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Short-Term Borrowings and Long-Term Debt
 6 Months Ended
Mar. 31, 2022
Debt Disclosure [Abstract]  
Short-Term Borrowings and Long-Term Debt

11.

SHORT-TERM BORROWINGS AND LONG-TERM DEBT:

 

Short-term Borrowings

In May 2020, we entered into a Loan and Security Agreement, which was subsequently amended in July 2021 (as amended to date, the “Credit Facility”), with Wells Fargo Commercial Distribution Finance LLC, M&T Bank, Bank of the West, and Truist Bank. The Credit Facility provides the Company a line of credit with asset based borrowing availability of up to $500.0 million for working capital and inventory financing, with the amount permissible pursuant to a borrowing base formula. The Credit Facility expires in July 2024, subject to extension for two one-year periods, with lender approval.

The Credit Facility has certain financial covenants as specified in the agreement. The covenants include provisions that our leverage ratio must not exceed 2.75 to 1.0 and that our current ratio must be greater than 1.2 to 1.0. The interest rate for amounts outstanding under the Credit Facility is 345 basis points plus the greater of 75 basis points or the one-month LIBOR. The Credit Facility allows for the transition of the benchmark interest rate used from LIBOR to the Secured Overnight Finance Rate (“SOFR”).

There is an unused line fee of ten basis points on the unused portion of the Credit Facility. As of March 31, 2022, we were in compliance with all covenants under the Credit Facility.

New inventory borrowing eligibility will generally mature 1,080 days from the original invoice date. Used inventory borrowing eligibility will generally mature 361 days from the date we acquire the used inventory. The collateral for the Credit Facility is all of our personal property with certain limited exceptions. None of our real estate has been pledged for collateral for the Credit Facility.

As of March 31, 2022, our indebtedness associated with financing our inventory and working capital needs totaled approximately $59.1 million and included unamortized debt issuance costs of approximately $0.2 million. As of March 31, 2021 and 2022, the interest rate on the outstanding short-term borrowings was approximately 4.20%. As of March 31, 2022, our additional available borrowings under our Credit Facility were approximately $94.9 million based upon the outstanding borrowing base availability.

As is common in our industry, we receive interest assistance directly from boat manufacturers, including Brunswick. The interest assistance programs vary by manufacturer, but generally include periods of free financing or reduced interest rate programs. The interest assistance may be paid directly to us or our lender depending on the arrangements the manufacturer has established. We classify interest assistance received from manufacturers as a reduction of inventory cost and related cost of sales.

The availability and costs of borrowed funds can adversely affect our ability to obtain adequate boat inventory and the holding costs of that inventory as well as the ability and willingness of our customers to finance boat purchases. However, we rely on our Credit Facility to purchase our inventory of boats. The aging of our inventory limits our borrowing capacity as defined curtailments reduce the allowable advance rate as our inventory ages. Our access to funds under our Credit Facility also depends upon the ability of our lenders to meet their funding commitments, particularly if they experience shortages of capital or experience excessive volumes of borrowing requests from others during a short period of time. Unfavorable economic conditions, weak consumer spending, turmoil in the credit markets, and lender difficulties, among other potential reasons, could interfere with our ability to utilize our Credit Facility to fund our operations. Any inability to utilize our Credit Facility could require us to seek other sources of funding to repay amounts outstanding under the credit agreements or replace or supplement our credit agreements, which may not be possible at all or under commercially reasonable terms.

Similarly, decreases in the availability of credit and increases in the cost of credit adversely affect the ability of our customers to purchase boats from us and thereby adversely affect our ability to sell our products and impact the profitability of our finance and insurance activities.

 

Long-term Debt

The below table summarizes the Company's long-term debt.

 

 

September 30, 2021

 

 

March 31, 2022

 

 

 

(Amounts in thousands)

 

Mortgage facility payable to Flagship Bank bearing interest at 2.25% as of March 31,

   2022 (prime minus 100 basis points with a floor of 2.00%). Requires monthly principal

   and interest payments with a balloon payment of approximately $4.0 million due

   August 2027.

 

$

6,899

 

 

$

6,652

 

Mortgage facility payable to Seacoast National Bank bearing interest at 3.00% as of

   March 31, 2022 (greater of 3.00% or prime minus 62.5 basis points). Requires

   monthly interest payments for the first year and then monthly principal and interest

   payments with a balloon payment of approximately $6.0 million due September 2031.

 

 

17,675

 

 

 

17,086

 

Mortgage facility payable to Hancock Whitney Bank bearing interest at 2.63% as of

   March 31, 2022 (prime minus 62.5 basis points with a floor of 2.25%). Requires

   monthly principal and interest payments with a balloon payment of approximately

   $15.5 million due November 2027. 50% of the outstanding borrowings are hedged

   with an interest rate swap contract with a fixed rate of 3.20%.

 

 

27,106

 

 

 

26,149

 

Revolving mortgage facility with FineMark National Bank & Trust bearing interest at

   3.00% as of March 31, 2022 (base minus 25 basis points with a floor of 3.00%).

   Facility matures in October 2027. Current available borrowings under the facility

   were approximately $25.3 million at March 31, 2022.

 

 

—

 

 

 

—

 

Total long-term debt

 

 

51,680

 

 

 

49,887

 

Less: current portion

 

 

(3,587

)

 

 

(3,587

)

Less: unamortized portion of debt issuance costs

 

 

(595

)

 

 

(553

)

Long-term debt, net current portion and unamortized debt issuance costs

 

$

47,498

 

 

$

45,747