Long-Term Debt | 9 Months Ended |
Sep. 30, 2014 |
Debt Disclosure [Abstract] | ' |
Long-Term Debt | ' |
Long-Term Debt |
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Long-term debt consists of the following at September 30, 2014 and December 31, 2013 (in thousands): |
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| September 30, 2014 | | December 31, 2013 |
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Senior secured notes | $ | 230,000 | | | $ | 230,000 | |
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Revolving line of credit | 32,000 | | | 26,500 | |
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| $ | 262,000 | | | $ | 256,500 | |
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In January 2013, the Company closed an offering of Senior Secured Notes for $230.0 million, the proceeds of which were used to repay the existing revolver balance, senior subordinated promissory note, subordinated notes payable and the fees and expenses associated with the offering. The Senior Secured Notes have a maturity date of January 15, 2018 and have an interest rate of 9.25% with semi-annual interest payments due on January 15th and July 15th. The Senior Secured Notes are jointly and severally guaranteed by each of the Company's future domestic restricted subsidiaries and are secured by substantially all of the Company’s and the guarantors’ existing and future tangible and intangible assets. |
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In connection with the issuance of the Senior Secured Notes, the Company entered into a registration rights agreement with the initial purchasers of the Senior Secured Notes. The Registration Statement was filed pursuant to the Company's obligations under this registration rights agreement on July 9, 2014. The Registration Statement was declared effective on July 30, 2014. The exchange offer expired on August 27, 2014 and all of the Senior Secured Notes were tendered by the holders and exchanged. |
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The Company also closed a $45.0 million revolving credit facility in January 2013, senior to the Senior Secured Notes, which allows the Company to borrow the lesser of $45.0 million or up to 5 times RMR. The revolving credit facility matures on January 15, 2018 and had $32.0 million drawn and availability of $6.1 million at September 30, 2014. The revolving credit facility includes a $1.0 million sub-limit for the issuance of letters of credit, and the amount outstanding reduces the available borrowing capacity. As of September 30, 2014 and December 31, 2013, the Company had $0.1 million in letters of credit outstanding. |
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Borrowings under the revolving line of credit bear interest at a floating rate per year equal to the higher of (A) the rate (adjusted for statutory reserve requirements for Eurocurrency liabilities) at which Eurodollar deposits are offered for a period equal to one, two, three, or six months, as quoted on Reuters Screen LIBOR01 Page (or any successor / similar page or service) as of 11:00 a.m., London time, on the day that is two London banking days preceding the applicable interest determination date and (B) 0.50%, plus 3.25% (3.75% as of September 30, 2014). The revolving credit facility includes financial covenants, including: (i) a covenant not to exceed a revolving facility usage to eligible RMR ratio of 5.0 to 1.0, (ii) a covenant to maintain a minimum fixed charge coverage of 1.25 to 1.0, and (iii) a covenant not to exceed a maximum gross attrition rate of 13.0% at any time. The revolving credit facility is secured by a first priority perfected lien on all of the same assets that secure the Senior Secured Notes. The revolving credit facility also provides that, upon the occurrence of certain events of default, the Company’s obligations thereunder may be accelerated and any lending commitments terminated. Such events of default include payment defaults to the lenders, material inaccuracies of representations and warranties, covenant defaults, cross‑defaults to other material indebtedness, voluntary and involuntary bankruptcy proceedings, material money judgments, certain change of control events and other customary events of default. As of September 30, 2014, the Company was in compliance with all of the restrictive and financial covenants. |
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On May 16, 2014, the Company entered into a waiver, consent and second amendment to its revolving credit facility with the lender, which (i) amended the revolving credit facility to permit, and in which the lender consented to, certain events in connection with certain reorganization transactions; (ii) amended the revolving credit facility to provide that a ‘‘change of control’’ in the indenture governing the 12.50% / 14.50% Senior Contingent Cash Pay Notes of Master Holdings (the "Master Holding Notes") will constitute a ‘‘change in control’’ under the revolving credit facility; and (iii) waived any defaults in connection with the Company’s prior substantial doubt about its ability to continue as a going concern. On August 15, 2014, the Company entered into a third amendment to its Revolving Credit Facility with the lender, which increased the amount of capital leases, mortgage financings or purchase money obligations, in each case, incurred for the purpose of financing all or any part of the purchase price or cost of design, construction, installation or improvement of property, plant or equipment used in the business, in an aggregate principal amount, including all new indebtedness incurred to renew, refund, refinance, replace, defease or discharge any existing indebtedness incurred not to exceed $5,000,000 at any time outstanding, less the outstanding amount of any capital leases disclosed. |
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On May 30, 2014, the Company completed a corporate reorganization with Master Holdings in connection with the closing of a $115.0 million offering of the Master Holdings Notes. The Master Holding Notes are not guaranteed by any of Master Holdings subsidiaries, including Holdings and Interface Systems. Pursuant to the reorganization, each of SunTx Capital Partners and certain of its affiliates, Michael T. Shaw, Michael J. McLeod, Kenneth Obermeyer and certain other stockholders of Holdings exchanged all of their shares of each class of common stock of Holdings and each class of preferred stock of Holdings for an equal number of shares of common stock and preferred stock of Master Holdings with substantially similar terms as the shares of Holdings. In addition, Master Holdings used $71.6 million of the proceeds of the offering to purchase shares of Class A common stock and Class B common stock of Holdings. Holdings and Interface Systems intend to use the consideration from the sale of shares of Holdings common stock to Master Holdings to make cash interest payments on the Senior Secured Notes and for general corporate purposes, including to fund growth initiatives. Immediately following the consummation of these transactions, Master Holdings owned approximately 99% of each class of common stock of Holdings and at least 99% of each class of Holdings’ preferred stock. Subsequent to these transactions, the remaining stockholders of Holdings exchanged all of their shares of each class of common stock and preferred stock of Holdings for an equal number of shares of common stock and preferred stock of Master Holdings. As a result, Master Holdings now owns 100% of the common stock and preferred stock of Holdings. |
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Based upon outstanding indebtedness as of September 30, 2014, aggregate annual maturities on the total borrowings under all debt agreements as of September 30, 2014 are as follows (in thousands): |
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Year | | Amount | | | |
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2014 | | $ | — | | | | |
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2015 | | — | | | | |
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2016 | | — | | | | |
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2017 | | — | | | | |
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2018 | | 262,000 | | | | |
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| | $ | 262,000 | | | | |
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At September 30, 2014, the Senior Secured Notes traded at a range of 102.25 to 103.25 based upon available market information. The range of the estimated fair value of the Company's Senior Secured Notes was $235.2 million to $237.5 million as of September 30, 2014 and is classified with Level 2 (see Note 8) of the valuation hierarchy. The remaining portion of the Company’s debt is considered a Level 3 input supported by little or no market activity. |
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Costs related to borrowings are deferred and amortized to interest expense over the terms of the related borrowing. Deferred charges consist of the following at September 30, 2014 and December 31, 2013 (in thousands): |
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| September 30, 2014 | | December 31, 2013 |
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Deferred financing fees | $ | 10,921 | | | $ | 10,921 | |
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Accumulated amortization | (3,721 | ) | | (2,083 | ) |
| $ | 7,200 | | | $ | 8,838 | |
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Amortization of deferred financing costs was $0.5 million and $0.6 million for the three months ended September 30, 2014 and 2013, respectively, and $1.6 million and $1.7 million for the nine months ended September 30, 2014 and 2013, respectively, which is included in interest expense in the accompanying unaudited consolidated statement of operations. |