.

 

Additionally, the Third Term Loan Amendment made certain modifications to the Senior Secured Term Loan which limits the Company’s ability to deploy and use collateral outside of the continental United States and other than in connection with oil and gas fracking and exploration without the prior consent of the administrative agent. In the Third Term Loan Amendment the Company further agreed to specific conditions and covenants regarding a turbine rental and services agreement entered on June 19, 2020 and which affect the equipment which is the subject thereof.

 

On November 12, 2020, the Company, USWS LLC, as the borrower, and all of the other subsidiaries of the Company entered into a Fourth Amendment (the “Fourth Term Loan Amendment”) to the Senior Secured Term Loan with CLMG Corp., as administrative and collateral agent, and the lenders party thereto.

 

Pursuant to the Fourth Term Loan Amendment, the agents and the lenders agreed to make certain modifications and amendments to the Senior Secured Term Loan to, among other things, consent to entry into the USDA Loan (described within

this section), subject to the amended terms and conditions specified for the same in the Fourth Term Loan Amendment.

 

Additionally, the principal amortization schedule was modified as follows:

 

 

(1)

Commencing on December 31, 2020, required quarterly principal payment of $1,250 until September 30, 2025

 

(2)

Additional principal payment of $2,500 on May 31, 2021

 

(3)

Principal payment of $2,500 on September 30, 2021, subject to certain conditions as defined in the Fourth Term Loan Amendment  

 

The Company accounted for the Second Term Loan Amendment and Fourth Term Loan Amendment as a troubled debt restructuring under ASC 470-60, Troubled Debt Restructurings by Debtors, due to the level of concession provided by the lenders under the Senior Secured Term Loan. Under this guidance, the future undiscounted cash flows of the Senior Secured Term Loan, as amended, exceeded the carrying value, and accordingly, no gain was recognized, and no adjustment was made to the carrying value of the debt. Interest expense on the amended Senior Secured Term Loan was computed using a new effective rate that equated the present value of the future cash payments specified by the new terms with the carrying value of the debt under the original terms.

 

As of December 31, 2020, the outstanding principal balance of the Senior Secured Term Loan was $246,250, of which $10,000 was due within one year from the balance sheet date.

 

ABL Credit Facility

 

On May 7, 2019, the Company, USWS LLC, and all the other subsidiaries of the Company entered into a $75,000 ABL Credit Agreement (the “ABL Credit Facility”) with the lenders party thereto and Bank of America, N.A., as the administrative agent, swing line lender and letter of credit issuer. The ABL Credit Facility had original maturity date of February 6, 2024. The ABL Credit Facility is subject to a borrowing base which is calculated based on a formula referencing the eligible accounts receivables of the Borrower. Borrowings under the ABL Credit Facility bear interest at LIBOR, plus an applicable LIBOR rate margin of 1.5% to 2.0% or base rate margin of 0.5% to 1.0% as defined in the ABL Credit Facility. The unused portion of the ABL Credit Facility is subject to an unused commitment fee of 0.250% to 0.375%. The Company recorded the related debt issuance costs amounting to $1,205 as part of deferred financing costs, net in the consolidated balance sheets, and records the amortization as interest expense ratably over the term of the ABL Credit Facility.

 

All borrowings under the ABL Credit Facility are subject to the satisfaction of customary conditions, including the absence of a default and the accuracy of representations and warranties and certifications regarding sales of certain inventory, and to a borrowing base (described above). In addition, the ABL Credit Facility includes a springing consolidated fixed charge coverage ratio of 1.00 to 1.00 but only when a financial covenant trigger period is in effect as defined in the ABL Credit Facility. Borrowings under the ABL Credit Facility are fully and unconditionally guaranteed jointly and severally by the Company and its subsidiaries, other than future unrestricted subsidiaries.

In April, August, and November of 2020, the Company, USWS LLC, and all the other subsidiaries of the Company entered into the First Amendment (the “First ABL Amendment”), Second Amendment (the “Second ABL Amendment”), and Third Amendment (the “Third ABL Amendment”), respectively, to the ABL Credit Facility with the lenders party thereto and Bank of America, N.A., as the administrative agent, swing line lender and letter of credit issuer.

Pursuant to the First ABL Amendment, the aggregate revolving commitment under the ABL Credit Facility was reduced from $75,000 to $60,000, the maturity date was extended to April 1, 2025, and the interest rate margin applicable to borrowings under the ABL Credit Facility was increased by 0.50% per annum and a LIBOR floor of 1% was added. In addition, the borrowing base under the ABL Credit Facility was amended to include a FILO Amount (as defined in the ABL Amendment) which increases borrowing base availability by up to the lesser of (i) $4.0 million and (ii) 5.0% of the value of eligible accounts receivable, subject to scheduled monthly reductions. Loans under the ABL Credit Facility which are advanced in respect of the FILO Amount accrue interest at a rate that is 1.50% higher than the rate applicable to other loans under the ABL Credit Facility, and may be repaid only after all other loans under the ABL Credit Facility have been repaid.

Pursuant to the Second ABL Amendment, the aggregate revolving commitment under the ABL Credit Facility was reduced from $60,000 to $50,000 and certain modifications were made to eligible accounts in the borrowing base and to the applicable thresholds in the cash dominion trigger period and financial covenant trigger period, among other things. The Company’s

option to request an increase in commitments under the accordion feature was also removed under the terms of the Second ABL Amendment.

Pursuant to the Third ABL Amendment, the lenders agreed to make certain modifications and amendments to the ABL Credit Facility to, among other things, consent to entry into the USDA Loan (described within this section).

Based on ASC 470-50, Modifications and Extinguishments, the Company accounted for each of the First ABL Amendment and Second ABL Amendment as a modification of debt. Under the First ABL Amendment, the borrowing capacity of the amended ABL Credit Facility was greater than the borrowing capacity of the old ABL Credit Facility and there was no change in the lenders. Accordingly, any unamortized deferred financing costs associated with the old ABL Credit Facility and fees in connection with the amended ABL Credit Facility were deferred and amortized to interest expense over its remaining term. Under the Second ABL Amendment, the borrowing capacity of the amended ABL Credit Facility was less than the borrowing capacity of the old ABL Credit Facility. Accordingly, unamortized deferred financing cost amounting to $0.2 million, which was calculated in proportion to the decrease in the borrowing capacity of the old Credit Facility, was written off and recorded as interest expense in the consolidated statements of operations. Any fees in connection with the Second ABL Amendment were deferred and amortized over its remaining term.

The ABL Credit Facility is subject to a borrowing base which is calculated based on a formula referencing the Company’s eligible accounts receivables. As of December 31, 2020, the borrowing base was $32,438 and the outstanding revolver loan balance was $23,710, classified as long-term debt in the consolidated balance sheets.

Paycheck Protection Program (PPP) Loan

In July 2020, the Company received an unsecured loan (the “PPP Loan”) amounting to $10,000 that bears interest at a rate of 1.0% per annum and matures in five years under the Paycheck Protection Program from a commercial bank. The Paycheck Protection Program was established under the Coronavirus Aid, Relief and Economic Security Act (as amended, the “CARES Act”) and is administered by the U.S. Small Business Administration. Under the terms of the CARES Act, loan recipients can apply for and be granted forgiveness for all or a portion of the loan. Forgiveness is determined, subject to certain limitations, based on the use of the loan proceeds for payroll costs, interest on mortgages or other debt obligations, rents and utilities. At least 60% of the proceeds must be used for payroll costs. No assurance can be given that the Company will obtain forgiveness of the PPP Loan either in whole or in part. Accordingly, the Company accounted for the PPP Loan as part of long-term debt in the consolidated balance sheets.

USDA Loan

On November 12, 2020, the Company, USWS LLC, and USWS Holdings entered into a Business Loan Agreement (the “USDA Loan”) with a commercial bank pursuant to the United States Department of Agriculture (“USDA”), Business & Industry Coronavirus Aid, Relief, and Economic Security Act Guaranteed Loan Program, in the aggregate principal amount of up to $25,000 for the purpose of providing long-term financing for eligible working capital.

The USDA loan bears interest of 5.75% per annum and is payable according to the following schedule:

 

(1)

36 monthly consecutive interest payments, beginning on December 12, 2020

 

(2)

83 monthly consecutive principal and interest payments beginning December 12, 2023

 

(3)

One final principal and interest payment of the remaining due on November 12, 2030

 

The Company recorded the related debt discount and debt issuance costs amounting to $506 and $558, respectively, as a direct deduction to the face amount of the USDA Loan and records the amortization of debt discount and debt issue costs to interest expense based on the effective interest rate method over the term of the USDA Loan.

 

The USDA Loan is secured by specific equipment collateral and is guaranteed by the USDA for up to 90% of the total proceeds.

 

The USDA Loan is subject to certain financial covenants. The Company is required to maintain a Debt Service Coverage Ratio (as defined in the USDA Loan) of not less than 1.25:1, to be monitored annually, beginning in calendar year 2021. Additionally, the Company is required to maintain a Debt to Net Worth Ratio (as defined in the USDA Loan) of not more than 9:1, to be monitored annually based upon year-end financial statements beginning in calendar year 2022.

 

As of December 31, 2020, the outstanding principal balance of the USDA Loan was $21,996, presented as long-term debt in the consolidated balance sheets. In January 2021, the Company received the remaining principal amount of $3,004.

Equipment Financing

In March 2020, the Company entered into an agreement to consolidate various individual equipment financing agreements, which represented substantially all our equipment financing notes, into four notes. The new notes are held by the same lender as the original equipment financing agreements. The amendments under the consolidated equipment financing agreements pertain to maturity date, interest rate, and date of first installment payment. The Company evaluated the debt modification in accordance with ASC 470-50 and concluded that the debt modification did not result in a substantially different debt, and accordingly, no gain or loss was recorded.

The total outstanding balance of the consolidated equipment financing agreements as of December 31, 2020 was $12,866, payable in equal monthly installments through May 1, 2024, at an interest rate of 5.7%.

The weighted average interest rate of amounts outstanding under the equipment financing agreements was 5.7% and 6.4% per annum as of December 31, 2020 and December 31, 2019, respectively. 

Payments of Debt Obligations due by Period

Presented below is a schedule of the repayment requirements of long-term debt as of December 31, 2020:

 

 

 

Principal Amount

 

 

 

of Long-term Debt

 

2021

 

$

13,573

 

2022

 

 

10,017

 

2023

 

 

9,203

 

2024

 

 

9,397

 

2025

 

 

256,503

 

Thereafter

 

 

16,358

 

Total

 

$

315,051