|3 Months Ended|
Mar. 31, 2019
|Debt Disclosure [Abstract]|
|Long-Term Debt||LONG-TERM DEBT
Long-term debt, excluding amounts outstanding on the revolving credit facility, as of March 31, 2019 and December 31, 2018 consisted of the following:
Substantially all of the Company's assets are pledged as collateral under a senior credit agreement with a syndicate of lenders (the "Senior Credit Agreement") and under a credit and guaranty agreement with Goldman Sachs Specialty Lending Group, L.P. (the "GS Credit Agreement"). However, the parent entity, Priority Technology Holdings, Inc., is neither a borrower nor a guarantor of this aforementioned debt. The Company's subsidiaries that are borrowers or guarantors are referred to as the "Borrowers."
The December 2018 modification of the Senior Credit Agreement and the GS Credit Agreement (collectively, the "Third Amendment") included a delayed draw basis amount of $70.0 million. Until the additional $70.0 million, net of a $350,000 discount, was drawn in March 2019, the Borrowers were assessed a fee on the undrawn amounts. This fee amounted to $0.4 million and is reflected in interest expense on the unaudited condensed consolidated statement of operations for the quarter ended March 31, 2019.
At March 31, 2019, the Senior Credit Agreement has a maximum borrowing amount of $422.5 million consisting of a $397.5 million term loan and a $25.0 million revolving credit facility. The allowed borrowings amount under the GS Credit Agreement is $80.0 million, excluding payment-in-kind interest.
The credit facilities under the Senior Credit Agreement (the "Senior Credit Facility") mature on January 3, 2023, with the exception of the revolving credit facility which expires on January 2, 2022. Any amounts outstanding under the revolving credit facility must be paid in full before the maturity date of January 2, 2022. The GS Credit Agreement matures on July 3, 2023.
At March 31, 2019, there was $10.0 million outstanding on the revolving credit facility; no amount was outstanding as of December 31, 2018. The variable interest rate on the revolving credit facility was 9.5% at March 31, 2019.
As a result of the Third Amendment, borrowings under the Senior Credit Agreement are subject to an applicable margin, or percentage per annum, equal to: (i) with respect to Initial Term Loans, (a) for LIBOR Rate Loans, 5.00% per annum and (b) for Base Rate Loans, 4.00% per annum; and (ii) with respect to Revolving Loans (a) for LIBOR Rate Loans and Letter of Credit fees, 5.00% per annum, (b) for Base Rate Loans, per annum, 4.00% and (c) for unused commitment fees, 0.50% per annum.
Under the Senior Credit Agreement, the Borrowers are required to make quarterly principal payments of $0.8 million. Additionally, the Borrowers may be obligated to make certain additional mandatory prepayments based on excess cash flow, as defined in the Senior Credit Agreement. No such prepayment was due for the year ended December 31, 2018.
Principal contractual maturities on long-term debt are as follows:
For each of the quarters ended March 31, 2019 and 2018, payment-in-kind (PIK) interest under the GS Credit Agreement added $1.2 million to the principal amount of the subordinated debt.
For the quarters ended March 31, 2019 and 2018, interest expense, including amortization of deferred financing costs and debt discounts, was $9.4 million and $6.9 million, respectively. Deferred financing costs and debt discounts are being amortized using the effective interest method over the remaining term of the respective debt and are recorded as a component of interest expense. Interest expense related to amortization of deferred finance costs and debt discounts was approximately $0.4 million and $0.3 million for the quarters ended March 31, 2019 and 2018, respectively,
The Senior Credit Agreement and the GS Credit Agreement, as amended, contain representations and warranties, financial and collateral requirements, mandatory payment events, events of default, and affirmative and negative covenants, including without
limitation, covenants that restrict among other things, the ability to create liens, pay dividends or distribute assets from the Company's subsidiaries to Priority Technology Holdings, Inc., merge or consolidate, dispose of assets, incur additional indebtedness, make certain investments or acquisitions, enter into certain transactions (including with affiliates), and to enter into certain leases. Substantially all of the Borrowers' assets are pledged as collateral under the Senior Credit Agreement and GS Credit Agreement. The Borrowers are also required to comply with certain restrictions on their Total Net Leverage Ratio (as defined in the Senior Credit Agreement and GS Credit Agreement). As of March 31, 2019 and December 31, 2018, the Borrowers were in compliance with the covenants.
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef