Quarterly report pursuant to Section 13 or 15(d)

BORROWINGS

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BORROWINGS
 6 Months Ended
Jun. 30, 2022
Debt Disclosure [Abstract]  
BORROWINGS
NOTE 8 — BORROWINGS
The following tables summarize the Company’s borrowings as of June 30, 2022, and December 31, 2021 (in thousands):
June 30, 2022
Principal repayment obligation Unamortized DFC Carrying value
Senior Secured Convertible Notes, current $ 166,666  $ (3,818) $ 162,848 
Senior Secured Convertible Notes, non-current 333,334  (7,194) 326,140 
Senior Notes due 2028 57,678  (2,746) 54,932 
Total borrowings $ 557,678  $ (13,758) $ 543,920 

December 31, 2021
Principal repayment obligation Unamortized DFC Carrying value
Senior Notes due 2028 $ 56,500  $ (2,813) $ 53,687 
Total borrowings $ 56,500  $ (2,813) $ 53,687 

Senior Secured Convertible Notes due 2025
On June 3, 2022, we issued and sold $500.0 million aggregate principal amount of 6.00% Senior Secured Convertible Notes due May 1, 2025 (the “Convertible Notes”). Net proceeds from the Convertible Notes were approximately $488.7 million after deducting fees and expenses. The Convertible Notes have quarterly interest payments due on February 1, May 1, August 1, and November 1 of each year and on the maturity date. Debt issuance costs of approximately $11.5 million were capitalized and are being amortized over the full term of the Convertible Notes using the effective interest rate method.
The holders of the Convertible Notes have the right to convert the Convertible Notes into shares of our common stock at an initial conversion rate of 174.703 shares per $1,000 principal amount of Convertible Notes (equivalent to a conversion price of approximately $5.724 per share of common stock) (the “Conversion Price”), subject to adjustment in certain circumstances. Holders of the Convertible Notes may force the Company to redeem the Notes for cash upon (i) a fundamental change or (ii) an event of default. The Company will force the holders of the Notes to convert all of the Convertible Notes if the trading price of our common stock closes above 200% of the Conversion Price for 20 consecutive trading days and certain other conditions are satisfied. The Company may provide written notice to each holder of the Convertible Notes calling all of such holder’s Convertible Notes for a cash purchase price equal to 120% of the principal amount being redeemed, plus accrued and unpaid interest (the “Optional Redemption”), and each holder will have the right to accept or reject such Optional Redemption. On each of May 1, 2023 and May 1, 2024, the holders of the Convertible Notes may redeem up to $166.6 million of the initial principal amount of the Convertible Notes at par, plus accrued and unpaid interest (the “Redemption Amount”). The Company classified the Redemption Amount in respect of May 1, 2023 as a current borrowing on the Condensed Consolidated Balance Sheet as of June 30, 2022.
Our borrowing obligations under the Convertible Notes are collateralized by a first priority lien on the Company’s equity interests in Tellurian Production Holdings, LLC (“Tellurian Production Holdings”), a wholly owned subsidiary of Tellurian Inc. Tellurian Production Holdings owns all of the Company’s upstream natural gas assets described in Note 3, Property, Plant and Equipment. Upon the Company’s compliance with its obligations in respect of an Optional Redemption (regardless of whether holders accept or reject the redemption), the lien on the equity interests in Tellurian Production Holdings will be automatically released. The Convertible Notes contain a minimum cash covenant and non-financial covenants. As of June 30, 2022, we remained in compliance with all covenants under the Convertible Notes.
As of June 30, 2022, the estimated fair value of the Convertible Notes, was approximately $465.3 million. The Level 3 fair value was estimated based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including our stock price and inputs that are not observable in the market.
Senior Notes due 2028
On November 10, 2021, we sold in a registered public offering $50.0 million aggregate principal amount of 8.25% Senior Notes due November 30, 2028 (the “Senior Notes”). Net proceeds from the Senior Notes were approximately $47.5 million after deducting fees. The underwriter was granted an option to purchase up to an additional $7.5 million of the Senior Notes within 30 days. On December 7, 2021, the underwriter exercised the option and purchased an additional
$6.5 million of the Senior Notes resulting in net proceeds of approximately $6.2 million after deducting fees. The Senior Notes have quarterly interest payments due on January 31, April 30, July 31, and October 31 of each year and on the maturity date. As of June 30, 2022, the Company was in compliance with all covenants under the indenture governing the Senior Notes. The Senior Notes are traded on the NYSE American under the symbol “TELZ,” and are classified as Level 1 within the fair value hierarchy. As of June 30, 2022, the closing market price per Senior Note was $21.85.
At-the-Market Debt Offering Program
On December 17, 2021, we entered into an at-the-market debt offering program under which the Company may offer and sell from time to time on the NYSE American up to an aggregate principal amount of $200.0 million of additional Senior Notes. For the six months ended June 30, 2022, we sold approximately $1.2 million aggregate principal amount of additional Senior Notes for total proceeds of approximately $1.1 million after fees and commissions under our at-the-market debt offering program.
Extinguishment of the 2019 Term Loan
On May 23, 2019, Driftwood Holdings LP, a wholly owned subsidiary of the Company, entered into a senior secured term loan agreement (the “2019 Term Loan”) to borrow an aggregate principal amount of $60.0 million. On March 12, 2021 (the “Extinguishment Date”), we finalized a voluntary repayment of the remaining outstanding principal balance of the 2019 Term Loan. A total of approximately $43.7 million was repaid to the lender during the first quarter of 2021 to satisfy the outstanding borrowing obligation. The extinguishment of the 2019 Term Loan resulted in an approximately $2.1 million gain, which was recognized within Gain on extinguishment of debt, net, on our Condensed Consolidated Statements of Operations.
As a result of repaying the outstanding balance prior to its contractual maturity, an approximately $4.4 million in unamortized DFC and discount was included in the computation of the gain from the extinguishment of the 2019 Term Loan.
The holder of the 2019 Term Loan held approximately 3.5 million unvested warrants that had a fair value of approximately $6.3 million as of the Extinguishment Date. Due to the extinguishment of the 2019 Term Loan, all the unvested warrants were contractually terminated (the “Terminated Warrants”), and their respective fair value was included in the computation of the gain on extinguishment of the 2019 Term Loan. The fair value of the Terminated Warrants was determined using a Black-Scholes option pricing model.
2018 Term Loan
On September 28, 2018, Tellurian Production Holdings entered into a three-year senior secured term loan credit agreement (the “2018 Term Loan”) in an aggregate principal amount of $60.0 million. On February 18, 2021, we voluntarily repaid approximately $43.0 million of the 2018 Term Loan outstanding principal balance. Then, on April 23, 2021, we voluntarily repaid the remaining outstanding principal balance of $17.0 million.
These voluntary repayments resulted in losses of approximately $0.2 million and $0.7 million for the three and six months ended June 30, 2021, respectively, which were recognized within (Loss) gain on extinguishment of debt, net, on our Condensed Consolidated Statements of Operations.
Trade Finance Credit Line
On July 19, 2021, we entered into an uncommitted trade finance credit line for up to $30.0 million that is intended to finance the purchase of LNG cargos for ultimate resale in the normal course of business. On December 7, 2021, the uncommitted trade finance credit line was amended and increased to $150.0 million. As of June 30, 2022, no amounts were drawn under this credit line.