Debt

6 Months Ended

Jun. 30, 2025

Notes Payable

On April 1, 2025, the Company entered into a new Credit Agreement (the “Citi Credit Agreement”) by and among Karman, the lenders from time to time party thereto and Citibank, N.A. (“Citi”), as the administrative agent for the lenders, and, substantially contemporaneously therewith, certain direct and indirect subsidiaries of Karman terminated all outstanding commitments and repaid all outstanding obligations under the previous TCW Credit Agreement. This transaction resulted in the extinguishment of the previous TCW Term Note and facilities under the TCW Credit Agreement and the issuance of a new $300.0 million term loan and $50.0 million revolving line of credit. The new term loan will mature on April 1, 2032 and the new revolving line of credit will mature on April 1, 2030.

On May 27, 2025, the Company increased its Citi Term Note by $75 million to fund the acquisition of ISP. All other terms and conditions of the Citi Credit Agreement remain unchanged.

The Company’s notes payable consisted of the following as of June 30, 2025 and December 31, 2024:



	June 30,			December 31,
	2025			2024
	(in thousands)
Term Note	$	375,000		$	326,662
Seller Note		—			10,452
Total notes payable		375,000			337,114
Issuance costs		(6,337	)		(3,054	)
Subtotal		368,663			334,060
Less: current portion of notes payable		(2,816	)		(7,140	)
Long-term notes payable		365,847			326,920

The Citi Term Note carries variable interest payments based on specified benchmark reference rates. Interest rates were 8.65% and 11.01% as of June 30, 2025 and December 31, 2024, respectively.

The Citi Credit Agreement contains a springing financial covenant that is tested on the last day of any testing fiscal quarter if and when the outstanding principal amount of revolving credit loans exceeds an applicable threshold. If the financial covenant is then in effect, the Company is required to maintain a Consolidated First Lien Net Leverage Ratio of less than or equal to 6.50 to 1.00. The financial covenant is also conditioned upon the Company’s requirement to deliver quarterly financial statements to the lender under the Citi Credit Agreement, which obligation commences with the fiscal quarter ending September 30, 2025. As a result, the financial covenant is not tested as of June 30, 2025.

The Company held a note payable to one of the sellers (the “Seller Note”) from a prior acquisition for $6.6 million. The note bears interest at 7.5% and is capitalized annually on the anniversary date of the acquisition. The Seller Note plus all capitalized interest amounts is due and payable March 22, 2026. In April 2025, the Company repaid outstanding principal and interest balance of $10.6 million. No principal and interest balance was outstanding as of June 30, 2025. The outstanding principal and interest balance as of December 31, 2024 was $10.5 million.

Revolving Line of Credit

The Company has a $50 million revolving line of credit under the Citi Credit Agreement to provide for working capital needs. On April 2, 2025, the Company drew $30.0 million from this revolving line of credit to fund the acquisition of MTI. Amount outstanding under the Citi revolving line of credit was $30.0 million as of June 30, 2025. As of December 31, 2024, amounts outstanding on the $25.0 million revolving line of credit under the TCW Credit Agreement was $25.0 million. The maturity date of the revolving line of credit under the TCW Credit Agreement was April 15, 2026.

The Company’s revolving line of credit carries variable interest payments based on specified benchmark reference rates. Borrowings under the line of credit bear interest based on the Secured Overnight Financing Rate (SOFR) and the Company’s leverage ratio. Interest rates were 8.65% and 11.01% as of June 30, 2025 and December 31, 2024, respectively.

Total interest expense related to the revolving line of credit, finance leases (Note 7) and notes payable amounted to $11.9 million and $13.4 million for the three months ended June 30, 2025 and 2024, respectively. Total interest expense was $23.7 million and $25.5 million for the six months ended June 30, 2025 and 2024, respectively. Through June 30, 2025, debt origination fees related to the Citi Term Note was $6.5 million, which are being amortized over the life of the loan using the straight-line method, as the difference between use of the effective interest and straight-line method is not material. Amortization of debt issuance cost related to the Citi Term Note of $0.2 million was recorded as part of interest expense for the three and six months ended June 30, 2025. Additionally, as a result of extinguishment of the TCW Term Note, the associated unamortized debt issuance cost of $2.5 million was written off and recorded as interest expense on the condensed consolidated statement of operations for the three and six months ended June 30, 2025.

Amortization of debt origination fees, related to the TCW Term Note, of $0.5 million and $1.1 million were recorded as part of interest expense for the three and six months ended June 30 2024, respectively.

No accrued interest was recorded under the Citi Credit Agreement or the TCW Credit Agreement as of June 30, 2025 and December 31, 2024.

- Definition

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.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
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+ Details

Karman Holdings Inc. 10-Q