Debt |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Debt Disclosure [Abstract] | |
| Debt | Debt Subordinated Convertible Debt Agreement On October 6, 2020, the Company entered into a subordinated convertible debt agreement (the “Convertible Notes”), whereby the Company issued $100 million of Convertible Notes to certain holders maturing on September 30, 2025. The Convertible Notes had an annual interest rate of 8.28%, which accrues as paid-in-kind through the duration of the contract. Repayment of principal and accrued interest was payable in cash or shares of the Company upon the occurrence of certain qualifying events or at the end of the contract term. Interest accrued over the term of the debt and was payable upon repayment at maturity or earlier upon the occurrence of certain events. As a part of the subordinated convertible debt agreement, the Company identified embedded derivatives that require bifurcation under ASC 815, Derivatives and Hedging, relating to the contingent conversion option, payment of liquidation, default payment and prepayment options. See Note 12—Derivative instruments for further discussion on the Company’s accounting for these embedded derivatives. In conjunction with the IPO on July 15, 2021, the outstanding Convertible Notes of $106.3 million of principal and interest were converted into 14,847,066 shares of common stock at a conversion price of $16.00. Subordinated Second Lien Term Loan On October 6, 2020, the Company entered into a Subordinated Second Lien Term Loan (“Subordinated Credit Agreement”) with certain lenders which committed the lenders to provide $125 million of financing to the Company in exchange for a note payable. This agreement matured over a five-year period that carried a Paid-In Kind (“PIK”) Interest rate of 13.00%. PIK Interest accrued over the term of the Subordinated Credit Agreement. The Subordinated Credit Agreement had a maturity date of October 5, 2025. In connection with the Subordinated Credit Agreement, the Company paid the lenders approximately $3.8 million in fees. Similarly, the Company paid third parties fees of approximately $1.0 million. The Company determined that all fees paid to the lenders and third parties would result in a reduction of the initial carrying amount. The Company amortized the debt discount and debt issuance costs into interest expense utilizing the effective interest method. On July 19, 2021, the Company repaid in full all outstanding indebtedness and terminated all commitments and obligations under the Subordinated Credit Agreement. The Company used proceeds from its IPO to repay $150.5 million under the terms of the Subordinated Credit Agreement, inclusive of a prepayment penalty of $3.8 million and penalty of six months of advanced interest for $9.3 million as a result of the repayment of indebtedness or termination of the Subordinated Credit Agreement. First Lien Loan The Company entered into a senior secured credit agreement, dated as of September 18, 2019 (the “Secured Credit Agreement”), with JPMorgan Chase Bank, N.A., as Administrative Agent, Australian Security Trustee, Lender, Swingline Lender and Issuing Bank, consisting of a $20.0 million revolving credit facility (the “Revolving Facility”) and a $30.0 million term loan facility (the “Term Facility”). Initial borrowings of $30.0 million from the Term Facility and $11.9 million of the availability under the Revolving Facility were used to repay, in full, amounts due to common stockholders as a result of the MWIG transaction. See Note 18—Convertible preferred stock and stockholders' equity (deficit) for further discussion. The remaining availability under the Revolving Facility may be drawn and used for general corporate purposes. The obligations under the Secured Credit Agreement are guaranteed by certain operating subsidiaries of the Company and secured by a majority of the Company’s assets. The Revolving Facility may be prepaid and terminated by the Company at any time without premium or penalty (subject to customary LIBOR breakage fees). The Term Facility bore interest at floating rate of LIBOR plus 1.5 percent. On June 23, 2020, the Company amended the Secured Credit Agreement to allow it to enter into a definitive agreement with a special purpose acquisition corporation. On October 6, 2020, the Company amended the agreement a second time. Through the second amendment, the Company agreed to convert $8,000,000 of the amount outstanding on the Revolving Facility to be part of the Term Facility. In addition to converting a portion of the Revolving Facility to the Term Facility, the Company agreed to repay $5,000,000 of the principal amount of the Revolving Facility outstanding. The interest rate of both the Term Facility and the Revolving Facility were amended to 4.00% and 3.00% for Eurodollar loans and letters of credit, and ABR Loans, respectively. On July 19, 2021, the Company repaid in full all outstanding indebtedness and terminated all commitments and obligations under the Term Facility. The Company used proceeds from its IPO to repay the Term Facility and Revolving Facility in the amount of $31.1 million and $7.0 million, respectively. On August 13, 2021, the Company entered into an amended and restated credit agreement (“Credit Agreement”) which amends and restates the Secured Credit Agreement dated September 18, 2019. The Credit Agreement provides for a $90 million five-year senior secured revolving facility (“Facility”). The Credit Agreement also provides that, under certain circumstances, the Company may increase the aggregate principal amount of revolving commitments by an aggregate amount of up to $35 million. The proceeds from the Facility will be used for general corporate purposes. Amounts outstanding under the Credit Agreement accrue interest at a rate equal to either, at the Company’s election, the LIBOR rate plus a margin of 2.50% to 3.50% per annum, or base rate plus a margin of 1.50% to 2.50%, in each case depending on the Company’s total leverage ratio. As a result of the amendment, the Company modified the existing covenant under the Secured Credit Agreement. The total leverage ratio was modified such that the Company is required to maintain a total leverage ratio, of less than 3.00 to 1.00. In connection with the Credit Agreement, the Company paid lender and third-party fees of $0.9 million and $0.1 million, respectively, associated with the amendment. The Company concluded that the amendment resulted in a modification of debt rather than a debt extinguishment. As such, the Company determined that all fees incurred in connection with the Credit Agreement would be deferred and amortized over the term of the new arrangement. On May 13, 2022, the Company entered into a second amendment (the “Second Amendment”) to the Credit Agreement. Pursuant to the Second Amendment, certain terms of the Credit Agreement were amended to permit the execution of the credit agreement dated as of May 13, 2022 between the Company and Fortress Credit Group (including establishing the securitization of the franchisee loans described below) and the issuance of warrants pursuant to the Warrant Purchase Agreement (See Note 13—Warrant liabilities). The outstanding balance of the Facility as of September 30, 2022 and December 31, 2021 was $88.1 million and $0, respectively. The unamortized debt issuance cost in connection to the Facility as of September 30, 2022 and December 31, 2021 was $0.8 million and $1.0 million, respectively. The availability on the Facility as of September 30, 2022 and December 31, 2021 was $0.3 million and $88.5 million, respectively. In connection with the Facility, the Lender has issued standby letters of credit on behalf of the Company associated with our corporate headquarters. The outstanding commitments under these letters of credit as of September 30, 2022 totaled $1.6 million, of which $0.1 million has expiration dates in less than one year and $1.5 million has an expiration date greater than one year. The amount of borrowings available at any time under the Facility is reduced by the amount of letters of credit outstanding. On July 25, 2022, the Company entered into a Waiver Under Credit Agreement (the “Credit Agreement Waiver”) with JPMorgan Chase Bank, N.A., as administrative agent and Australian Security Trustee. Pursuant to the Credit Agreement Waiver, certain lenders party to the Credit Agreement have agreed to waive certain defaults under the Credit Agreement related to cross-default provisions associated with required minimum market capitalization thresholds under the Company’s Fortress Credit Facility. As of September 30, 2022, the Company was in compliance with its covenants on the Secured Credit Agreement. Fortress Credit Facility The Company entered into a credit agreement, dated as of May 13, 2022 (the “New Credit Agreement”), with a newly created subsidiary of the Company, F45 SPV Finance Company, LLC as “Borrower” and Fortress Credit Group (“Fortress”), as administrative agent, collateral agent, and lender, consisting of a $150 million (the “Maximum Commitment Amount”) seven-year credit facility (the “New Facility”). The Maximum Committed Amount may be increased to $300 million in certain circumstances under the terms of the New Credit Agreement. The New Credit Agreement requires that the Company enter into a limited guaranty, guaranteeing the Company’s obligations under the New Facility, in an amount not to exceed 10% of the total New Facility size. The proceeds from the New Facility will be used by the Borrower to purchase loans made by another subsidiary of the Company, F45 Intermediate Holdco, LLC, to certain franchisees of the Company (the “Receivables”). The obligations under the New Credit Agreement are secured by the Receivables. Amounts outstanding under the New Credit Agreement accrue interest at a rate equal to the amount of interest received by the Company from each franchisee loan agreement. The covenants of the New Credit Agreement include negative covenants that, among other things, restrict the Company’s ability to incur additional indebtedness, grant liens and make certain acquisitions, investments, asset dispositions and restricted payments. In addition, the New Credit Agreement contains certain financial covenants that require the Company to maintain certain market capitalization levels. During July 2022, the Company determined it was no longer in compliance with covenants requiring minimum market capitalization thresholds in the New Credit Agreement. Subsequently, on August 14, 2022, F45 SPV Finance Company, LLC, delivered a notice to Fortress, as administrative agent, terminating its New Credit Agreement, dated as of May 13, 2022, by and among the Borrower, the Company and Fortress, as administrative agent, collateral agent, and lender. There were no borrowings outstanding under the New Credit Agreement at the time of termination. In connection with the New Credit Agreement, the Company entered into a warrant purchase agreement with certain affiliates of Fortress, pursuant to which the Company is obligated to issue warrants in up to four tranches, each representing 1.25% of the fully diluted shares of the Company’s common stock outstanding on the issue date of the warrants (see Note 13—Warrant liabilities). As a result of issuance of the warrants, the Company determined the fair value of the warrants of approximately $8.9 million issued in connection with the New Credit Agreement would be deferred and amortized over the term of the New Credit Agreement. The Company recorded additional debt issuance costs for fees paid to lenders and third parties of approximately $2.9 million. As a result of the termination of the New Credit Agreement on August 14, 2022, the Company recorded interest expense of $11.5 million in the condensed consolidated statements of operations and comprehensive loss during three and nine months ended September 30, 2022 associated with the write-off of debt issuance costs incurred on the New Credit Agreement. Additionally, the Company recorded additional charges of approximately $2.5 million associated with fees incurred with termination of the New Credit Agreement during the three and nine months ended September 30, 2022. PPP Loan On April 10, 2020, the Company received loan proceeds of approximately $2.1 million under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses to help sustain its employee payroll costs, rent, and utilities due to the impact of the recent COVID-19 pandemic. Loans obtained through the PPP are eligible to be forgiven as long as the proceeds are used for qualifying purposes, which include the payment of payroll costs, interest on covered mortgage obligations, rent obligations and utility payments. The receipt of these funds, and the forgiveness of the loan is dependent on the Company having initially qualified for the loan and qualifying for the forgiveness of such loan based on its adherence to the forgiveness criteria. In June 2020, Congress passed the Payroll Protection Program Flexibility Act that made several significant changes to PPP loan provisions, including providing greater flexibility for loan forgiveness. The Company used the proceeds from the PPP loan to fund payroll costs in accordance with the relevant terms and conditions of the CARES Act. The Company followed the government guidelines and tracking costs to ensure full forgiveness of the loan. To the extent it was not forgiven, the Company would have been required to repay that portion at an interest rate of 1% over a period of 1.5 years, beginning November 2020 with a final installment in April 2025. During the third quarter of 2021, the outstanding balance on the PPP loan including interest was forgiven by the U.S. Small Business Administration (“SBA”). The Company is subject to examination by the SBA as the total loan forgiveness exceeds the $2.0 million threshold. Interest expense Interest expense recorded on the debt facilities was $1.2 million and $2.1 million for the three and nine months ended September 30, 2022, respectively, and $42.1 million and $59.2 million for the three and nine months ended September 30, 2021, respectively. The weighted-average interest rate on the Company’s outstanding debt as of September 30, 2022 was 5.58%. There was no outstanding debt as of December 31, 2021.
|