Quarterly report pursuant to Section 13 or 15(d)

BORROWINGS

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BORROWINGS
 3 Months Ended
Mar. 31, 2023
Debt Disclosure [Abstract]  
BORROWINGS
NOTE 8 — BORROWINGS
The Company’s borrowings consist of the following (in thousands):
March 31, 2023
Principal repayment obligation Unamortized debt issuance costs Carrying value
Senior Secured Convertible Notes, current $ —  $ —  $ — 
Senior Secured Convertible Notes, non-current 333,334  (5,644) $ 327,690 
Senior Notes due 2028 57,678  (2,502) $ 55,176 
Total borrowings $ 391,012  $ (8,146) $ 382,866 

December 31, 2022
Principal repayment obligation Unamortized debt issuance costs Carrying value
Senior Secured Convertible Notes, current $ 166,666  $ (3,110) $ 163,556 
Senior Secured Convertible Notes, non-current 333,334  (6,219) 327,115 
Senior Notes due 2028 57,678  (2,585) 55,093 
Total borrowings $ 557,678  $ (11,914) $ 545,764 
Amortization of the Company’s DFC is a component of Interest expense, net in the Company’s Consolidated Statements of Operations. The Company amortized approximately $0.9 million and $0.1 million during the three months ended March 31, 2023, and 2022, respectively.
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” or the “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 Notes using the effective interest rate method.
The holders of the Convertible Notes have the right to convert the Notes into shares of our common stock at an initial conversion rate of 174.703 shares per $1,000 principal amount of 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 Convertible Notes to convert all of the 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 Notes calling all of such holder’s 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 $166.7 million of the initial principal amount of the Notes at par, plus accrued and unpaid interest (the “Redemption Amount”). On March 27, 2023, the holders of the Convertible Notes delivered to the Company notice to redeem $166.7 million of the initial principal amount of the Notes at par, plus accrued interest (the “Redemption Amount”). On March 28, 2023, the Company irrevocably deposited the Redemption Amount of approximately $169.1 million in order to satisfy the redemption and retirement of $166.7 million principal amount of the Convertible Notes, plus accrued interest. As a result of the Company’s payment of the Redemption Amount prior to the Convertible Notes’ contractual maturity, the Company wrote off approximately $2.8 million of prorated unamortized debt issuance costs, which was recognized within Loss on extinguishment of debt, net, on our Condensed Consolidated Statements of Operations.
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 Notes contain a minimum cash covenant of $100.0 million and non-financial covenants. As of March 31, 2023, we remained in compliance with all covenants under the Notes.
As of March 31, 2023, the estimated fair value of the non-current Convertible Notes was approximately $280.7 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 March 31, 2023, the Company was in compliance with all covenants under the indenture governing the Senior Notes. The Senior Notes are listed and trade on the NYSE American under the symbol “TELZ,” and are classified as Level 1 within the fair value hierarchy. As of March 31, 2023, the closing market price was $16.70 per Senior Note.
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. During the three months ended March 31, 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. On December 30, 2022, the Company terminated the at-the-market debt offering program.