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, 2014
LONG-TERM DEBT AND LONG-TERM OBLIGATIONS [Abstract]  
LONG-TERM DEBT AND LONG-TERM OBLIGATIONS
NOTE 12 - LONG-TERM DEBT AND LONG-TERM OBLIGATIONS

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

   
2014
   
2013
 
   
(thousands of dollars)
 
  Revolving note to domestic bank (A)
    -       6,489  
  Term notes to domestic bank (B)
    -       6,750  
  Revolving note to domestic banks (C)
    7,200       -  
  Term note to domestic banks (D)
    68,250       -  
  Term note to domestic banks (E)
    5,000       -  
                 
     Total long-term debt
    80,450       13,239  
                 
  Less current portion
    7,000       1,400  
                 
     Total long-term debt, less current portion
  $ 73,450     $ 11,839  

(A)  
On May 25, 2006 South Hampton entered into a $12.0 million revolving loan agreement with a domestic bank secured by accounts receivable and inventory. The loan was originally due to expire on October 31, 2008, but was amended to extend the termination date to June 30, 2015.  Additional amendments were entered into during 2008 and 2009 which ultimately increased the availability of the line to $18.0 million based upon the Company’s accounts receivable and inventory.  This agreement was replaced by the Amended and Restated Credit Agreement dated October 1, 2014, as detailed below.
 
(B)  
On September 19, 2007 South Hampton entered into a $10.0 million term loan agreement with a domestic bank to finance the expansion of the petrochemical facility.  An amendment was entered into on November 26, 2008, which increased the term loan to $14.0 million due to the increased cost of the expansion.  This note was secured by plant, pipeline and equipment. The agreement was set to expire on October 31, 2018.

As discussed in Note 22, effective August 2008 we entered into a pay-fixed, receive-variable interest rate swap with the lending bank which had the effect of converting the interest rate on $10.0 million of the loan to a fixed rate. This agreement was replaced by the Amended and Restated Credit Agreement dated October 1, 2014, as detailed below.
 
(C)  
On October 1, 2014, Tocco, South Hampton, Gulf State and TC (South Hampton, Gulf State 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, 2014, Tocco had borrowed funds under the Revolving Loans aggregating $7.2 million with $32.8 million available to be drawn.

(D)  
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.

(E)  
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 ends 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, 2014, Tocco had borrowed funds under the agreement aggregating $5.0 million with $20.0 million available to be drawn.

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 will 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 will be payable quarterly, with principal due and payable at maturity.  Interest on the Acquisition Term Loan will be 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 will be payable quarterly using a fifteen year commercial style amortization, with interest only through December 31, 2015, and principal payments to commence March 31, 2016.  Interest on the Loans will be 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, 2014, the variable interest rate under the loans was 2.67%.

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, 2014.

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)
 
2015
  $ 7,000  
2016
    8,304  
2017
    8,304  
2018
    8,304  
2019
    48,538  
Total
  $ 80,450