|6 Months Ended|
Jun. 30, 2023
|Debt Disclosure [Abstract]|
|Debt Obligations||Debt Obligations
Secured Term Loan
In April 2023, Sunlight entered into the Secured Term Loan that consists of loan commitments for two tranches of loans secured by a first lien perfected security interest in all of Sunlight’s assets: (a) a $38.8 million tranche used to repay all outstanding borrowings under the Revolving Credit Facility with SVB, pay fees and accrued interest due under the Secured Term Loan and other agreements between Sunlight and its Bank Partner, and for general corporate purposes (the “Tranche 1 Loan”) and (b) a $49.8 million tranche used for deferred loan sale proceeds and to pay fees and capitalized interest applicable to the tranche (the “Tranche 2 Loan”). No scheduled principal payments are due until May 2024, after which Sunlight is required to make monthly principal payments until maturity.
SVB Receivership and Revolving Credit Facility
On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (the “FDIC”) was appointed as receiver of SVB. SVB was Sunlight’s primary bank and the sole lender for Sunlight’s revolving credit facility prior to Sunlight refinancing the facility with its Bank Partner in April 2023. On March 12, 2023, the Department of the Treasury, Board of Governors of the Federal Reserve System and the FDIC issued a joint statement noting that, among other things, the resolution of SVB would fully protect all depositors and that depositors would have full access to all of their money on deposit with SVB on Monday, March 13, 2023. While SVB’s receivership had a short-term impact on Sunlight’s business and its ability to make payments to its installer base, Sunlight resumed payments to installers within a few days.
Debt consists of the following:
a.Excludes unamortized allocated discount and deferred financing costs.
b.Carrying value reflects $24.7 million of unamortized allocated discount and deferred financing costs at June 30, 2023.
c.In April 2023, Sunlight entered into a Loan and Security Agreement with its Bank Partner and repaid the Prior Facility (defined below) in full. Borrowings under the Secured Term Loan, secured by the net assets of Sunlight Financial LLC and guaranteed by SL Financial Holdings Inc., a wholly-owned subsidiary of the Company, bear interest at a per annum rate equal to the sum of (i) a floating rate index and (ii) a fixed margin. Sunlight may borrow an aggregate $88.6 million between tranches of the Secured Term Loan and apply facility interests and fees paid-in-kind up to the $100.0 million maximum facility size. The facility includes unused facility costs, and amounts borrowed under this facility are nonrecourse to Sunlight Financial Holdings Inc. Sunlight may prepay the Secured Term Loan without penalty, and is subject to mandatory prepayment under certain conditions including liquidity thresholds, upon a liquidation, winding up, change of control, merger, sale of all or substantially all of the assets of Sunlight, or a transaction that results in the Company becoming privately held.
d.In April 2021, Sunlight entered into a Loan and Security Agreement with Silicon Valley Bank (“SVB”) (the “Prior Facility”), including a standby letter of credit. Borrowings under the Prior Facility, secured by the net assets of Sunlight Financial LLC, bore interest at a per annum rate equal to the sum of (i) a floating rate index and (ii) a fixed margin. The facility includes unused facility costs, and amounts borrowed under this facility were nonrecourse to Sunlight Financial Holdings Inc.
Activities — Activities related to the carrying value of Sunlight’s debt obligations were as follows:
Maturities — At June 30, 2023, all of Sunlight’s debt obligations contractually mature in 2025.
Covenants — Sunlight’s debt obligations are subject to customary loan covenants and event of default provisions, including, among other things, limitations on use of proceeds, dispositions, changes in business, management or business locations, change of control, mergers or acquisitions, indebtedness, liens, restricted payments, dividends or any other payments to equity, investments, transactions with affiliates, and capital expenditures, subject to certain customary baskets and exceptions. The Secured Term Loan also includes a financial covenant requiring minimum liquidity (unrestricted and unencumbered cash and cash equivalents held by Sunlight) in deposit accounts or securities accounts in an amount equal to or greater than $20.0 million, measured as of the end of each calendar month and requires that Sunlight maintain unrestricted cash in an aggregate amount of not less than the greater of (x) $20.0 million and (y) 75% of Sunlight’s cash, in accounts with Sunlight’s Bank Partner or its affiliates.
The Secured Term Loan also contains customary events of default that would permit the lenders to accelerate the loans, including, among other things, the failure to make timely payments when due under the Secured Term Loan or other material indebtedness as described in the Secured Term Loan, the failure to satisfy covenants contained in the Secured Term Loan, specified events of bankruptcy and insolvency, a material event of default under the Amended Loan Program Documents or any other agreement with Sunlight’s Bank Partner.
As of June 30, 2023, Sunlight’s financial covenants and calculated amounts were as follows (in millions):
a.Sunlight’s Bank Partner waived this covenant and other nonfinancial covenants.
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://www.xbrl.org/2003/role/disclosureRef