Quarterly report pursuant to Section 13 or 15(d)

Long Term Debt

Long Term Debt

3 Months Ended

Mar. 31, 2019

8. Long Term Debt

Long-term debt consists of the following at March 31, 2019 and December 31, 2018:

(Amounts in Thousands)	March 31, 2019			December 31, 2018
Revolving Credit facility dated October 31, 2011, as amended, borrowings based upon eligible accounts receivable, subject to monthly borrowing base calculation, balance due March 24, 2021. Effective interest rate for the first quarter of 2019 was 7.6%. ⁽¹⁾	$	1,004		$	639
Term Loan dated October 31, 2011, as amended, payable in equal monthly installments of principal of $102, balance due on March 24, 2021. Effective interest rate for the first quarter of 2019 was 5.7%. ⁽¹⁾		2,367	⁽²⁾		2,663	⁽²⁾
Total debt		3,371			3,302
Less current portion of long-term debt		1,184			1,184
Long-term debt	$	2,187		$	2,118

⁽¹⁾Our revolving credit facility is collateralized by our accounts receivable and our term loan is collateralized by our property, plant, and equipment.

⁽²⁾Net of debt issuance costs of ($72,000) and ($80,000) at March 31, 2019 and December 31, 2018, respectively.

Revolving Credit and Term Loan Agreement

The Company entered into an Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated October 31, 2011 (“Amended Loan Agreement”), with PNC National Association (“PNC”), acting as agent and lender. The Amended Loan Agreement has been amended from time to time since the execution of the Amended Loan Agreement. The Amended Loan Agreement, as subsequently amended (“Revised Loan Agreement”), provides the Company with the following credit facility with a maturity date of March 24, 2021: (a) up to $12,000,000 revolving credit (“revolving credit”) and (b) a term loan (“term loan”) of approximately $6,100,000, which requires monthly installments of approximately $101,600 (based on a seven-year amortization). The maximum that we can borrow under the revolving credit is based on a percentage of eligible receivables (as defined) at any one time reduced by outstanding standby letters of credit and borrowing reductions that our lender may impose from time to time.

On March 29, 2019, the Company entered into an amendment to its Revised Loan Agreement with its lender under the credit facility which provided the following:

●	waived the Company’s failure to meet the minimum quarterly fixed charge coverage ratio (“FCCR”) requirement for the fourth quarter of 2018;
●	waived the quarterly FCCR testing requirement for the first quarter of 2019;
●	revised the methodology to be used in calculating the FCCR in each of the second and third quarters of 2019 (with continued requirement to maintain a minimum 1.15:1 ratio in each of the quarters);
●	revised the minimum Tangible Adjusted Net Worth requirement (as defined in the Revised Loan Agreement) from $26,000,000 to $25,000,000;
●	eliminated the London InterBank Offer Rate (“LIBOR”) interest payment option of paying annual rate of interest due on our term loan and revolving credit until the Company becomes compliant with its FCCR requirement again. Prior to this amendment, the Company had the option of paying annual rate of interest due on the revolving credit at prime (5.50% at March 31, 2019) plus 2% or LIBOR plus 3% and the term loan at prime plus 2.5% or LIBOR plus 3.5%;
●	provided consent for the $2,500,000 loan that the Company entered into with Robert Ferguson on April 1, 2019 (see “Note 15 – Subsequent Events – Loan and Securities Purchase Agreement, Promissory Note and Subordinate Agreement” for a discussion of this loan). The Company is not allowed to make any principal prepayment on this loan until it receives the restricted finite risk sinking funds of approximately $5,000,000 held as collateral by American International Group, Inc. (“AIG”) under our financial assurance policy. The Company expects to receive this restricted funds resulting from the closure of our M&EC facility by the end of the second quarter of 2019 (see “Note 10 – Commitments and Contingencies – Insurance” for a discussion of restricted sinking funds held by AIG under our financial assurance policy); and
●	revised the annual rate used to calculate the Facility Fee (as defined in the Revised Loan Agreement) (unused revolving credit line fee) from 0.250% to 0.375%.

Most of the other terms of the Revised Loan Agreement remain principally unchanged. In connection with this amendment, the Company paid its lender a fee of $20,000.

Pursuant to the Revised Loan Agreement, as amended, the Company may terminate the Revised Loan Agreement, upon 90 days’ prior written notice upon payment in full of its obligations under the Revised Loan Agreement. No early termination fee shall apply if the Company pays off its obligations after March 23, 2019.

At March 31, 2019, the borrowing availability under our revolving credit was approximately $1,860,000, based on our eligible receivables and includes an indefinite reduction of borrowing availability of $1,000,000 that the Company’s lender has imposed. Our borrowing availability under our revolving credit was also reduced by outstanding standby letters of credit totaling approximately $2,639,000.

The Company’s credit facility with PNC contains certain financial covenants, along with customary representations and warranties. A breach of any of these financial covenants, unless waived by PNC, could result in a default under our credit facility allowing our lender to immediately require the repayment of all outstanding debt under our credit facility and terminate all commitments to extend further credit. The Company’s lender waived the fixed charge coverage ratio testing requirement for the first quarter of 2019. The Company met all of its other financial covenants in the first quarter of 2019 and expects to meet its financial covenants in each of the remaining quarters of 2019 and into the first half of 2020.