ATLANTIC AMERICAN CORPAAME
ATLANTIC AMERICAN CORP Debt Disclosure
| Note 10. |
Credit Arrangements
|
Bank
Debt
On May 12, 2021, the Company entered into a Revolving Credit Agreement with Truist Bank as the lender (the “Lender”). The Revolving Credit Agreement provides for an unsecured $10,000 revolving credit facility that originally matured on April 12, 2024. On March 22, 2024, the Company entered into a First Amendment (the “Amendment”) to its Revolving Credit Agreement (as amended, the “Credit Agreement”) with the Lender.
The Amendment, among other things, (a) updates the interest rate provisions to memorialize that the Company pays interest on the unpaid principal balance of outstanding revolving loans at the Adjusted rate (as defined in the Credit Agreement), plus 2.00%,
(b) extends the maturity date of the revolving credit facility to March 22, 2027, (c) requires the monthly payment of an unused
commitment fee of 0.2% of the unused facility amount, and (d) requires that the Company maintain a consolidated net worth of not
less than $64,200. Except as modified by the Amendment, the existing terms of the original Credit Agreement remain in effect.
The Credit Agreement requires the Company to comply with certain covenants, including a debt-to-capital ratio that restricts the Company from incurring consolidated indebtedness
that exceeds 35% of the Company’s consolidated capitalization at any time and maintaining a minimum consolidated net worth, as
previously mentioned. The Credit Agreement also contains customary representations and warranties and events of default. Events of default include, among others, (a) the failure by the Company to pay any amounts owed under the Credit
Agreement when due, (b) the failure to perform and not timely remedy certain covenants, (c) a change in control of the Company and (d) the occurrence of bankruptcy or insolvency events. Upon an event of default, the Lender may, among other
things, declare all obligations under the Credit Agreement immediately due and payable and terminate the revolving commitments. As of December 31, 2024 and 2023, the Company had outstanding borrowings of $4,023 and $3,019, respectively,
under the Credit Agreement.
For the year ended 2024 and 2023, the Company incurred $283 and $200 in interest expense, respectively, on the revolving credit facility borrowing. During the year ended 2024 and 2023, the Company paid $9 and $0, respectively, in fees on
the available unused amount of the revolving credit facility of $6,000. At December 31, 2024 and 2023, the effective interest rate
was 6.67% and 7.46%,
respectively.
Junior Subordinated Debentures
The Company has two unconsolidated Connecticut statutory business trusts, which exist for the exclusive
purposes of: (i) issuing trust preferred securities (“Trust Preferred Securities”) representing undivided beneficial interests in the assets of the trusts; (ii) investing the gross proceeds of the Trust Preferred Securities in junior
subordinated deferrable interest debentures (“Junior Subordinated Debentures”) of the Company; and (iii) engaging in those activities necessary or incidental thereto.
The outstanding $18,042 and $15,696 of Junior Subordinated Debentures mature on December 4, 2032
and May 15, 2033, respectively, are callable quarterly, in whole or in part, only at the option of the Company. Prior to July 1,
2023, the interest rate was based on 3-month plus an applicable margin. Effective July 1, 2023, the interest rate is determined based on a reference rate of the 3-month plus applicable tenor spread of 0.26161% plus an applicable margin, ranging from 4.00%
to 4.10%. At December 31, 2024, the effective interest rate was 8.82%.
The financial structure of each of Atlantic American Statutory Trust I and II, as of December 31, 2024 and 2023, was as follows:
|
Atlantic American
Statutory Trust I
|
Atlantic American
Statutory Trust II
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JUNIOR SUBORDINATED DEBENTURES(1)(2)
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||||||||
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Balance December 31, 2024
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$
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18,042
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$ | 23,196 | ||||
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Less: Treasury debt(3)
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—
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(7,500 | ) | |||||
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Net balance December 31, 2024
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$
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18,042
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$
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15,696
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||||
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Net balance December 31, 2023
|
$
|
18,042
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$
|
15,696
|
||||
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Coupon rate
|
3-Month SOFR + 0.26161 spread adj + 4.00%
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3-Month SOFR + 0.26161 spread adj + 4.10% | ||||||
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Interest payable
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Quarterly | Quarterly | ||||||
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Maturity date
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December 4, 2032 | May 15, 2033 | ||||||
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Redeemable by issuer
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Yes | Yes | ||||||
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TRUST PREFERRED SECURITIES
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||||||||
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Issuance date
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December 4, 2002 | May 15, 2003 | ||||||
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Securities issued
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17,500
|
22,500 | ||||||
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Liquidation preference per security
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$
|
1
|
$
|
1
|
||||
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Liquidation value
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$
|
17,500
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$
|
22,500
|
||||
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Coupon rate
|
3-Month SOFR + 0.26161 spread adj + 4.00%
|
3-Month SOFR + 0.26161 spread adj + 4.10% | ||||||
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Distribution payable
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Quarterly | Quarterly | ||||||
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Distribution guaranteed by(4)
|
Atlantic American Corporation
|
Atlantic American Corporation | ||||||
| (1) |
For each of the respective debentures, the Company has the right at any time, and from time to time, to defer
payments of interest on the Junior Subordinated Debentures for a period not exceeding 20 consecutive quarters up to the
debentures’ respective maturity dates. During any such period, interest will continue to accrue and the Company may not declare or pay any cash dividends or distributions on, or purchase, the Company’s common stock nor make any principal,
interest or premium payments on or repurchase any debt securities that rank equally with or junior to the Junior Subordinated Debentures. The Company has the right at any time to dissolve each of the trusts and cause the Junior
Subordinated Debentures to be distributed to the holders of the Trust Preferred Securities.
|
| (2) |
The Junior Subordinated Debentures are unsecured and rank junior and subordinate in right of payment to all
senior debt of the Parent and are effectively subordinated to all existing and future liabilities of its subsidiaries.
|
| (3) |
In 2014, the Company acquired $7,500 of the Junior Subordinated Debentures.
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| (4) |
The Parent has guaranteed, on a subordinated basis, all of the obligations under the Trust Preferred Securities,
including payment of the redemption price and any accumulated and unpaid distributions to the extent of available funds and upon dissolution, winding up or liquidation.
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About Debt Disclosures
Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.
Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.