Quarterly report pursuant to Section 13 or 15(d)

SHORT-TERM BANK DEBT AND LONG-TERM DEBT

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SHORT-TERM BANK DEBT AND LONG-TERM DEBT
3 Months Ended
Mar. 31, 2022
Debt Disclosure [Abstract]  
SHORT-TERM BANK DEBT AND LONG-TERM DEBT

NOTE 11 - SHORT-TERM BANK DEBT AND LONG-TERM DEBT

 

    December 31, 2021     March 31, 2022  
              (Unaudited)  
Current maturities of long-term debt   $ 6,114     $ 6,006  
Long term debt - less current maturities   $ 18,110     $ 16,258  

 

 

Long-term debt

 

In connection with the Transactions, PowerFleet Israel incurred $30,000 in term loan borrowings on the closing date of the Transactions (the “Closing Date”) under the Credit Agreement, pursuant to which Hapoalim agreed to provide PowerFleet Israel with two senior secured term loan facilities in an aggregate principal amount of $30,000 (comprised of two facilities in the aggregate principal amount of $20,000 and $10,000, respectively (the “Term A Facility” and “Term B Facility”, respectively, and collectively, the “Term Facilities”)) and a five-year revolving credit facility (the “Revolving Facility”) to Pointer in an aggregate principal amount of $10,000 (collectively, the “Credit Facilities”). As of March 31, 2022, no amounts were outstanding under the Revolving Facility.

 

The Credit Facilities will mature on the date that is five years from the Closing Date. The indicative interest rate provided for the Term Facilities in the original Credit Agreement was approximately 4.73% for the Term A Facility and 5.89% for the Term B Facility. The interest rate for the Revolving Facility is, with respect to NIS-denominated loans, Hapoalim’s prime rate + 2.5%, and with respect to US dollar-denominated loans, LIBOR + 4.6%. In addition, the Company agreed to pay a 1% commitment fee on the unutilized and uncancelled availability under the Revolving Facility. The Credit Facilities are secured by the shares held by PowerFleet Israel in Pointer and by Pointer over all of its assets. The original Credit Agreement includes customary representations, warranties, affirmative covenants, negative covenants (including the following financial covenants, tested quarterly: Pointer’s net debt to EBITDA; Pointer’s net debt to working capital; minimum equity of PowerFleet Israel; PowerFleet Israel equity to total assets; PowerFleet Israel net debt to EBITDA; and Pointer EBITDA to current payments and events of default.

 

On August 23, 2021, PowerFleet Israel and Pointer (the “Borrowers”) entered into an amendment (the “Amendment”), effective as of August 1, 2021, to the Credit Agreement with Hapoalim. The Amendment memorializes the agreements between the Borrowers and Hapoalim regarding a reduction in the interest rates of the two Term Facilities. Pursuant to the Amendment, commencing as of November 12, 2020, the interest rate with respect to the Term A Facility was reduced to a fixed rate of 3.65% per annum and the interest rate with respect to the Term B Facility was reduced to a fixed rate of 4.5% per annum. The Amendment also provides, among other things, for (i) a reduction in the credit allocation fee on undrawn and uncancelled amounts of the Revolving Facility from 1% to 0.5% per annum, (ii) removal of the requirement that PowerFleet Israel maintain $3,000 on deposit in a separate reserve fund, and (iii) modifications to certain of the affirmative and negative covenants, including a financial covenant regarding the ratio of the Borrowers’ debt levels to Pointer’s EBITDA. The Company is in compliance with the covenants as of March 31, 2022.

 

In connection with the Credit Facilities, the Company incurred debt issuance costs of $742. For the three-month periods ended March 31, 2021 and 2022, amortization of the debt issuance costs was $83 and $64, respectively. The Company recorded charges of $277 and $236 for the three-month periods ended March 31, 2021 and 2022, respectively, to interest expense on its consolidated statements of operations related to interest expense and amortization of debt issuance costs associated with the Credit Facilities.

 

Scheduled maturities of the long-term debt as of March 31, 2022 are as follows:

 

Year ending December 31:      
April - December 2022   $ 4,532  
2023   5,092  
2024     12,640  
Long term debt     22,264  
Less: Current Portion     6,006  
Total   $ 16,258  

 

The Term B Facility is not subject to amortization over the life of the loan and instead the original principal amount is due in one installment on the fifth anniversary of the date of the consummation of the Transactions.