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Revolving Credit Facilities | 12 Months Ended
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Oct. 31, 2021
Revolving Credit Facilities |
Revolving Credit Facilities | 6. Revolving Credit Facilities ​ We have a revolving credit facility with Bank of America, N.A. (Bank of America) as administrative agent and Merrill Lynch, Pierce, Fenner & Smith Inc. as joint lead arranger and sole bookrunner, and Farm Credit West (FCW), as joint lead arranger. ​ On January 29, 2021, we entered into the Third Amendment to Credit Agreement (the “Third Amendment”) with Farm Credit West, PCA and Bank of America, N.A. relating to our Credit Agreement dated as of June 14, 2016, First Amendment to Credit Agreement dated as of August 29, 2016, and Second Amendment to Credit Agreement dated as of February 28, 2019 (collectively, the “Credit Facility”). This Third Amendment, among other things, provides for a five-year extension of the maturity date to January 29, 2026, a $20 million increase in the revolving commitment to $100 million (from $80 million) (for a total facility size of $150 million if the $50 million accordion is exercised, up from a total size of $130 million), and a 25 basis point increase in the interest rate. The new interest rate schedules are effective mid-June 2021. The weighted-average interest rate under the Credit Facility was 2.2% and 1.9% at October 31, 2021 and 2020, respectively. Under the Credit Facility, we had $37.7 million and $20.6 million outstanding as of October 31, 2021 and 2020, and had standby letters-of-credit of $2.5 million as of October 31, 2021. In accordance with the extended due date, the outstanding balance of the Credit Facility has been classified as long-term in the accompanying balance sheet as of October 31, 2021. Borrowings under the Credit Facility will be at the Company’s discretion either at a Eurodollar Rate (LIBOR) loan plus applicable margin or a base rate loan plus applicable margin. The applicable margin will be based on the Company’s Consolidated Leverage Ratio and can range from 1.00% to 1.50% for LIBOR loans and 0.00% to 0.50% for Base Rate Loans. The Credit Facility also includes a commitment fee on the unused commitment amount at a rate per annum of 0.15%. The Credit Facility contains customary affirmative and negative covenants for agreements of this type, including the following financial covenants applicable to the Company and its subsidiaries on a consolidated basis: (a) a quarterly consolidated leverage ratio of not more than 2.50 to 1.00 and (b) a quarterly consolidated fixed charge coverage ratio of not less than 1.15 to 1.00. The Credit Facility also contains customary events of default. If any event of default occurs and is continuing, Bank of America may take the following actions: (a) declare the commitment of each lender to make loans and any obligation of the Issuer to make credit extensions to be terminated; (b) declare the unpaid principal amount of all outstanding loans, all interest, and all other amounts to be immediately due and payable; (c) require that Calavo cash collateralize the obligations; and (d) exercise on behalf of itself, the lenders and the Issuer all rights and remedies available to it. As of October 31, 2021, the Company was out of compliance with the Fixed Charge Coverage Ratio (“FCCR”) for the quarter ended as of that date, and expected to be out of compliance with this requirement for the first half of fiscal 2022. In response to this event of default, the Company and Bank of America have entered into the Fourth Amendment, Limited Waiver and Limited Consent to Credit Agreement (the “Amendment”) on December 1, 2021. The principal terms of the Amendment are as follows:
| ● | The interest rate was increased by 0.50%.
| ● | The FCCR will not be tested for the quarters ended October 31, 2021, January 31, 2022 and April 30, 2022. Testing will resume for the quarter ended July 31, 2022.
| ● | The quarterly FCCR will be replaced by a cumulative monthly minimum Consolidated EBITDA requirement, with the first measurement to occur as of January 31, 2022 for the three months then ended, and continuing monthly thereafter through June 2022.
| ● | Consolidated financial statements must be submitted monthly for the month and year-to-date period, beginning with the financial statements for the month of November 2021 and continuing through June 2022.
| ● | The Company will pledge the 1,677,000 shares it holds of Limoneira stock as collateral (which collateral is in addition to the general business assets of the Company that already secure the credit facility). The pledge will be lifted upon such time as the Company has certified compliance with a 1.15 to 1.0 minimum FCCR for two consecutive fiscal quarters.
| ● | Calavo de Mexico will be added as a guarantor of the line of credit.
The above terms and conditions will remain in effect until such time as the Company has certified compliance with a 1.15 to 1.0 minimum FCCR for two consecutive fiscal quarters. In addition, pursuant to the Amendment, Bank of America and the Lenders consented to the Borrower’s intercompany transfer of up to $25 million to Calavo de Mexico (CDM), for the purpose of providing CDM the alternative to offer cash security as collateral in favor of the Mexican Federal Tax Administration Service (the “Mexican SAT”) for its tax obligations imposed by the Mexican SAT with respect to an assessment for the year ending December 31, 2013 (“2013 Tax Assessment”, See Note 7). This cash security would be intended as a substitute for the liens the Mexican SAT placed on the fixed assets of CDM as described in Note 7. The Amendment further provides that any payments in settlement of the 2013 Tax Assessment of up to $25 million may be excluded as cash tax payments in the calculation of the quarterly FCCR. Such advance may be made only once the January 2022 financial statements of the Company are delivered to Bank of America and the Company is otherwise in compliance with the terms of the credit agreement. ​ Bank of America has waived the default as of October 31, 2021, and therefore we are in compliance with all financial covenants. We expect to remain in compliance at minimum through December 2022. ​ The Company and Bank of America have also entered into a fifth Amendment to our credit facilty, through which the LIBOR reference interest rate will be replaced by the BSBY Bloomberg rate ​

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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