Subject to certain exceptions, the Company must prepay an aggregate principal amount equal to 75% of its Excess Cash Flow (as defined in the New Centre Lane Facility), minus the sum of all voluntary prepayments, within five business days after the date that is 90 days following the end of each fiscal year. The New Centre Lane Facility also requires mandatory prepayment of certain amounts in the event the Company or its subsidiaries receive proceeds from certain events and activities, including, among others, asset sales, casualty events, the issuance of indebtedness and equity interests not otherwise permitted under the New Centre Lane Facility and the receipt of tax refunds or extraordinary receipts in excess of $500,000, plus, in certain instances, the applicable Prepayment Premium, calculated as set forth above.
The New Centre Lane Facility contains customary representations and warranties, as well as customary affirmative and negative covenants. The New Centre Lane Facility contains covenants that may, among other things, limit the Company’s ability to incur additional debt, incur liens, make investments or capital expenditures, declare or pay dividends, engage in mergers, acquisitions and dispositions, engage in new lines of business or certain transactions with affiliates and change accounting policies or fiscal year.
The New Centre Lane Facility requires the Company to regularly provide financial information to the lenders, and, beginning on December 31, 2018, to maintain certain total leverage and fixed charge coverage ratios and meet minimum consolidated adjusted EBITDA and minimum liquidity requirements (each of which as defined in the New Centre Lane Facility). As of June 30, 2020, and December 31, 2019, the Company was in compliance with all of its financial covenants.
On January 13, 2020, the Company entered into a Third Amendment to the New Centre Lane Facility (“New Centre Lane Amendment”) that, among other things, redefined and changed the minimum leverage ratio requirement to a minimum net leverage ratio and changed the minimum consolidated Adjusted EBITDA and minimum liquidity requirements. In addition, the New Centre Lane Amendment increased the Prepayment Premium to 2% beginning on January 13, 2020 and to 1% beginning January 14, 2021 and thereafter. The New Centre Lane Amendment also waived the requirement to prepay future cash proceeds generated from the Company’s Rights Offering and any event of default that would otherwise result from the failure to pay such amounts. The Company’s expense related to the New Centre Lane Amendment was $0.2 million and is included in general and administrative expenses on the condensed consolidated statement of operations in this Form 10-Q for the six months ended June 30, 2020.
Events of default under the New Centre Lane Facility include, but are not limited to, a breach of any of the financial covenants or any representations or warranties, failure to timely pay any amounts due and owing, the commencement of any bankruptcy or other insolvency proceeding, judgments in excess of certain acceptable amounts, the occurrence of a change in control, certain events related to ERISA matters and impairment of security interests in collateral or invalidity of guarantees or security documents.
Upon a default under the New Centre Lane Facility, the Company’s senior secured lenders would have the right to accelerate the then-outstanding amounts under such facility and to exercise their rights and remedies to collect such amounts, which would include foreclosing on collateral constituting substantially all of the Company’s assets and those of its subsidiaries. The Company’s borrowing rate under the New Centre Lane Facility as of both June 30, 2020 and December 31, 2019 was 12.5%.
Letters of Credit and Bonds
In line with industry practice, the Company is often required to provide letters of credit and payment and performance surety bonds to customers. These letters of credit and bonds provide credit support and security for the customer if the Company fails to perform its obligations under the applicable contract with such customer.
The MidCap Facility provides a sub-facility for up to $6.0 million of non-cash collateralized letters of credit at 6.0% interest, of which the Company had $0.9 million and $1.8 million outstanding as of June 30, 2020 and December 31, 2019, respectively. There were no amounts drawn upon these letters of credit.
In addition, as of June 30, 2020 and December 31, 2019, the Company had outstanding payment and performance surety bonds of $61.6 million and $59.3 million, respectively.
Deferred Financing Costs
Deferred financing costs are amortized over the terms of the related debt facilities using the effective yield method. The following table summarizes the amortization of deferred financing costs related to the Company's debt facilities and recognized in interest expense on the unaudited condensed consolidated statements of operations: