DEBT |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DEBT |
DEBT
Our debt consisted of the following (in thousands):
Convertible Subordinated Debt
In the third quarter of fiscal 2013, we issued $70 million aggregate principal amount of 4.50% convertible subordinated notes due November 15, 2017. These notes are convertible into shares of our common stock until November 14, 2017 at the option of the holders at a conversion rate of 75.896 shares per $1,000 principal amount, a conversion price of approximately $13.20 per share. As the purchasers were qualified institutional investors, as defined in Rule 144A under the Securities Act of 1933 (“Securities Act”), the 4.50% notes have not been registered under the Securities Act. We pay 4.50% interest per annum on the principal amount of the 4.50% notes semi-annually in May and November of each year. The terms of the 4.50% notes are governed by an agreement dated October 31, 2012 between Quantum and U.S. Bank National Association. The 4.50% notes are subordinated to any existing indebtedness and other liabilities pro-rata. We incurred and capitalized $2.3 million of fees related to the issuance of the 4.50% notes. These fees are amortized to interest expense over the term of the notes with the remaining unamortized amount included as a deduction to the carrying amount.
In the third and fourth quarters of fiscal 2017, we entered into private transactions with note holders to purchase an aggregate principal amount of $6.9 million of the 4.50% notes for $6.8 million of cash. In connection with these transactions, we recorded a gain on debt extinguishment of $0.1 million, which included a write-off of the pro-rata unamortized debt issuance costs related to the purchased notes.
Long-term Debt
On October 21, 2016 (“closing date”), we refinanced our credit agreement with Wells Fargo (as amended, the “WF credit agreement”) through the use of proceeds obtained from our term loan and revolving credit facility (“credit facility”). The credit facility includes a revolving credit and security agreement with PNC Bank, National Association (“revolving credit agreement”) and a term loan credit and security agreement with TCW Asset Management Company LLC (“term loan agreement”). In connection with the refinance, we recorded a loss on debt extinguishment of $0.1 million comprised of unamortized debt issuance costs related to borrowings under the WF credit agreement.
On the closing date, we borrowed $50.0 million under the term loan agreement and $26.0 million under the revolving credit agreement. These borrowings were used to i) pay $60.3 million of the outstanding balance on the WF credit agreement and accrued interest, ii) fund $10.0 million towards a portion of a $20.0 million restricted reserve requirement under the revolving credit agreement with the remaining portion of the requirement funded with cash on hand, iii) pay $4.7 million of transaction fees and other expenses and iv) pay a $1.0 million refundable deposit to Wells Fargo to hold during the transfer of our existing letters of credit to the new credit facility. Transaction fees and other expenses incurred under the credit facility included $3.1 million of debt issuance costs, $1.0 million of debt discount and $0.6 million of loan commitment fees. The $20.0 million restricted reserve requirement is presented as long-term restricted cash, within the Consolidated Balance Sheet as of March 31, 2017.
Revolving Credit Agreement
Under the revolving credit agreement, we have the ability to borrow the lesser of $80.0 million or the amount of the monthly borrowing base, which is reduced by $1.0 million by the outstanding letters of credit. Our borrowing base is established monthly based on certain working capital asset balances. The revolving credit agreement also includes an uncommitted accordion in an amount up to $20.0 million. The revolving credit agreement matures on October 21, 2021. As of March 31, 2017, our excess availability under the revolving credit agreement was $46.4 million.
Included in the $4.7 million of transaction fees and other expenses as discussed above are $1.9 million of debt issuance costs and $0.6 million of loan commitment fees attributable to the revolving credit agreement. Debt issuance costs related to our revolving credit agreement were recorded as a reduction of its carrying amount to the extent outstanding borrowings are greater than the related unamortized fees and are amortized to interest expense over the term of the related agreement using the effective interest method. Loan commitment fees paid related to future borrowing capacity were recorded as an asset and are amortized ratably over the term of the revolving credit agreement.
Borrowings under the revolving credit agreement bear interest at a rate per annum equal to, at our option, either (a) the greater of (i) the base rate, (ii) the Federal funds rate plus 0.50% and (iii) the 1 month LIBOR rate, plus 1.0%, plus an applicable margin of 1.50%, or (b) the LIBOR rate plus an applicable margin of 2.50%. The base rate is defined in the revolving credit agreement. Additionally, we are required to pay a 0.375% commitment fee on undrawn amounts under the revolving credit agreement on a quarterly basis, which is recorded as interest expense in the period incurred. As of March 31, 2017, we had a $18.5 million outstanding balance on the line of credit at an interest rate of 3.86%.
Term Loan Agreement
The term loan agreement provides for $50.0 million of a senior secured term loan drawn on the closing date and $20.0 million of a senior secured delay draw term loan (“DDTL”). Borrowings under the DDTL are restricted to be used only to redeem our 4.50% notes due November 15, 2017. The term loan agreement matures on October 21, 2021. The amount outstanding under the term loan is to be repaid on a quarterly basis in an amount equal to 1.25% of the original principal amount beginning on March 31, 2018, with any remaining principal balance due on the maturity of the term loan.
Included in the $4.7 million of transaction fees and other expenses are $1.2 million of debt issuance costs and $1.0 million of debt discount attributable to the term loan agreement. These fees were recorded as a reduction to the carrying amount of outstanding borrowings under the term loan agreement and amortized to interest expense over the term of the borrowing using the effective interest method.
Borrowings under the term loan agreement bear interest at a rate per annum equal to, at our option, either (a) the greatest of (i) 3.00%, (ii) the Federal funds rate plus 0.50%, (iii) the LIBOR rate based upon an interest period of 1 month plus 1.0% and (iv) the “prime rate” last quoted by the Wall Street Journal, plus a margin ranging from 6.00% to 7.25% based on the applicable senior net leverage ratio, or (b) the LIBOR rate plus 7.00% to 8.25% based on the applicable senior net leverage ratio. The senior net leverage ratio is defined in the term loan agreement. As of March 31, 2017, our interest rate on the term loan was 8.55%.
The revolving credit agreement and the term loan agreement are collateralized by a pledge of substantially all of our assets and contain certain financial covenants and customary events of default for such securities. Financial covenants include a fixed charge coverage ratio, senior net leverage ratio and total leverage ratio. Additionally, the revolving credit agreement includes minimum liquidity requirements. There is a blanket lien on all of our assets under the revolving credit agreement and term loan agreement. As of March 31, 2017, and during fiscal 2017, we were in compliance with all covenants.
Debt Maturities
A summary of the scheduled maturities for our outstanding debt as of March 31, 2017 follows (in thousands):
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