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Subsequent Events | 6 Months Ended
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Apr. 30, 2019
Subsequent Events [Abstract] |
Subsequent Events | Note 18. Subsequent Events Acquisition of Bridgeport Fuel Cell Project and Execution of Related Credit Agreements On October 31, 2018, FuelCell Finance, entered into a membership interest purchase agreement (the “Purchase Agreement”) with Dominion Generation, Inc., amended on January 15, 2019 and May 9, 2019, pursuant to which FuelCell Finance purchased (on May 9, 2019) all of the outstanding membership interests in Dominion Bridgeport Fuel Cell, LLC (which is now known as Bridgeport Fuel Cell, LLC) (“BFC”). BFC owns a 14.9 MW fuel cell park in Bridgeport, Connecticut (the “Bridgeport Fuel Cell Project”), which the Company originally developed and constructed and has been operating for the past five years under a long term services agreement. On May 9, 2019, FuelCell Finance closed on the purchase of BFC for a total purchase price of approximately $35.5 million, subject to a dollar-for-dollar post-closing adjustment to the extent that the closing working capital is greater or less than $1.0 million (the “Purchase Price”). Also on May 9, 2019, in connection with the purchase of BFC, FuelCell Finance entered into a Credit Agreement with Liberty Bank, as administrative agent and co-lead arranger and Fifth Third as co-lead arranger and swap hedger (the “Credit Agreement”) whereby (i) Fifth Third provided financing to BFC in the amount of $12.5 million towards the Purchase Price; and (ii) Liberty Bank provided financing to BFC in the amount of $12.5 million towards the Purchase Price. As security for the Credit Agreement, Liberty Bank and Fifth Third were granted a first priority lien in (i) all assets of BFC, including BFC’s cash accounts, fuel cells, and all other personal property, as well as third party contracts including the Energy Purchase Agreement between BFC and Connecticut Light and Power Company dated July 10, 2009, as amended; (ii) certain newly manufactured fuel cell modules located at 3 Great Pasture Road, Danbury, CT that are intended to be used to replace the Bridgeport Fuel Cell Project’s fuel cell modules as part of routine operation and maintenance; and (iii) FuelCell Finance’s ownership interest in BFC. BFC has the right to make additional principal payments or pay the balance due under the Credit Agreement in full provided that it pays any associated breakage fees with regard to the interest rate swap agreements fixing the interest rate, discussed below. The maturity date is May 9, 2025. The interest rate under the Credit Agreement fluctuates monthly at the 30-day LIBOR rate plus 275 basis points on a total notional value of $25.0 million. An interest rate swap agreement was required to be entered into with Fifth Third in connection with the Credit Agreement to protect against movements in the floating LIBOR index. Accordingly, on May 16, 2019, BFC entered into the 1992 ISDA Master Agreement, along with the Schedule to such Agreement, with Fifth Third, and executed the related trade confirmations on May 17, 2019. Pursuant to the terms of such Agreement, Fifth Third and BFC will pay a fixed rate of interest of 2.34% multiplied by the notional amount of the swap in exchange for receipt of period payments based on a floating rate index of 2.75% multiplied by the same notional amount upon which the fixed rate payments are derived, with the notional amount in each case being equal to the outstanding principal amount under the loans from Fifth Third and Liberty Bank. The net interest rate across the Credit Agreement and the swap transaction totals a fixed rate of 5.09%. The obligations of BFC to Fifth Third under the swap agreement are treated as obligations under the Credit Agreement and, accordingly, are secured by the same collateral securing the obligations of BFC under the Credit Agreement. The Credit Agreement also requires BFC to maintain a debt service reserve at each of Liberty Bank and Fifth Third of $1.25 million, which debt service reserves were funded on May 10, 2019, to be held in deposit accounts at each respective bank, with funds to be disbursed with the consent of or at the request of the required lenders in their sole discretion. Each of Liberty Bank and Fifth Third also has an operation and module replacement reserve (“O&M Reserve”) of $250.0 thousand, both of which were funded at closing, to be held in deposit accounts at each respective bank, and thereafter BFC is required to deposit $100.0 thousand per month into each O&M Reserve for the first five years of the Credit Agreement, with such funds to be released at the sole discretion of Liberty Bank and Fifth Third, as applicable. BFC is also required to maintain excess cash flow reserve accounts at each of Liberty Bank and Fifth Third and to deposit 50% of the excess cash flows from the Bridgeport Fuel Cell Project into these accounts. Excess cash flow consists of cash generated by BFC from the Bridgeport Fuel Cell Project after payment of all expenses (including after payment of service fees to the Company), debt service to Liberty Bank and Fifth Third, the funding of all required reserves, and payments to Connecticut Green Bank for the subordinated facility (as described below). BFC is also required to maintain a debt service coverage ratio of not less than 1.20, measured annually. The Credit Agreement contains customary representations, warranties and covenants. In addition, on May 9, 2019, in connection with the closing of the purchase of BFC, BFC entered into a subordinated credit agreement with the Connecticut Green Bank whereby Connecticut Green Bank provided financing in the amount of $6.0 million (the “Subordinated Credit Agreement”), $1.8 million of which was used to collateralize a letter of credit issued by Liberty Bank to satisfy a performance assurance requirement in the Energy Purchase Agreement with Connecticut Light and Power Company and the balance of which was applied toward outstanding principal on the Company’s existing indebtedness to Connecticut Green Bank. As security for the Subordinated Credit Agreement, Connecticut Green Bank received a perfected lien, subordinated and second in priority to the liens securing the $25.0 million (senior term loan amount) loaned under the Credit Agreement, in all of the same collateral securing the Credit Agreement. The interest rate under the Subordinated Credit Agreement is 8% per annum. A commitment fee of $60.0 thousand was earned by Connecticut Green Bank in connection with the closing. The debt service coverage ratio required to be maintained under the Subordinated Credit Agreement may not be less than 1.10 as of the end of each fiscal quarter. The term of the Subordinated Credit Agreement expires 7 years from the date of the advance of the loan. Principal and interest are due monthly in amounts sufficient to fully amortize the loan over an 84 month period. However, monthly debt service payments can accumulate in arrearages in the event that BFC does not have sufficient cash to make any monthly debt service payment. BFC has the right to make additional principal payments or pay the balance in full at any time without additional fees or penalties. The Subordinated Credit Agreement also contains customary representations, warranties and covenants. The balance of the financing for the acquisition was from the $15 million of restricted cash on hand that was tied to the Bridgeport Fuel Cell Project and released at closing. Hercules Loan and Security Agreement Amendments On May 8, 2019, the Company and Hercules (and various affiliated entities) entered into the eighth amendment to the Hercules Agreement pursuant to which the Company was required, at all times commencing on May 1, 2019 through 2:00 pm Eastern Time on June 7, 2019, to maintain an unrestricted cash balance of at least 40% of the outstanding loan balance, in accounts subject to an account control agreement in favor of Hercules. After 2:00 pm Eastern Time on June 7, 2019, the Company was required to maintain, at all times, an unrestricted cash balance of at least (a) 75% of the outstanding loan balance plus (b) the amount of accounts payable (as defined under GAAP) not paid within 90 days of the invoice date, in accounts subject to an account control agreement in favor of Hercules. In connection with the execution of this amendment, the Company paid a $250,000 non-refundable fee to Hercules. On June 11, 2019 (the “Ninth Amendment Effective Date”), the Company and each of its qualified subsidiaries, as borrower, certain banks and other financial institutions, as lender, and Hercules, as administrative agent for itself and lender, entered into the ninth amendment to the Hercules Agreement (the “Ninth Hercules Amendment”). Under the Ninth Hercules Amendment, borrower has agreed, among other things, to: (a) no later than June 11, 2019, pay lender $1.4 million to be applied towards the outstanding balance of the loan; (b) no later than June 26, 2019, direct EMRE (as defined below) to pay lender $6.0 million of the $10.0 million payable under the EMRE License Agreement (as defined below) to be applied towards the outstanding balance of the loan; and (c) on each of July 1, 2019 and August 1, 2019, pay lender interest-only payments on the outstanding principal balance of the loan. Borrower has further agreed that interest at the default rate of five percent per annum (in addition to the current interest rate) will accrue from June 3, 2019; provided, however, that, in the event that all of the secured obligations are paid in full on or prior to the last day of the Amendment Period (as defined below), lender will fully and unconditionally waive its right to payment of accrued and unpaid default interest. In such circumstances, lender will also fully and unconditionally waive payment of the prepayment charge which would have been two percent of the outstanding loan balance. In the Ninth Hercules Amendment, the term “Amendment Period” is defined as the period from and after the Ninth Amendment Effective Date through the earlier of (i) August 9, 2019 and (ii) the occurrence of any event of default under the Ninth Hercules Amendment. In addition, Hercules has waived borrower’s compliance with certain financial reporting covenants and the minimum unrestricted cash balance covenant set forth in the Hercules Agreement, in each case from June 11, 2019 through the end of the Amendment Period. Hercules further agreed that borrower is permitted to use and maintain one or more deposit accounts that are not subject to any account control agreements for the purpose of borrower’s receipt and use of $4.0 million of the $10.0 million to be received from EMRE under the EMRE License Agreement. Any failure by borrower to timely perform any of the obligations under the Ninth Hercules Amendment will constitute an event of default under the Hercules Agreement. Upon any failure by borrower to timely perform any of the obligations under the Ninth Hercules Amendment, Hercules will be permitted to issue a notice of default with respect to such an event of default and any other defaults that may exist, whether arising prior to the Ninth Amendment Effective Date or otherwise. As of June 11, 2019, prior to the application of the payments made and to be made to Hercules as described above, the outstanding principal balance under the Hercules Agreement was approximately $20.9 million. Management is exploring refinancing alternatives for the Company’s senior secured credit facility with Hercules. If the Company is not able to consummate such a refinancing transaction by August 9, 2019, and if Hercules is not willing to provide further accommodations, the Company could default on its obligations under its senior secured credit facility with Hercules, which would trigger additional defaults under other agreements. Advanced Technology License Agreement Effective as of June 11, 2019, the Company entered into the EMRE License Agreement with EMRE, pursuant to which the Company has agreed, subject to the terms of the EMRE License Agreement, to grant EMRE and its affiliates a non-exclusive, worldwide, fully paid, perpetual, irrevocable, non-transferrable license and right to use the Company’s patents, data, know-how, improvements, equipment designs, methods, processes and the like to the extent it is useful to research, develop, and commercially exploit carbonate fuel cells in applications in which the fuel cells concentrate carbon dioxide from industrial and power sources and for any other purpose attendant thereto or associated therewith. Such right and license is sublicensable to third parties performing work for or with EMRE or its affiliates, but shall not otherwise be sublicensable. Upon the payment by EMRE to the Company of $10.0 million, which was received by the Company on June 14, 2019, EMRE and its affiliates were fully vested in the rights and licenses granted in the EMRE License Agreement. Series B Preferred Stock No dividends were declared or paid by the Company on the Series B Preferred Stock in connection with the May 15, 2019 dividend payment date. Based on the dividend rate in effect on May 15, 2019, the aggregate amount of such dividend payment would have been $0.8 million. Because such dividends were not paid on May 15, under the terms of the Amended Certificate of Designation with respect to the Series B Preferred Stock, the holders of shares of Series B Preferred Stock will be entitled to receive, when, as and if, declared by the Board of Directors, dividends at the normal dividend rate plus an additional 25% of the unpaid dividend in subsequent dividend periods until the Company has paid or provided for the payment of all dividends on the shares of Series B Preferred Stock for all prior dividend periods. Thus, a total of $1.0 million would be payable with respect to the May 15 dividend period, if and when declared by the Board of Directors. Series C Preferred Stock Subsequent to April 30, 2019, the holders of the Series C Preferred Stock converted 1,618 Series C Preferred Shares into 1,658,861shares of common stock resulting in a reduction of $3.2 million, which represents the carrying value of the Series C Preferred Stock at April 30, 2019, to bring the amount of outstanding Series C Preferred Shares to zero and thus retirement of the instrument. Series D Preferred Stock As described in Note 12, “Redeemable Preferred Stock”, the holders of the Series D Preferred Stock have the right, upon the occurrence of various triggering events, as defined in the Series D Certificate of Designation and described in Note 12, to convert their shares at a reduced conversion price or to require the redemption of their shares, including a redemption premium. During the week of June 10, 2019, the holders of the Series D Preferred Stock asserted that certain triggering events had occurred under the Series D Certificate of Designation and indicated their intent to exercise their rights to convert certain of their shares at a reduced conversion price. While the Company does not agree with the basis for their assertions or their characterization of such events, there are provisions under the Series D Certificate of Designation which may be interpreted as giving them the right to demand such conversion at a reduced conversion price. Accordingly (rather than disputing such right), the Company has effected certain conversions at a reduced conversion prices of $0.4619, which are equal to the lower of the Series D Conversion Price in effect on the Trading Day (as such term is defined in the Series D Certificate of Designation) immediately preceding the delivery of the conversion notice and 85% of the lowest VWAP of the common stock on any of the five consecutive Trading Days ending on the Trading Day immediately prior to delivery of the applicable conversion notice. This conversion right commences on the date of the triggering event and ends on the later of (i) the date the triggering event is cured and (ii) ten Trading Days after the Company delivers notice of the triggering event. As of June 13, 2019, due to conversions, there were 8,396 shares of Series D Preferred Stock issued and outstanding with a liquidation value of $8.4 million. There were approximately 12.1 million common shares issued subsequent to April 30, 2019 due to conversions of Series D Preferred Shares. In the event of a triggering event (as defined in the Series D Certificate of Designation and summarized above), the holders of Series D Preferred Shares may require the Company to redeem such Series D Preferred Shares in cash at a price equal to the greater of  (a) 125% of the stated value of the Series D Preferred Shares being redeemed plus accrued dividends, if any, and (b) the market value of the number of shares issuable on conversion of the Series D Preferred Shares, valued at the greatest closing sales price during the period from the date immediately before the triggering event through the date the Company makes the redemption payment. NRG Loan Agreement On June 13, 2019, FuelCell Finance and NRG entered into a fourth amendment to the NRG Loan Agreement, which amends the definition of “Maturity Date” under the NRG Loan Agreement. Pursuant to the fourth amendment, the Maturity Date of each note is now the date that is the earlier of (a) July 12, 2019, (b) the commercial operation date or substantial completion date, as applicable, with respect to the fuel cell project owned by the borrower under such note, and (c) closing of a refinancing of indebtedness.

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- Definition The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 855 -URI http://asc.fasb.org/topic&trid=2122774 + Details
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