Annual report pursuant to Section 13 and 15(d)

LONG-TERM DEBT AND LONG-TERM OBLIGATIONS

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LONG-TERM DEBT AND LONG-TERM OBLIGATIONS
12 Months Ended
Dec. 31, 2016
LONG-TERM DEBT AND LONG-TERM OBLIGATIONS [Abstract]  
LONG-TERM DEBT AND LONG-TERM OBLIGATIONS
NOTE 13 - LONG-TERM DEBT AND LONG-TERM OBLIGATIONS

Long-term debt and long-term obligations at December 31 are summarized as follows:

   
2016
   
2015
 
   
(thousands of dollars)
 
  Revolving note to domestic banks (A)
 
$
9,000
   
$
1,000
 
  Term note to domestic banks (B)
   
56,000
     
61,250
 
  Term note to domestic banks (C)
   
19,000
     
20,000
 
  Loan fees
   
(748
)
   
(1,020
)
                 
     Total long-term debt
   
83,252
     
81,230
 
                 
  Less current portion including loan fees
   
10,145
     
8,061
 
                 
     Total long-term debt, less current portion including loan fees
 
$
73,107
   
$
73,169
 

Loan fees are capitalized and amortized on a straight line basis over the life of the loan, which approximates the effective interest method.  Loan fees of $748,000 and $1,020,000 net of accumulated amortization are included with long term debt and long term obligations at December 31, 2016 and 2015.  Amortization of loan fees amounted to approximately $272,000, $272,000, and $68,000 for the years ended December 31, 2016, 2015, and 2014, respectively.


(A)
On October 1, 2014, TOCCO, SHR, GSPL and TC (SHR, GSPL and TC collectively the “Guarantors”) entered into an Amended and Restated Credit Agreement (“ARC Agreement”) with the lenders which from time to time are parties to the ARC Agreement (collectively, the “Lenders”) and Bank of America, N.A., a national banking association, as Administrative Agent for the Lenders, and Merrill Lynch, Pierce, Fenner & Smith Incorporated as Lead Arranger.

Subject to the terms and conditions of the ARC Agreement, TOCCO may (a) borrow, repay and re-borrow revolving loans (collectively, the “Revolving Loans”) from time to time during the period ending September 30, 2019, up to but not exceeding at any one time outstanding $40.0 million (the “Revolving Loan Commitment”) and (b) request up to $5.0 million of letters of credit and $5.0 million of swingline loans.  Each of the issuance of letters of credit and the advance of swingline loans shall be considered usage of the Revolving Loan Commitment.  All outstanding loans under the Revolving Loans must be repaid on October 1, 2019.  As of December 31, 2016, and 2015, TOCCO had long-term outstanding borrowings under the Revolving Loans of $9.0 million and $1.0 million, respectively.  At December 31, 2016, approximately $31.0 million was available to be drawn.  However, in order to maintain compliance with our covenants, we could have only drawn approximately $29.5 million.

(B)
Under the ARC Agreement, TOCCO also borrowed $70.0 million in a single advance term loan (the “Acquisition Term Loan”) to partially finance the Acquisition.  At December 31, 2016, there was a short-term amount of $8.8 million and a long-term amount of $47.3 million outstanding.  At December 31, 2015, there was a short-term amount of $7.0 million and a long-term amount of $54.3 million outstanding.

(C)
Under the ARC Agreement, TOCCO also has the right to borrow $25.0 million in a multiple advance loan (the “Term Loans,” together with the Revolving Loans and Acquisition Term Loan, collectively the “Loans”).  Borrowing availability under the Term Loans ended on December 31, 2015.  The Term Loans convert from a multiple advance loan to a “mini-perm” loan once TOCCO has fulfilled certain obligations such as certification that construction of D Train was completed in a good and workmanlike manner, receipt of applicable permits and releases from governmental authorities, and receipt of releases of liens from the contractor and each subcontractor and supplier.  The Loans also include a $40.0 million uncommitted increase option (the “Accordion Option”).  As of December 31, 2016, TOCCO had borrowed funds under the agreement aggregating $20.0 million with no additional availability remaining.  At December 31, 2016, there was a short-term amount of $1.7 million and a long-term amount of $17.3 million outstanding.  At December 31, 2015, there was a short-term amount of $1.3 million and a long-term amount of $18.7 million outstanding.

All of the Loans under the ARC Agreement will accrue interest at the lower of (i) a London interbank offered rate (“Eurodollar Rate”) plus a margin of between 2.00% and 2.50% based on the total leverage ratio of TOCCO and its subsidiaries on a consolidated basis, or (ii) a base rate (“Base Rate”) equal to the highest of the federal funds rate plus 0.50%, the rate announced by Bank of America, N.A. as its prime rate, and Eurodollar Rate plus 1.0%, plus a margin of between 1.00% to 1.50% based on the total leverage ratio of TOCCO and its subsidiaries on a consolidated basis.  The Revolving Loans accrue a commitment fee on the unused portion thereof at a rate between 0.25% and 0.375% based on the total leverage ratio of TOCCO and its subsidiaries on a consolidated basis.  Interest on the Revolving Loans is payable quarterly, with principal due and payable at maturity.  Interest on the Acquisition Term Loan is payable quarterly using a ten year commercial style amortization, commencing on December 31, 2014.  The Acquisition Term Loan is also payable as to principal beginning on December 31, 2014, and continuing on the last business day of each March, June, September and December thereafter, each payment in an amount equal to $1,750,000, provided that the final installment on the September 30, 2019, maturity date shall be in an amount equal to the then outstanding unpaid principal balance of the Acquisition Term Loan.  Interest on the Term Loans is payable quarterly using a fifteen year commercial style amortization, with interest only through December 31, 2015, and quarterly principal payments of $333,333 commenced on March 31, 2016.  Interest on the Loans is computed (i) in the case of Base Rate Loans, on the basis of a 365-day or 366-day year, as the case may be, and (ii) in the case of Eurodollar Rate Loans, on the basis of a 360-day year, in each case for the actual number of days elapsed in the period during which it accrues.  At December 31, 2016, the variable interest rate under the loans was 3.27%.

The Loans may be prepaid in whole or in part without premium or penalty (Eurodollar Rate Loans are prepayable only on the last days of related interest periods or upon payment of any breakage costs) and the lenders’ commitments relative thereto reduced or terminated.  Subject to certain exceptions and thresholds, outstanding Loans shall be prepaid by an amount equal to 100% of the net cash proceeds from: (i) all sales, transfers, licenses, lease or other disposition of any property by TOCCO and Guarantors (other than a permitted transfer); (ii) any equity issuance by TOCCO or the Guarantors; (iii) any debt issuance by TOCCO or the Guarantors; or (iv) the receipt of any cash received by TOCCO or the Guarantors not in the ordinary course of business.  Amounts prepaid in connection with the mandatory repayments described above will be applied first, to the principal repayment installments of the Acquisition Term Loan in inverse order of maturity, second, to the principal repayment installments of the Term Loans in inverse order of maturity and, third, to the Revolving Loans in the manner set forth in the Amended and Restated Credit Agreement.

All amounts owing under the ARC Agreement and all obligations under the guarantees will be secured in favor of the Lenders by substantially all of the assets of TOCCO and its subsidiaries and guaranteed by its subsidiaries.

The ARC Agreement contains, among other things, customary covenants, including restrictions on the incurrence of additional indebtedness, the granting of additional liens, the making of investments, the disposition of assets and other fundamental changes, the transactions with affiliates and the declaration of dividends and other restricted payments.  The ARC Agreement also includes the following financial covenants, each tested on a quarterly basis for TOCCO and its subsidiaries on a consolidated basis: a maximum total leverage ratio of 3.25 to 1, a minimum fixed charge coverage ratio of 1.25 to 1, and an asset coverage test of greater than 1.1 to 1.  The ARC Agreement further includes customary representations and warranties and events of default, and upon occurrence of such events of default the outstanding obligations under the ARC Agreement may be accelerated and become immediately due and payable and the commitment of the Lenders to make loans under the ARC Agreement may be terminated.  TOCCO was in compliance with all covenants at December 31, 2016.

Principal payments of long-term debt for the next five years and thereafter ending December 31 are as follows:
Year Ending December 31,
 
Long-Term Debt
 
   
(thousands of dollars)
 
2017
 
$
10,417
 
2018
   
8,333
 
2019
   
65,250
 
Total
 
$
84,000