| Financing and Other Debt | 16. Financing and Other Debt The following table summarizes the Company’s total outstanding debt by type: Year ended December 31, (In thousands) 2021 2020 Revolving line-of-credit facility under Amended and Restated Credit Agreement $ 119,800 $ — Tranche A term loan 941,742 873,777 Tranche B term loan 1,431,185 1,442,368 Term loans under Amended and Restated Credit Agreement 2,372,927 2,316,145 Notes outstanding — 400,000 Convertible Notes outstanding 310,000 310,000 Securitized debt 100,861 85,945 Participation debt 1,500 — Borrowed federal funds — 20,000 Total gross debt $ 2,905,088 $ 3,132,090 The following table summarizes the Company’s total outstanding debt by balance sheet classification: Year ended December 31, (In thousands) 2021 2020 Current portion of gross debt $ 165,703 $ 170,556 Less: Unamortized debt issuance costs/debt discount (9,934) (17,826) Short-term debt, net $ 155,769 $ 152,730 Long-term portion of gross debt $ 2,739,385 $ 2,961,534 Less: Unamortized debt issuance costs/debt discount (44,020) (87,421) Long-term debt, net $ 2,695,365 $ 2,874,113 Supplemental information under Amended and Restated Credit Agreement: Letters of credit 1 $ 51,392 $ 51,628 Remaining borrowing capacity on revolving credit facility 2 $ 758,808 $ 818,372 1 Collateral for lease agreements, virtual card and fuel payment processing activity at the Company’s foreign subsidiaries. 2 Contingent on maintaining compliance with the financial covenants as defined in the Company’s Amended and Restated Credit Agreement. Amended and Restated Credit Agreement On April 1, 2021, the Company amended and restated the 2016 Credit Agreement (the “Amended and Restated Credit Agreement”). As part of the Amended and Restated Credit Agreement, the lenders agreed to (i) increase commitments under the Company’s secured revolving credit facility from $870.0 million to $930.0 million (the “Revolving Credit Facility”), (ii) provide additional senior secured tranche A term loans (the “Tranche A Term Loans”) resulting in an aggregate outstanding principal amount of the Tranche A Term Loans equal to $978.4 million, (iii) re-establish the senior secured tranche B term loans’ aggregate principal amount at $1,442.0 million (the “Tranche B Term Loans”), (iv) eliminate the 0.75 percent eurocurrency rate floor with respect to the Revolving Credit Facility, and (v) make certain other changes to the previously existing 2016 Credit Agreement, including without limitation, (a) extending the maturity dates for the Tranche A Term Loans and Revolving Credit Facility to April 1, 2026 and the maturity date for the Tranche B Term Loans to April 1, 2028, (b) providing additional flexibility with respect to certain negative covenants, prepayments and other provisions of the Company’s previously existing 2016 Credit Agreement, and (c) revising the Company’s maximum consolidated leverage ratio for all future quarters. Prior to maturity, the Tranche A Term Loans and Tranche B Term Loans require scheduled quarterly payments of $12.2 million and $3.6 million, respectively, due on the last day of each March, June, September and December. The Revolving Credit Facility and the Tranche A Term Loans bear interest at variable rates, at the Company’s option, plus an applicable margin determined based on the Company’s consolidated leverage ratio. The Tranche B Term Loans bear interest at variable rates, at the Company’s option, plus an applicable margin, which is fixed at 1.25 percent for base rate borrowings and 2.25 percent with respect to eurocurrency rate borrowings. The Company maintains interest rate swap contracts to manage the interest rate risk associated with its outstanding variable-interest rate borrowings. See Note 12, Derivative Instruments, for further discussion. As of December 31, 2021, amounts outstanding under the Amended and Restated Credit Agreement bore a weighted average effective interest rate of 2.2 percent. As of December 31, 2020, amounts outstanding under the 2016 Credit Agreement bore a weighted average effective interest rate of 2.3 percent. In addition, the Company pays a quarterly commitment fee at a rate per annum ranging, as of December 31, 2021, from 0.25 percent to 0.50 percent of the daily unused portion of the Revolving Credit Facility (which was 0.40 percent at both December 31, 2021 and December 31, 2020) determined based on the Company’s consolidated leverage ratio. The obligations of the borrowers under the Amended and Restated Credit Agreement are guaranteed by the Company and certain direct and indirect wholly-owned domestic subsidiaries of the Company and the obligations of foreign borrowers under the Revolving Credit Facility are guaranteed by certain direct and indirect foreign subsidiaries of the Company, subject to certain exceptions. Under the Amended and Restated Credit Agreement, the Company has granted a security interest in substantially all of the assets of the Company and the guarantors, subject to certain exceptions including, without limitation, the assets of WEX Bank and certain foreign subsidiaries. The Amended and Restated Credit Agreement contains customary representations and warranties, as well as affirmative and negative covenants, as further described under the following “Debt Covenants” heading. Notes Outstanding On March 15, 2021, the Company redeemed $400.0 million of Notes outstanding, which were otherwise scheduled to mature on February 1, 2023. The redemption price of the Notes was $400.0 million plus accrued and unpaid interest through the redemption date. Prior to redemption, interest was payable semiannually in arrears on February 1 and August 1 of each year. Unamortized debt issuance costs previously incurred and capitalized in conjunction with the Notes of $1.4 million were accelerated as of the redemption date and amortized in full to interest expense during the year ended December 31, 2021. Convertible Notes Pursuant to a purchase agreement dated June 29, 2020, on July 1, 2020, the Company closed on a private placement with an affiliate of Warburg Pincus LLC (together with its affiliate, “Warburg Pincus”), pursuant to which the Company issued $310.0 million in aggregate principal amount of convertible notes due 2027 (the “Convertible Notes”) and 577,254 shares of the Company's common stock for an aggregate purchase price of $389.2 million, of which $90.0 million constituted the purchase price for the shares, reflecting a purchase price of $155.91 per share. The issuance of the Convertible Notes provided the Company with net proceeds of approximately $299.2 million after original issue discount. The Convertible Notes have a seven-year term and mature on July 15, 2027, unless earlier converted, repurchased or redeemed. Interest on the Convertible Notes is calculated at a fixed rate of 6.5% per annum, payable semi-annually in arrears on January 15 and July 15 of each year. At the Company's option, interest is either payable in cash, through accretion to the principal amount of the Convertible Notes, or a combination of cash and accretion. The Convertible Notes may be converted at the option of the holders at any time prior to maturity, or earlier redemption or repurchase of the Convertible Notes, based upon an initial conversion price of $200.00 per share of common stock. The Company may settle conversions of Convertible Notes, at its election, in cash, shares of the Company’s common stock, or a combination thereof. The initial conversion price is subject to adjustments customary for convertible debt securities and a weighted average adjustment in the event of issuances of equity and equity linked securities by the Company at prices below the then applicable conversion price for the Convertible Notes or the then market price of the Company’s common stock, subject to certain exceptions, including exceptions with respect to underwritten offerings, Rule 144A offerings, private placements at discounts not exceeding a specified amount, issuances as acquisition consideration and equity compensation related issuances. The Company will have the right, at any time after July 1, 2023, to redeem the Convertible Notes in whole or in part if the closing price of WEX's common stock is at least 200% of the conversion price of the Convertible Notes for 20 trading days (whether or not consecutive) out of any 30 consecutive trading day period prior to the time the Company delivers a redemption notice, (including at least one of the five trading days immediately preceding the last day of such 30 trading day period), subject to the right of holders of the Convertible Notes to convert its Convertible Notes prior to the redemption date. In the event of certain fundamental change transactions, including certain change of control transactions and delisting events involving the Company, holders of the Convertible Notes will have the right to require the Company to repurchase its Convertible Notes at 105% of the principal amount of the Convertible Notes, plus the present value of future interest payments through the date of maturity. No such repurchase occurred during the years ended December 31, 2021 and 2020. Until January 1, 2021, the Convertible Notes were separated into liability and equity components. Effective January 1, 2021, the Company adopted ASU 2020-06 using the modified-retrospective approach under which separation of the conversion feature into an equity component is no longer required, and the Company now accounts for the Convertible Notes and its conversion feature as a single unit of account. The remaining debt discount and debt issuance costs associated with the Convertible Notes will be amortized to interest expense using the effective interest rate method over the seven-year contractual life of the Convertible Notes. As of December 31, 2021 and 2020, the Convertible Notes had an effective interest rate of 7.5 percent and 11.2 percent, respectively. Based on the closing price of the Company’s common stock as of December 31, 2021, the “if-converted” value of the Convertible Notes was less than the respective principal amount. The Convertible Notes consist of the following: (In thousands) December 31, 2021 December 31, 2020 Principal $ 310,000 $ 310,000 Less: Unamortized discounts (12,844) (66,755) Less: Unamortized issuance cost (2,068) (2,358) Net carrying amount of Convertible Notes 1 $ 295,088 $ 240,887 Equity component 2 $ — $ 54,689 1 Recorded within long-term debt, net on our consolidated balance sheet. 2 Represents the proceeds allocated to the conversion option, or debt discount, recorded within additional paid-in capital on the consolidated balance sheet through December 31, 2020. Additional paid-in capital on the consolidated balance sheet through December 31, 2020 was further reduced by $0.6 million of issuance costs and $13.6 million in taxes associated with the equity component. Effective January 1, 2021, the Convertible Notes and its conversion feature were accounted for as a single unit of account. The following table sets forth total interest expense recognized for the Convertible Notes: (In thousands) Year Ended December 31, 2021 Year Ended December 31, 2020 Interest on 6.5% coupon $ 20,150 $ 10,019 Amortization of debt discount and debt issuance costs 2,086 3,414 $ 22,236 $ 13,433 Debt Issuance Costs The Company accounted for the 2021 amendment and restatement of the 2016 Credit Agreement as both a debt modification and extinguishment, and consequently recorded a loss on extinguishment of debt of $3.4 million related to the write-off of unamortized debt issuance costs during the year ended December 31, 2021. The Company incurred $5.5 million of third-party debt restructuring costs associated with the amendment and restatement during the year ended December 31, 2021, which have been classified within general and administrative expenses in our consolidated statements of operations. Debt discounts and financing fees totaling $16.1 million, incurred in conjunction with the amendment and restatement, were capitalized during the year ended December 31, 2021, and are being amortized into interest expense over the term of the respective debt facilities using the effective interest method. During the year ended December 31, 2020, the Company completed four amendments (the Eighth, Ninth, Tenth and Eleventh Amendments) to the 2016 Credit Agreement, largely in connection with its acquisition of eNett and Optal. The Eighth Amendment was superseded by the Ninth Amendment (other than with respect to the consent fees payable in connection with the Eighth Amendment) and the Eleventh Amendment modified terms that were only applicable if the Company was required to finance the acquisition of eNett and Optal. However, the Ninth Amendment, among other things, amended certain provisions of the 2016 Credit Agreement relating to financial maintenance covenants and pricing terms and the Tenth Amendment increased the commitments under the Revolving Credit Facility by $50.0 million. The Company accounted for the Ninth, Tenth and Eleventh Amendments as debt modifications. As part of these transactions, the Company incurred and expensed an insignificant amount of third party costs, which are classified within general and administrative expenses in our consolidated statements of operations. In association with the Ninth Amendment, the Company incurred and capitalized $4.3 million of lender fees. Consent fees incurred pursuant to the Eighth Amendment and payable upon a consummation of the eNett and Optal acquisition of $2.9 million were capitalized during December 2020. During the year ended December 31, 2019, the Company entered into the Fifth, Sixth and Seventh Amendments to the 2016 Credit Agreement. The Company accounted for the Fifth Amendment to the 2016 Credit Agreement as a debt modification. The Company accounted for the Sixth Amendment to the 2016 Credit Agreement as both a debt modification and a partial debt extinguishment, and consequently recorded a loss on extinguishment of debt of $1.3 million related to the write-off of unamortized debt issuance costs during 2019. The Company incurred and expensed $10.6 million of third party costs associated with the Fifth and Sixth Amendments, which are classified within general and administrative expenses in the consolidated statements of income during 2019. We expensed as incurred an insignificant amount of costs resulting from the Seventh Amendment to the 2016 Credit Agreement. During 2019, the Company also incurred and capitalized lender costs of $3.4 million associated with the Fifth Amendment and a debt discount of $11.0 million associated with the Sixth Amendment. Debt issuance costs incurred and capitalized are being amortized into interest expense over the remaining term of the respective debt arrangements using the effective interest method. Debt Covenants The Amended and Restated Credit Agreement contains various affirmative and negative covenants that, subject to certain customary exceptions, limit the Company and its subsidiaries’ including, in certain limited circumstances, WEX Bank and the Company’s other regulated subsidiaries, ability to, among other things (i) incur additional debt, (ii) pay dividends or make other distributions on, redeem or repurchase capital stock, or make investments or other restricted payments, (iii) enter into transactions with affiliates, (iv) dispose of assets or issue stock of restricted subsidiaries or regulated subsidiaries, (v) create liens on assets, or (vi) effect a consolidation or merger or sell all, or substantially all, of the Company’s assets. Additionally, the indenture governing the Convertible Notes contains customary negative and affirmative covenants that, subject to certain customary exceptions, limit the Company and its subsidiaries’, but excluding WEX Bank and the Company's other regulated subsidiaries, ability to, among other things, incur additional debt. These covenants are subject to important exceptions and qualifications. The Amended and Restated Credit Agreement also requires, solely for the benefit of the lenders of the Tranche A Term Loan and lenders under the Revolving Credit Facility, that the Company maintain at the end of each fiscal quarter the following financial ratios: • a consolidated interest coverage ratio (as defined in the Amended and Restated Credit Agreement) of no less than 3.00 to 1.00; and • a consolidated leverage ratio (as defined in the Amended and Restated Credit Agreement) of no more than 6.00 to 1.00 for the quarter ending December 31, 2021, 5.75 to 1.00 for the quarter ending March 31, 2022, 5.50 to 1.00 for the quarter ending June 30, 2022, 5.25 to 1.00 for the quarter ending September 30, 2022, 5.00 to 1.00 for the quarters ending December 31, 2022 through September 30, 2023, and 4.75 to 1.00 thereafter. The indenture governing the Convertible Notes includes a debt incurrence covenant that restricts the Company from incurring certain indebtedness, including disqualified stock and preferred stock issued by the Company or its subsidiaries, subject to customary exceptions, including if, after giving effect to any such proposed incurrence or issuance, and the receipt and application of the proceeds therefrom, the ratio of (x) the Company’s consolidated EBITDA for the most recent four fiscal quarters for which financial statements are available, to (y) the Company’s consolidated fixed charges for such period would be greater than 1.5:1.0. The indenture governing the Convertible Notes also contains other customary terms and covenants, including customary events of default. Australian Securitization Facility The Company has a securitized debt agreement with MUFG Bank Ltd. through April 2022. Under the terms of the agreement, each month, on a revolving basis, the Company sells certain of its Australian receivables to the Company’s Australian Securitization Subsidiary, which in turn uses the receivables as collateral to issue asset-backed commercial paper (“securitized debt”). The amount collected on the securitized receivables is restricted to pay the securitized debt and is not available for general corporate purposes. The Company pays a variable interest rate on the outstanding balance of the securitized debt, based on the Australian Bank Bill Rate plus an applicable margin. The interest rate was 0.91 percent and 0.97 percent as of December 31, 2021 and 2020, respectively. The Company had securitized debt under this facility of $70.1 million and $62.6 million as of December 31, 2021 and 2020, respectively, recorded in short-term debt, net. European Securitization Facility The Company has a securitized debt agreement with MUFG Bank Ltd. through April 2022. Under the terms of the agreement, the Company sells certain of its receivables from selected European countries to its European Securitization Subsidiary. The European Securitization Subsidiary, in turn, uses the receivables as collateral to issue securitized debt. The amount of receivables to be securitized under this agreement is determined by management on a monthly basis. The amount collected on the securitized receivables is restricted to pay the securitized debt and is not available for general corporate purposes. The Company pays a variable interest rate on the outstanding balance of the securitized debt, based on the Sterling Overnight Index Average, plus an applicable margin. The interest rate was 0.92 percent and 0.98 percent as of December 31, 2021 and 2020, respectively. The Company had securitized debt under this facility of $30.8 million and $23.4 million as of December 31, 2021 and 2020, respectively, recorded in short-term debt, net. Participation Debt From time to time, WEX Bank enters into participation agreements with third-party banks to fund customers’ balances that exceed WEX Bank’s lending limit to individual customers. Associated unsecured borrowings generally carry a variable interest rate set according to an applicable reference rate plus a margin of 225 to 250 basis points as of December 31, 2021. As of December 31, 2021, the Company had outstanding participation agreements for the borrowing of up to $45.0 million through December 31, 2022 and up to $35.0 million thereafter through December 31, 2023. As of December 31, 2021, the average interest rate on these agreements was 2.54 percent. There was $1.5 million borrowed against these participation agreements as of December 31, 2021 and recorded within short-term debt, net on the consolidated balance sheet. There were no amounts borrowed against participation agreements as of December 31, 2020. Borrowed Federal Funds WEX Bank borrows from uncommitted federal funds lines to supplement the financing of the Company's accounts receivable. Federal funds lines of credit were $530.0 million and $376.0 million, respectively, as of December 31, 2021 and 2020. There were no outstanding borrowings as of December 31, 2021 and $20.0 million as of December 31, 2020. The average interest rate on borrowed federal funds was 0.11 percent and 1.01 percent for the years ended December 31, 2021 and 2020, respectively. Other As of December 31, 2021, WEX Bank pledged $343.5 million of fleet receivables held by WEX Bank to the Federal Reserve Bank as collateral for potential borrowings, through the Federal Reserve Bank Discount Window. Amounts that can be borrowed are based on the amount of collateral pledged and were $268.6 million as of December 31, 2021. WEX Bank had no borrowings outstanding on this line of credit through the Federal Reserve Bank Discount Window as of December 31, 2021 and December 31, 2020. Debt Commitments The table below summarizes the Company’s annual principal payments on its total debt for each of the next five years: (In thousands) 2022 $ 165,703 2023 $ 63,342 2024 $ 63,342 2025 $ 63,342 2026 $ 880,275 |
