15. DEBT 

 

The Company had the following debt outstanding.

DETAIL OF DEBT

(Dollars in Thousands)



The 2024 Note

On September 1, 2024, pursuant to the Redemption Agreement, the Operating LLC issued to JKD Investor the 2024 Note, which evidences the Operating LLC’s obligation to repay to the JKD Investor the original principal amount of $5,146. Pursuant to the 2024 Note, the unpaid principal amount and all accrued but unpaid interest thereunder will be due and payable as follows: (i) $2,573 of the principal amount will be due and payable on August 31, 2025, and (ii) $2,573 will be due and payable on August 31, 2026.

The 2024 Note accrues interest on the unpaid principal amount from September 1, 2024 until maturity at a rate equal to 12% per year. Interest on the 2024 Note is payable in cash quarterly on each January 1, April 1, July 1, and October 1, and commenced on October 1, 2024. Under the 2024 Note, upon the occurrence or existence of any “Event of Default” thereunder, the outstanding principal amount is (or in certain instances, at the option of the holder thereof, may be) immediately accelerated. Further, upon the occurrence of any “Event of Default” under the 2024 Note and for so long as such Event of Default continues, all principal, interest and other amounts payable under the 2024 Note will bear interest at a rate equal to 13% per year.

The 2024 Note could not be prepaid in whole or in part prior to January 31, 2025. The 2024 Note may, with at least 31 days’ prior written notice from the Operating LLC to the holder thereof, be prepaid in whole or in part at any time following January 31, 2025 without the prior written consent of the holder and without penalty or premium.

The 2024 Note and the payment of all principal, interest, and any other amounts payable thereunder are senior obligations of the Operating LLC and will be senior to any Indebtedness (as defined in the 2024 Note) of the Operating LLC outstanding as of and issued following September 1, 2024. Pursuant to the 2024 Note, following September 1, 2024, the Operating LLC  may not incur any Indebtedness that is a senior obligation to the 2024 Note. See notes 4.

The 2020 Note

On January 5, 2024, the Operating LLC and JKD Investor entered into an amendment to the 2020 Note, pursuant to which the 2020 Note was amended to (a) extend (i) the maturity date thereof from January 31, 2024 to January 31, 2026, (ii) the date following which the 2020 Note may be redeemed by JKD Investor from January 31, 2023 to January 31, 2025, and (iii) the date following which the 2020 Note may be prepaid by the Operating LLC from January 31, 2023 to January 31, 2025; and (b) increase the interest rate payable under the 2020 Note from 10% per annum to 12% per annum effective as of January 31, 2024. 

Junior Subordinated Notes

The Company assumed $49,614 aggregate principal amount of junior subordinated notes outstanding at the time of the AFN Merger. The Company recorded the debt at fair value on the acquisition date. Any difference between the fair value of the junior subordinated notes on the AFN Merger date and the principal amount of debt is amortized into earnings over the estimated remaining life of the underlying debt as an adjustment to interest expense.

The junior subordinated notes are payable to two special purpose trusts:

Alesco Capital Trust I and Sunset Financial Trust (collectively, the “Trusts”) described above are VIEs pursuant to variable interest provisions included in ASC 810 because the holders of the equity investment at risk do not have adequate decision making ability over the Trusts’ activities. The Company is not the primary beneficiary of the Trusts as it does not have the power to direct the activities of the Trusts. The Trusts are not consolidated by the Company and, therefore, the Company’s consolidated financial statements include the junior subordinated notes issued to the Trusts as a liability, and the investment in the Trusts’ common securities as an asset. The common securities were deemed to have a fair value of $0 as of the AFN Merger date. These are accounted for as cost method investments; therefore, the Company does not adjust the value at each reporting period. Any income generated on the common securities is recorded as interest income, a component of interest expense, net, in the consolidated statement of operations.

The junior subordinated notes have several financial covenants. Since the AFN Merger, Cohen & Company Inc. has been in violation of one covenant of Alesco Capital Trust I. As a result of this violation, Cohen & Company Inc. is prohibited from issuing additional debt that is either subordinated to or pari passu with the Alesco Capital Trust I debt. This violation does not prohibit Cohen & Company Inc. from issuing senior debt or the Operating LLC from issuing debt of any kind. Cohen & Company Inc. is in compliance with all other covenants of the junior subordinated notes. The Company does not consider this violation to have a material adverse impact on its operations or on its ability to obtain financing in the future.

Byline Credit Facility 

On October 28, 2020, the Company entered into an unsecured line of credit with Byline Bank, as lender, and JVB, as borrower (the "Byline Credit Facility"). From October 28, 2020 to June 2024, the Company and Byline Bank have entered into several amendments that changed the terms such as: (i) interest rate; (ii) total line of credit; (iii) financial covenants; and (iv) maturity dates. During that period, the Company complied with all financial covenants and all payment terms of the Byline Credit Facility and there were no defaults or events of default thereunder during the period.

Effective as of  December 31, 2024, the Byline Credit Facility consisted of a single $15,000 unsecured line of credit under which JVB is the borrower and which is guaranteed by the Company, the Operating LLC, JVB Holdings, JVB, and C&Co PrinceRidge Holdings, LP.  On June 18, 2024, the Operating LLC and Byline Bank entered into the Second Amendment to Third Amended and Restated Loan Agreement, pursuant to which both the maturity date and the final date upon which loans can be made under the Byline Credit Facility were extended from June 18, 2024 to June 18, 2025.

Loans under the Byline Credit Facility bear interest at a per annum rate equal to Term SOFR plus 6.0%, provided that in no event can the interest rate be less than 7.0%. The Company is required to pay on a quarterly basis an undrawn commitment fee at a per annum rate equal to 0.50% of the undrawn portion of Byline Bank’s $15,000 commitment under the Byline Credit Facility.

The Company is also required to pay on each anniversary a commitment fee at a per annum rate equal to 0.50% of the $15,000 commitment under the Byline Credit Facility. Loans under the Byline Credit Facility must be used by the Company for working capital purposes and general liquidity. The Company may request a reduction in Byline Bank’s $15,000 commitment in a minimum amount of $1,000 and multiples of $500 thereafter upon not less than five days’ prior notice to Byline Bank. The Company may draw on the facility until June 18, 2025. Loans (both principal and interest) made by Byline Bank under the amended and restated agreement are scheduled to mature and become immediately due and payable in full on June 18, 2025.

The Company is subject to the following financial covenants in the Byline Credit Facility. As of March 31, 2025 and December 31, 2024, the Company was in compliance with all of the following financial covenants.

1. JVB's tangible net worth as defined must exceed $70,000;

2. JVB's excess net capital as defined in Rule 15c3-1 of the Exchange Act must exceed $40,000; and

3. The total amount drawn on the facility must not exceed 25% of JVB's tangible net worth as defined.  

As of  March 31, 2025 and December 31, 2024, no amounts were outstanding under the Byline Credit Facility, and the Company was in compliance with all financial covenants thereunder.

  

Interest Expense, net 

INTEREST EXPENSE

(Dollars in Thousands)