Quarterly report pursuant to Section 13 or 15(d)

SENIOR TERM LOAN

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SENIOR TERM LOAN
6 Months Ended
Jun. 30, 2022
Senior Term Loan  
SENIOR TERM LOAN

 

9. SENIOR TERM LOAN

 

On December 30, 2020, Legacy Airspan, together with Holdco, Airspan Networks (SG) Inc., Mimosa Networks, Inc., Mimosa Networks International, LLC, Airspan Communications Limited, Airspan Networks LTD, and Airspan Japan K.K., as guarantors, together with the other parties thereto, entered into an assignment agreement, whereby Pacific Western Bank (“PWB”) and Ally Bank assigned their interests in a loan facility under the Second Amended and Restated Loan and Security Agreement with Legacy Airspan (the “PWB Facility”) to certain new lenders (the “Assignment Agreement”), and PWB entered into a resignation and assignment agreement (the “Agent Resignation Agreement”) pursuant to which PWB resigned in its capacity as agent under all of the transaction documents and Fortress became the successor agent (as defined in the Agent Resignation Agreement), replacing PWB in such capacity under the PWB Facility. The Assignment Agreement and the Agent Resignation Agreement, along with a Reaffirmation and Omnibus Amendment, resulted in the amendment and restatement of the terms of the PWB Facility and the Fortress Credit Agreement with the new lenders as the lenders thereunder. Fortress became the administrative agent, collateral agent and trustee for the lenders and other secured parties. At Closing, on August 13, 2021, the Company, Legacy Airspan and certain of the Company’s subsidiaries who are party to the Fortress Credit Agreement entered into a Waiver and Consent, Second Amendment, Restatement, Joinder and Omnibus Amendment to Credit Agreement and Other Loan Documents relating to the Fortress Credit Agreement with Fortress (the “August 2021 Fortress Amendment”) to, among other things, add the Company as a guarantor, recognize and account for the Business Combination, recognize and account for the Convertible Notes (see Note 10) and provide updated procedures for replacement of LIBOR. On March 29, 2022, the Company, Legacy Airspan and certain of the Company’s subsidiaries who are party to the Fortress Credit Agreement entered into a Third Amendment and Waiver to Credit Agreement and Other Loan Documents relating to the Fortress Credit Agreement with Fortress to, among other things, amend the financial covenants included in the Fortress Credit Agreement.

 

The Fortress Credit Agreement initial term loan total commitment of $34.0 million and a term loan commitment of $10.0 million were both funded to Legacy Airspan on December 30, 2020. Pursuant to the Fortress Credit Agreement, the Company may expand the term loan commitment by $20.0 million subject to the terms and conditions of the Fortress Credit Agreement. The maturity date of the total loan commitment is December 30, 2024. The Fortress Credit Agreement contains a prepayment premium of 5.0% if the prepayment occurs during the period from December 30, 2021 through December 29, 2022, and 3.0% if the prepayment occurs during the period from December 30, 2022 through December 29, 2023. The Fortress Credit Agreement also contained a prohibition on prepayment during the period from December 30, 2020 through December 29, 2021. Subsequent to December 29, 2021, the Company may prepay this loan but will incur a related fee in the amount of a make-whole amount of interest that would have been payable had such prepayment not been made.

 

As of June 30, 2022, the Company was in compliance with all applicable covenants under the Fortress Credit Agreement.

 

Based on management’s current forecast, the Company has concluded that it is probable that it will not be in compliance with the minimum last twelve-month Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) covenant under the Fortress Credit Agreement as of the September 30, 2022 quarterly measurement date. Under the terms of the Fortress Credit Agreement, as of the last day of any fiscal quarter, the Company’s EBITDA for the preceding twelve months may not be less than the applicable minimum established in the Fortress Credit Agreement. For the last day of the next four fiscal quarters, commencing with the fiscal quarter ending September 30, 2022, the applicable minimum twelve-month EBITDA under the Fortress Credit Agreement ranges from a loss of $23.0 million to a loss of $42.0 million.

 

In addition, based on management’s current forecast, absent of additional financing or capital raising, the Company has concluded it is also probable that it will not be in compliance with the minimum liquidity covenant under the Fortress Credit Agreement during certain periods of the next twelve months. Under the terms of the Fortress Credit Agreement, the Company is required at all times to maintain minimum liquidity of between $15.0 million and $20.0 million, depending on EBITDA performance levels and whether a default or event of default exists under the Fortress Credit Agreement.

 

While the Company intends to seek waivers from compliance with the applicable covenants in connection with such anticipated breaches, or amendments of the existing financial covenants included in the Fortress Credit Agreement, the Company is also pursuing alternative sources of capital. In the event the Company is not in compliance with all applicable covenants under the Fortress Credit Agreement as of September 30, 2022, and the Company is unable to obtain waivers from compliance with such covenants or otherwise remedy such breaches, the Company expects to classify its senior term loan, convertible debt, subordinated term loan and subordinated debt as current liabilities on its condensed consolidated balance sheet as of September 30, 2022.

 

The Company’s senior term loan balance was $45.5 million and $46.8 million, inclusive of accrued interest of $3.7 million and $2.5 million, as of June 30, 2022 and December 31, 2021, respectively. Deferred financing fees of $4.5 million and $5.9 million are reflected as reductions of the outstanding senior term loan balance as of June 30, 2022 and December 31, 2021, respectively.