Quarterly report pursuant to Section 13 or 15(d)

Debt

v3.19.2
Debt
6 Months Ended
Jun. 30, 2019
Debt Disclosure [Abstract]  
Debt
Debt
 
Long-term debt consisted of the following (amounts in thousands):
 
June 30,
2019
 
December 31,
2018
9.125% Senior Notes due April 1, 2020 with an effective interest rate of 9.1%
$
585,000

 
$
585,000

Ascent Intercompany Loan due October 1, 2020 with an effective rate of 12.5%

 
12,000

Term loan, matures September 30, 2022, LIBOR plus 5.50%, subject to a LIBOR floor of 1.00%, with an effective rate of 8.6%
1,072,500

 
1,075,250

$295 million revolving credit facility, matures September 30, 2021, LIBOR plus 4.00%, subject to a LIBOR floor of 1.00%, with an effective rate of 7.5%
181,400

 
144,200

 
1,838,900

 
1,816,450

Less: Current portion of long-term debt, not subject to compromise
(181,400
)
 
(1,816,450
)
Long-term debt subject to compromise
1,657,500

 

Less: Amounts reclassified to Liabilities subject to compromise
(1,657,500
)
 

Long-term debt
$

 
$



Senior Notes
 
The Senior Notes total $585,000,000 in principal, mature on April 1, 2020 and bear interest at 9.125% per annum.  Interest payments are due semi-annually on April 1 and October 1 of each year. Ascent Capital has not guaranteed any of the Company's obligations under the Senior Notes.

In connection with management’s negotiations with its creditors, the Company did not make its Senior Notes interest payment of $26,691,000 due on April 1, 2019. Under the terms of the RSA, which is pending approval in Bankruptcy Court, the Senior Notes will be converted to equity. See note 1, Basis of Presentation for further information. As the Senior Notes are unsecured debt, they have been reclassified to Liabilities subject to compromise on the unaudited condensed consolidated balance sheets. See note 9, Liabilities Subject to Compromise for further information.

The Senior Notes are guaranteed by all of the Company's existing domestic subsidiaries. See note 14, Consolidating Guarantor Financial Information for further information.

Ascent Intercompany Loan
 
On February 29, 2016, the Company retired the existing intercompany loan with an outstanding principal amount of $100,000,000 and executed and delivered a Promissory Note to Ascent Capital in a principal amount of $12,000,000 (the "Ascent Intercompany Loan"), with the $88,000,000 remaining principal being treated as a capital contribution.  The entire principal amount under the Ascent Intercompany Loan would have been due on October 1, 2020.  The Ascent Intercompany Loan bore interest at a rate equal to 12.5% per annum, payable semi-annually in cash in arrears on January 12 and July 12 of each year.  Borrowings under the Ascent Intercompany Loan constituted unsecured obligations of the Company and were not guaranteed by any of the Company’s subsidiaries.

In January 2019, the Company repaid $9,750,000 of the Ascent Intercompany Loan and $2,250,000 was contributed to our stated capital.
 
Credit Facility

On September 30, 2016, the Company entered into an amendment ("Amendment No. 6") with the lenders of its existing senior secured credit agreement dated March 23, 2012, and as amended and restated on April 9, 2015, February 17, 2015, August 16, 2013, March 25, 2013, and November 7, 2012 (the "Existing Credit Agreement"). Amendment No. 6 provided for, among other things, the issuance of a $1,100,000,000 senior secured term loan at a 1.5% discount and a new $295,000,000 super priority revolver (the Existing Credit Agreement together with Amendment No. 6, the "Credit Facility").

As of June 30, 2019, the Credit Facility term loan has an outstanding principal balance of $1,072,500,000, maturing on September 30, 2022. The Credit Facility term loan requires quarterly interest payments and quarterly principal payments of $2,750,000. The Company did not make its quarterly principal repayment in the second quarter of 2019. The Credit Facility term loan bears interest at LIBOR plus 5.5%, subject to a LIBOR floor of 1.0%. The Credit Facility revolver has a principal amount outstanding of $181,400,000 and an aggregate of $1,000,000 available under two standby letters of credit issued as of June 30, 2019, maturing on September 30, 2021. The Credit Facility revolver typically bears interest at LIBOR plus 4.0%, subject to a LIBOR floor of 1.0%. There is a commitment fee of 0.5% on unused portions of the Credit Facility revolver. In conjunction with negotiations around certain defaults of the Credit Facility in the first quarter of 2019, the Credit Facility revolver lenders allowed us to continue to borrow under the revolving credit facility for up to $195,000,000 at an alternate base rate plus 3.0% and the Credit Facility term loan lenders allowed the term loan to renew with interest due on an alternate base rate plus 4.5%. Additionally, for the period of April 24, 2019 through May 20, 2019, an additional 2.0% default interest rate was accrued and paid on the Credit Facility term loan and revolver. On July 3, 2019, with approval from the Bankruptcy Court, the Credit Facility revolver principal and interest was repaid in full with proceeds from the DIP Facility. As such, the Credit Facility revolver principal amount is presented as Current portion of long-term debt and a liability not subject to compromise on the unaudited condensed consolidated balance sheets.

Under the terms of the RSA, which is pending approval in Bankruptcy Court, $100,000,000 of the Credit Facility term loan will be converted into equity and the remaining portion will be repaid upon emergence with proceeds from exit financing that are currently being negotiated. See note 1, Basis of Presentation for further information. As the Credit Facility term loan will be partially repaid and partially converted to equity, it has been reclassified to Liabilities subject to compromise on the unaudited condensed consolidated balance sheets. See note 9, Liabilities Subject to Compromise for further information.

The Credit Facility is secured by a pledge of all of the outstanding stock of the Company and all of its existing subsidiaries and is guaranteed by all of the Company’s existing domestic subsidiaries.  Ascent Capital has not guaranteed any of the Company’s obligations under the Credit Facility.

In order to reduce the financial risk related to changes in interest rates associated with the floating rate term loan under the Credit Facility term loan, the Company had entered into interest rate swap agreements with terms similar to the Credit Facility term loan (all outstanding interest rate swap agreements are collectively referred to as the “Swaps”). Prior to December of 2018, all of the Swaps were designated as effective hedges of the Company's variable rate debt and qualified for hedge accounting. However, in December of 2018, given the potential for changes in the Company's future expected interest payments that the Swap hedged, all of the Swaps no longer qualified as a cash flow hedge and were de-designated as such. In April of 2019, all of the outstanding Swaps were settled and terminated with their respective counterparties. See note 7, Derivatives, for further disclosures related to the settlement of these derivative instruments.
As of June 30, 2019, principal payments scheduled to be made on the Company’s debt obligations, assuming certain accelerated maturities due to Chapter 11 Cases, are as follows (amounts in thousands):
Remainder of 2019
$
1,838,900

2020

2021

2022

2023

2024

Thereafter

Total principal payments
1,838,900

Less:
 
Unamortized deferred debt costs and discounts

Total debt carrying value
$
1,838,900