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7 - DEBT
On April 16, 2010, the Company entered into a $100,000,000 senior secured revolving credit facility (the “2010 Credit Facility”) with Nordea Bank Finland plc, acting through its New York branch. An amendment to the $100,000,000 senior secured was entered into by the Company effective November 30, 2010. This amendment increased the commitment amount of the 2010 Credit Facility from $100,000,000 to $150,000,000 and amounts borrowed will bear interest at LIBOR plus a margin of 3.00% as compared to 3.25% under the original facility. The term of the 2010 Credit Facility was extended to six years from the previous 3.5 years and will now mature on November 30, 2016 as compared to April 16, 2014 previously. A commitment fee of 1.25% per annum is payable on the unused daily portion of the 2010 Credit Facility, which began accruing on March 18, 2010 under the terms of the commitment letter entered into on February 25, 2010. In connection with the commitment letter entered on February 25, 2010, the Company paid an upfront fee of $312,500. Additionally, upon executing the original 2010 Credit Facility, the Company paid the remaining upfront fee of $937,500, for total fees of $1,250,000. In connection with the amendment to the 2010 Credit Facility effective November 30, 2010, the Company paid an upfront fee of $1,350,000. Of the total original facility amount of $150,000,000, $25,000,000 is available for working capital purposes. As of December 31, 2011, total available working capital borrowings were $23,500,000 as $1,500,000 was drawn down during the year ended December 31, 2010 for working capital purposes. As of December 31, 2011, $38,750,000 remained available under the 2010 Credit Facility as total drawdowns of $101,250,000 were made to fund the purchase of the Baltic Wind, Baltic Cove and Baltic Breeze and the total commitment was reduced to $140,000,000 on November 30, 2011. Refer to Note 4 — Vessel Acquisitions for further information regarding these vessel deposits and acquisitions.
The Company intends to use the 2010 Baltic Trading Credit Facility primarily for bridge financing for future vessel acquisitions. Pursuant to the amended 2010 Credit Facility, the total commitment of $150,000,000 will be reduced in 11 consecutive semi-annual reductions of $5,000,000 which commenced on the six month anniversary of the effective date, or May 31, 2011. On the maturity date, November 30, 2016, the total commitment will reduce to zero and all borrowings must be repaid in full.
Borrowings under the 2010 Credit Facility are secured by liens on the Company’s initial vessels and other related assets. Borrowings under the facility are subject to the delivery of security documents with respect to the Company’s initial vessels
All amounts owing under the 2010 Credit Facility are also secured by the following:
· cross-collateralized first priority mortgages of each of the Company’s initial vessels;
· an assignment of any and all earnings of the Company’s initial vessels; and
· an assignment of all insurance on the mortgaged vessels.
The 2010 Credit Facility requires the Company to comply with a number of covenants, including financial covenants related to liquidity, consolidated net worth, and collateral maintenance; delivery of quarterly and annual financial statements and annual projections; maintaining adequate insurances; compliance with laws (including environmental); compliance with ERISA; maintenance of flag and class of the Company’s initial vessels; restrictions on consolidations, mergers or sales of assets; restrictions on changes in the Manager of the Company’s initial vessels (or acceptable replacement vessels); limitations on changes to the Management Agreement between the Company and Genco; limitations on liens; limitations on additional indebtedness; restrictions on paying dividends; restrictions on transactions with affiliates; and other customary covenants.
The amended 2010 Credit Facility includes the following financial covenants which apply to the Company and its subsidiaries on a consolidated basis and are measured at the end of each fiscal quarter:
· Cash and cash equivalents plus the undrawn amount available for working capital under the facility must not be less than $5,000,000 during the first year following the amendment, or until November 30, 2011. Beginning December 1, 2011, cash and cash equivalents plus the undrawn amount available for working capital under the facility must not be less than $750,000 per vessel for all vessels in the Company’s fleet.
· Consolidated net worth must not be less than (i) $232,796,091 plus (ii) 50% of the value of any subsequent primary equity offerings of the Company.
· The aggregate fair market value of the mortgaged vessels must at all times be at least 140% of the aggregate outstanding principal amount under the 2010 Credit Facility.
The Company believes it is in compliance with all of the financial covenants under its 2010 Credit Facility as of December 31, 2011.
The following table sets forth the repayment of the outstanding debt of $101,250,000 at December 31, 2011 under the 2010 Credit Facility:
|
Year Ending December 31, |
|
Total |
|
|
|
|
|
|
|
2012 |
|
$ |
— |
|
|
2013 |
|
— |
|
|
2014 |
|
— |
|
|
2015 |
|
1,250,000 |
|
|
2016 |
|
100,000,000 |
|
|
|
|
|
|
|
Total debt |
|
$ |
101,250,000 |
|
Interest rates
The following table sets forth the effective interest rate associated with the interest expense for the 2010 Credit Facility, excluding the cost associated with unused commitment fees. Additionally, it includes the range of interest rates on the debt, excluding the impact of unused commitment fees:
|
|
|
Year Ended December 31, |
|
Period from
inception to
December 31, |
|
|
|
|
2011 |
|
2010 |
|
2009 |
|
|
Effective Interest rate (excluding impact of unused commitment fees) |
|
3.29 |
% |
3.48 |
% |
— |
|
|
Range of Interest Rates (excluding impact of unused commitment fees) |
|
3.25% to 3.33 |
% |
3.27% to 3.60 |
% |
— | |