Quarterly report pursuant to Section 13 or 15(d)

DEBT

v3.22.2.2
DEBT
9 Months Ended
Sep. 30, 2022
Debt Disclosure [Abstract]  
DEBT

NOTE 9 – DEBT

 

On November 18, 2021, the Company issued $650 million principal amount of its 1.00% Convertible Senior Notes due 2026 (the “Notes”). The Notes were issued pursuant to, and are governed by, an indenture dated as of November 18, 2021, between the Company and U.S. Bank National Association, as trustee. Pursuant to the purchase agreement between the Company and the initial purchasers of the Notes, the Company also granted the initial purchasers an option to purchase up to an additional $97.5 million principal amount of Notes. This option was exercised and an additional $97.5 million principal amount of Notes were issued on November 23, 2021. As of September 30, 2022 and December 31, 2021, notes outstanding, net of unamortized discounts of approximately $16.2 million and $19.1 million, respectively, were $731.3 million and $728.4 million, respectively.

 

On July 28, 2022, the Company entered into a Revolving Credit and Security Agreement (the “Agreement” or “RLOC”) with Silvergate Bank (the “Bank”) pursuant to which Silvergate has agreed to loan the Company up to $100 million on a revolving basis pursuant to the terms of the Agreement. This facility refinanced and replaced an existing $100 million facility the Company had in place with the Bank. On the same date the Company also entered into a $100 million principal term loan facility (the “Term Loan”). The terms of the facilities set forth in the RLOC and the Term Loan are as follows:

 

Initial Term:   Termination is on August 5, 2024.
     
Availability of the facilities:  

The RLOC shall be made available from time to time to the Company for periodic draws (provided no event of default then exists) from its closing date up to and including the termination date of the Agreement.

 

The Company may borrow up to $100 million on the term loan, with $50 million to be made as of the Closing Date (the “Initial Draw”), and $50 million to be made, at Borrower’s request, on or before April 25, 2023 (the “Delayed Draw”), and subject to satisfaction of the conditions set forth in the Term Loan Agreement.

     

Origination Fees for

the facilities:

 

RLOC: 0.35% of the Loan Commitment to the Bank (or $350 thousand); due at RLOC closing (and on each anniversary if the RLOC continues for more than one year).

 

Term Loan: An origination fee of $150 thousand and a contingent draw fee in the amount of $250 thousand (the, “Contingent Draw Fee”) upon the execution of the Term Loan Agreement. This Contingent Draw Fee will be refunded to the Company if it borrows the Delayed Draw by no later than November 25, 2022.

     

Unused Commitment

Fee on the RLOC:

  0.25% per annum of the portion of the unused Loan Commitment, payable monthly in arrears.
     
Renewal of the RLOC:   The RLOC may be renewed annually by agreement between the Bank and the Company, subject to (without limitation): (i) Company makes a request for renewal, in writing, no less than sixty (60) days prior to the then current maturity date, (ii) no event of default then exists, (iii) Company provides all necessary documentation to extend the RLOC, (iv) Company has paid all applicable fees related to the loan renewal, and (v) the Bank has approved such extension request according to its internal credit policies as determined by the Bank in its sole and absolute discretion.

 

Interest Rate and Payments

for the facilities:

 

RLOC: Interest only to be paid monthly, with principal all due at maturity. The interest rate is defined as the higher of (i) the Floor Rate and (ii) Prime Rate plus the Applicable Margin. “Floor Rate” shall mean, as of any date of determination: (a) five and one-quarter percent (5.25%) for any days during an Interest Period the Loan to Value (“LTV”) Ratio is less than forty percent (40%), (b) six percent (6.00%) for any days during an Interest Period the LTV Ratio is greater than or equal to forty percent (40%) and less than fifty-five percent (55%), and (c) six and three-quarter percent (6.75%) for any day. The Applicable Margin means at any time: (a) one and one-quarter percent (1.25%) for any days during an Interest Period the LTV Ratio is less than forty (40%), (b) two percent (2.00%) for any days during an Interest Period the LTV Ratio is greater than or equal to forty (40%) and less than fifty-five percent (55%), and (c) two and three-quarter percent (2.75%) for any days during an Interest Period the LTV Ratio is greater than or equal to fifty-five percent (55%).

 

Term Loan: Interest, which shall be due on the principal amount of the loan, at the higher of 5.75% and the Prime Rate plus 1.75%, only to be paid monthly, with principal all due at maturity.

 

 

MARATHON DIGITAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

 

Collateral for the facilities:   The RLOC and term loan facilities are secured by a pledge of a sufficient amount of Company’s right, title and interest in and to bitcoin stored in a custody account for the benefit of the Bank (the “Collateral Account”). The Bank will establish a Collateral Account with a regulated custodial entity (the “Custodian”) that has been approved by the Bank. The Bank and Custodian will have a custodial agreement to perfect the security interest in the pledged Collateral Account which, among other things, allows for 1) the Bank to monitor the balance of the Collateral Account and 2) allows the Bank to have exclusive control over the Collateral Account including liquidation of the collateral in the event of Company’s default under the terms of the RLOC. The Bank may also file a UCC financing statement on the pledged collateral. The Company bears the risk of loss from market value declines of its collateral pursuant to its obligation to pledge additional bitcoin if its market value declines such that outstanding borrowings under the RLOC are undercollateralized. The Company may also withdraw its collateral from the Collateral Account if market value of bitcoin increases and outstanding borrowings under the RLOC are overcollateralized or if such borrowings are repaid in whole or in part.
     

Minimum Advance Rates

for the facilities:

  At origination, the Company must ensure the Collateral Account balance has sufficient bitcoin to cause the LTV ratio to equal 65% (or less) (“Minimum Advance Rate”) on the unpaid principal balance of the facilities. If at any time the LTV ratio exceeds 75%, the Company must bring the rate of advance to the Minimum Advance Rate.
     
Covenants for the facilities:   The Company must maintain a minimum adjusted net worth of $350 million. The Company must maintain a minimum liquidity of $25 million.