v3.22.2.2
Debt and Financing Lease Obligations
 9 Months Ended
Oct. 31, 2022
Debt Disclosure [Abstract]  
Debt and Financing Lease Obligations Debt and Financing Lease Obligations 
Debt and financing lease obligations consisted of the following:
(in thousands)October 31,
2022		January 31,
2022
Revolving Credit Facility$114,000 $149,000 
2020-A VIE Asset-backed Class A Notes— 9,184 
2020-A VIE Asset-backed Class B Notes— 18,342 
2020-A VIE Asset-backed Class C Notes— 17,695 
2021-A VIE Asset-backed Class A Notes24,287 195,595 
2021-A VIE Asset-backed Class B Notes66,090 66,090 
2021-A VIE Asset-backed Class C Notes63,890 63,890 
2022-A VIE Asset-backed Class A Notes191,174 — 
2022-A VIE Asset-backed Class B Notes132,090 — 
Financing lease obligations5,436 6,115 
Total debt and financing lease obligations596,967 525,911 
Less:
Deferred debt issuance costs(4,375)(2,873)
Current maturities of long-term debt and financing lease obligations(919)(889)
Long-term debt and financing lease obligations$591,673 $522,149 
Asset-backed Notes. From time to time, we securitize customer accounts receivables by transferring the receivables to various bankruptcy-remote VIEs. In turn, the VIEs issue asset-backed notes secured by the transferred customer accounts receivables and restricted cash held by the VIEs.
Under the terms of the securitization transactions, all cash collections and other cash proceeds of the customer receivables go first to the servicer and the holders of issued notes, and then to us as the holder of non-issued notes, if any, and residual equity. We retain the servicing of the securitized portfolios and receive a monthly fee of 4.75% (annualized) based on the outstanding balance of the securitized receivables. In addition, we, rather than the VIEs, retain all credit insurance income together with certain recoveries related to credit insurance and RSAs on charge-offs of the securitized receivables, which are reflected as a reduction to net charge-offs on a consolidated basis.
The asset-backed notes were offered and sold to qualified institutional buyers pursuant to the exemptions from registration provided by Rule 144A under the Securities Act of 1933. If an event of default were to occur under the indenture that governs the respective asset-backed notes, the payment of the outstanding amounts may be accelerated, in which event the cash proceeds of the receivables that otherwise might be released to the residual equity holder would instead be directed entirely toward repayment of the asset-backed notes, or if the receivables are liquidated, all liquidation proceeds could be directed solely to repayment of the asset-backed notes as governed by the respective terms of the asset-backed notes. The holders of the asset-backed notes have no recourse to assets outside of the VIEs. Events of default include, but are not limited to, failure to make required payments on the asset-backed notes or specified bankruptcy-related events.
The asset-backed notes outstanding as of October 31, 2022 consisted of the following:
(dollars in thousands)
Asset-Backed NotesOriginal Principal Amount
Original Net Proceeds (1)
Current Principal AmountIssuance DateMaturity DateContractual Interest Rate
Effective Interest Rate (2)
2021-A Class A Notes$247,830 $246,152 $24,287 11/23/20215/15/20261.05%3.13%
2021-A Class B Notes66,090 65,635 66,090 11/23/20215/15/20262.87%3.54%
2021-A Class C Notes63,890 63,450 63,890 11/23/20215/15/20264.59%5.08%
2022-A Class A Notes275,600 273,731 191,174 7/21/202212/15/20265.87%8.38%
2022-A Class B Notes132,090 129,050 132,090 7/21/202212/15/20269.52%10.27%
Total$785,500 $778,018 $477,531 
(1)After giving effect to debt issuance costs.
(2)For the nine months ended October 31, 2022, and inclusive of the impact of changes in timing of actual and expected cash flows.
On July 21, 2022, the Company completed the issuance and sale of approximately $407.7 million in aggregate principal amount of asset-backed notes secured by the transferred customer accounts receivables and restricted cash held by a consolidated VIE, which resulted in net proceeds to us of approximately $402.8 million, net of debt issuance costs. Net proceeds from the offering were used to repay indebtedness under the Company’s Revolving Credit Facility, as defined below, and for other general corporate purposes. The asset-backed notes mature on December 15, 2026 and consist of $275.6 million of 5.87% Asset Backed Fixed Rate Notes, Class A, Series 2022-A (the "Class A Notes"), approximately $132.1 million of 9.52% Asset Backed Fixed Rate Notes, Class B, Series 2022-A (the "Class B Notes"). Additionally, the Company issued approximately $63.1 million in aggregate principal amount of zero coupon Asset Backed Fixed Rate Notes, Class C, Series 2022-A (the "Class C Notes") which mature on December 15, 2026. The Class C Notes were retained by the Company upon issuance. On November 30, 2022, the Company sold the Class C Notes. See Note 10, Subsequent Events, for details.
Revolving Credit Facility. On March 29, 2021, Conn’s, Inc. and certain of its subsidiaries (the “Borrowers”) entered into the Fifth Amended and Restated Loan and Security Agreement (the “Fifth Amended and Restated Loan Agreement”), with certain lenders, which provides for a $650.0 million asset-based revolving credit facility (as amended, the “Revolving Credit Facility”) under which credit availability is subject to a borrowing base and a maturity date of March 29, 2025.
The Fifth Amended and Restated Loan Agreement, among other things, permits borrowings under the Letter of Credit Subline (as defined in the Fifth Amended and Restated Loan Agreement) that exceed the cap of $40 million to $100 million, solely at the discretion of the lenders for such amounts in excess of $40 million. The obligations under the Revolving Credit Facility are secured by substantially all assets of the Company, excluding the assets of the VIEs. As of October 31, 2022, under our Revolving Credit Facility, we had immediately available borrowing capacity of $155.4 million, net of standby letters of credit issued of $22.3 million, and an additional $358.3 million that may become available if the balance of eligible customer receivables and total eligible inventory balances increases.
Loans under the Revolving Credit Facility bear interest, at our option, at a rate of LIBOR plus a margin ranging from 2.50% to 3.25% per annum (depending on a pricing grid determined by our total leverage ratio) or the alternate base rate plus a margin ranging from 1.50% to 2.25% per annum (depending on a pricing grid determined by our total leverage ratio). The alternate base rate is a rate per annum equal to the greatest of the prime rate, the federal funds effective rate plus 0.5%, or LIBOR for a 30-day interest period plus 1.0%. We also pay an unused fee on the portion of the commitments that is available for future borrowings or letters of credit at a rate ranging from 0.25% to 0.50% per annum, depending on the average outstanding balance and letters of credit of the Revolving Credit Facility in the immediately preceding quarter. The weighted-average interest rate on borrowings outstanding and including unused line fees under the Revolving Credit Facility was 4.3% for the nine months ended October 31, 2022.
The Revolving Credit Facility places restrictions on our ability to incur additional indebtedness, grant liens on assets, make distributions on equity interests, dispose of assets, make loans, pay other indebtedness, engage in mergers, and other matters. The Revolving Credit Facility restricts our ability to make dividends and distributions unless no event of default exists and a liquidity test is satisfied. Subsidiaries of the Company may pay dividends and make distributions to the Company and other obligors under the Revolving Credit Facility without restriction. We are restricted from making distributions as a result of the Revolving Credit Facility distribution and payment restrictions. The Revolving Credit Facility contains customary default provisions, which, if triggered, could result in acceleration of all amounts outstanding under the Revolving Credit Facility.
Debt Covenants. On November 21, 2022, we entered into Amendment No. 1 (the "Amendment") to the Fifth Amended and Restated Loan and Security Agreement, dated as of March 29, 2021, which waived testing of the interest coverage covenants beginning with the third quarter of fiscal year 2023 and continuing until the date on which the Company delivers financial statements and compliance certificate for the fiscal quarter ending April 30, 2024 (unless earlier terminated pursuant to the terms of the Amendment). See Note 10, Subsequent Events, for further details. After giving effect to the foregoing amendment, as of October 31, 2022, we were in compliance with the covenants in our Revolving Credit Facility.
A summary of the significant financial covenants that govern our Revolving Credit Facility compared to our actual compliance status at October 31, 2022 is presented below: 
 ActualRequired Minimum/ Maximum
Interest Coverage Ratio for the quarter must equal or exceed minimumNot Tested1.00:1.00
Interest Coverage Ratio for the trailing two quarters must equal or exceed minimumNot Tested1.50:1.00
Leverage Ratio must not exceed maximum1.64:1.004.50:1.00
ABS Excluded Leverage Ratio must not exceed maximum0.84:1.002.50:1.00
Capital Expenditures, net, must not exceed maximum$50.4 million$100.0 million
All capitalized terms in the above table are defined in the Revolving Credit Facility and may or may not match directly to the financial statement captions in this document. The covenants are calculated quarterly, except for capital expenditures, which is calculated for a period of four consecutive fiscal quarters, as of the end of each fiscal quarter.