Short-Term Bank Debt and Long-Term Debt
|12 Months Ended|
Dec. 31, 2020
|Debt Disclosure [Abstract]|
|Short-Term Bank Debt and Long-Term Debt||
NOTE 11 – SHORT-TERM BANK DEBT AND LONG-TERM DEBT
Convertible notes payable
In connection with the Transactions, the Company issued and sold convertible unsecured promissory notes in the aggregate principal amount of $5,000 to the Investors (as amended, the “Notes”). The Notes bore interest at 10% per annum, matured on March 31, 2021. The Notes were repaid on October 1, 2020.
Long term debt
In connection with the Transactions, PowerFleet Israel incurred $30,000 in term loan borrowings on 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”). On the first anniversary of the Closing Date, the Company will be required to deposit in a separate restricted deposit account the Israeli shekel (“NIS”) equivalent of $3,000. As of December 31, 2020, no amounts were outstanding under the revolving credit 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 Credit Agreement is 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 pays 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 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. The Company is in compliance with the covenants as of December 31, 2020.
The Company has been in discussions with Bank Hapoalim regarding an amendment to the Credit Agreement with respect to a reduction in the interest rates from approximately 4.73% for the Term A Facility and 5.89% for the Term B Facility to 3.65% for the Term A Facility and 4.5% for the Term B Facility as well as the elimination of the requirement to deposit in a separate restricted deposit account the Israeli shekel (“NIS”) equivalent of $3,000. Although subject to the execution of a definitive amendment to the Credit Agreement, the Company has an agreement in principle with respect to these two provisions. In the interim, Bank Hapoalim has agreed to not require the $3,000 escrow deposit and has agreed to reduce the interest rates to 3.65% for the Term A Facility and 4.5% for the Term B Facility effective November 2020.
In connection with the Credit Facilities, the Company incurred debt issuance costs of $742. For the years ended December 31, 2019 and 2020, the Company recorded $18 and $31 respectively, of amortization of the debt issuance costs. The Company recorded charges of $379 and $1,451 to interest expense on its consolidated statements of operations for the years ended December 31, 2019 and 2020, related to interest expense and amortization of debt issuance costs associated with the Credit Facilities.
Scheduled maturities of the Term A and Term B facilities as of December 31, 2020 are as follows:
The Term B Facility is not subject to amortization over the life of the loan and instead the original principal amount is to be due in one installment on the fifth anniversary of the date of the consummation of the Transactions.
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef