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Debt and Financing Obligation | 9 Months Ended
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Jul. 31, 2019
Debt Disclosure [Abstract] |
Debt and Financing Obligation | Note 17. Debt and Financing Obligation Debt as of July 31, 2019 and October 31, 2018 consisted of the following:
|  | July 31, |  |  | October 31, |
|  | 2019 |  |  | 2018 |
Connecticut Development Authority Note |  | $ | — |  |  | $ | 284 |
Connecticut Green Bank Loans |  |  | 7,719 |  |  |  | 6,052 |
Finance obligation for sale-leaseback transactions |  |  | 45,247 |  |  |  | 46,062 |
State of Connecticut Loan |  |  | 10,000 |  |  |  | 10,000 |
Hercules Loan and Security Agreement |  |  | 7,426 |  |  |  | 25,343 |
New Britain Renewable Energy Term Loan |  |  | 644 |  |  |  | 1,107 |
NRG Construction Loan Facility |  |  | 5,750 |  |  |  | — |
Generate Lending Construction Loan |  |  | 10,000 |  |  |  | — |
Enhanced Capital Term Loan and Security Agreement |  |  | 1,500 |  |  |  | — |
Liberty Bank Term Loan Agreement |  |  | 12,153 |  |  |  | — |
Fifth Third Bank Term Loan Agreement |  |  | 12,153 |  |  |  | — |
Fifth Third Bank Construction Loan Agreement |  |  | 11,072 |  |  |  | — |
Capitalized lease obligations |  |  | 195 |  |  |  | 341 |
Deferred finance costs |  |  | (2,621 | ) |  |  | (1,311 | )
Total debt and financing obligations |  | $ | 121,238 |  |  | $ | 87,878 |
Current portion of long-term debt and financing obligations |  |  | (43,416 | ) |  |  | (17,596 | )
Long-term debt and financing obligations |  | $ | 77,822 |  |  | $ | 70,282 |
As of July 31, 2019, the Company had a long-term loan agreement with the Connecticut Green Bank, providing a total of $5.9 million in support of the Bridgeport Fuel Cell Project. During the three months ended July 31, 2019, this loan was partially repaid with a new project level loan from Connecticut Green Bank in connection with the Company’s acquisition of all of the membership interests in BFC. The balance as of July 31, 2019 was $1.8 million. 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”). 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 loaned under the BFC Credit Agreement (as defined below), in all of the same collateral securing the BFC Credit Agreement. The interest rate under the Subordinated Credit Agreement is 8% per annum. Principal and interest are due monthly in amounts sufficient to fully amortize the loan over an 84 month period ending in May 2026. The Subordinated Credit Agreement contains customary representations, warranties and covenants. The balance under the Subordinated Credit Agreement as of July 31, 2019 was $5.9 million. Also on May 9, 2019, in connection with the purchase of BFC, FuelCell Finance (a subsidiary of the Company) entered into a Credit Agreement with Liberty Bank, as administrative agent and co-lead arranger, and Fifth Third as co-lead arranger (the “BFC Credit Agreement”), whereby (i) Fifth Third provided financing to BFC in the amount of $12.5 million towards the BFC Purchase Price; and (ii) Liberty Bank provided financing to BFC in the amount of $12.5 million towards the BFC Purchase Price. As security for the BFC 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 fuel cell modules 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. Principal and interest are due monthly in amounts sufficient to fully amortize the loans over an 84 month period. The maturity date of each loan under the BFC Credit Agreement is May 9, 2025. The interest rate under the BFC Credit Agreement fluctuates monthly at the 30-day LIBOR rate plus 275 basis points on a total notional value which is equivalent to the outstanding principal. On May 16, 2019, an interest rate swap agreement (the “Swap Agreement”) was entered into with Fifth Third in connection with the BFC Credit Agreement for the term of the loan. The net interest rate across the BFC Credit Agreement and the swap transaction totals a fixed rate of 5.09%. The interest rate swap will be marked-to-market on a quarterly basis. The mark-to-market adjustment is based on Level 2 inputs including primarily the forward LIBOR curve available to swap dealers. The mark-to-market methodology involves comparison of (i) the sum of the present value of all monthly variable rate payments during the term at the notional amount of the loan outstanding based on a reset rate using the forward LIBOR curve and (ii) the sum of the present value of all monthly fixed rate payments during the term of the loan at the notional amount which is equivalent to the outstanding principal. The mark-to-market adjustment for the three and nine months ended July 31, 2019 was $0.4 million. The BFC 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 BFC 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. BFC is also required to maintain a debt service coverage ratio of not less than 1.20, measured annually based on fiscal quarters beginning with the quarter ended July 31, 2020. The BFC Credit Agreement contains other representations, warranties and covenants and includes a material adverse effect clause related to the operations, business, properties, liabilities or prospects of Bridgeport Fuel Cell, LLC. Several of the Company’s project finance subsidiaries previously entered into sale-leaseback agreements with PNC for commissioned projects where the Company had entered into a PPA with the site host/end-user of produced power. Under the financing method of accounting for a sale-leaseback, the Company did not recognize as income any of the sale proceeds received from the lessor that contractually constitute payments to acquire the assets subject to these arrangements. Instead, the sale proceeds received were accounted for as financing obligations. The outstanding financing obligation balance as of July 31, 2019 was $45.2 million and the decrease from $46.1 million on October 31, 2018 includes lease payments offset by the recognition of interest expense. The outstanding financing obligation includes an embedded gain which will be recognized at the end of the lease term. In November 2015, the Company entered into a definitive Assistance Agreement with the State of Connecticut and received a disbursement of $10.0 million, which was used for the first phase of the expansion of the Company’s Torrington, Connecticut manufacturing facility. In conjunction with this financing, the Company entered into a $10.0 million promissory note and related security agreements securing the loan with equipment liens and a mortgage on its Danbury, Connecticut location. Interest accrues at a fixed interest rate of 2.0 percent, repayable over 15 years. Principal payments were deferred for four years from disbursement and begin on December 1, 2019. Under the Assistance Agreement, the Company was eligible for forgiveness of up to 50 percent of the loan principal if the Company created 165 full-time positions and retained 538 full-time positions for two consecutive years (the “Employment Obligation”) as measured on October 28, 2017 (the “Target Date”). The Assistance Agreement was subsequently amended in April 2017 to extend the Target Date by two years to October 28, 2019. In January 2019, the Company and the State of Connecticut entered into a Second Amendment to the Assistance Agreement (the “Second Amendment”). The Second Amendment extends the Target Date to October 31, 2022 and amends the Employment Obligation to require the Company to maintain a minimum of 538 full-time positions for 24 consecutive months. If the Company meets the Employment Obligation, as modified by the Second Amendment, and creates an additional 91 full-time positions, the Company may receive a credit in the amount of $2.0 million to be applied against the outstanding balance of the loan. The Second Amendment deletes and cancels the provisions of the Assistance Agreement related to the second phase of the expansion project and the loans related thereto, but the Company had not drawn any funds or received any disbursements under those provisions. A job audit will be performed within ninety days of the Target Date. If the Company does not meet the Employment Obligation, then a penalty shall be assessed at a rate of $18,587.36 times the number of employees below the Employment Obligation. Such penalty, which accelerates the payment, is immediately payable and will be first applied against any outstanding fees or interest due and then against outstanding principal. In April 2016, the Company entered into a loan and security agreement (as amended from time to time, the “Hercules Agreement”) with Hercules for an aggregate principal amount of up to $25.0 million. The loan was a 30 month secured facility. The Hercules Agreement was subsequently amended on September 5, 2017, October 27, 2017, March 28, 2018, August 29, 2018, December 19, 2018, February 28, 2019, March 29, 2019, May 8, 2019, June 11, 2019 and July 24, 2019. Principal payments under the Hercules Agreement began on April 1, 2019 and were expected to total approximately $1.8 million per month, however, the Company has been prepaying principal as a result of the recent amendments to the Hercules Agreement, resulting in a loan balance of $7.4 million as of July 31, 2019. The term loan interest rate as of July 31, 2019 was 10.65%. The term loan interest rate is the greater of (i) 9.90% plus the prime rate minus 4.50%, and (ii) 9.90%. The initial end of term charge of $1.7 million was paid on October 1, 2018. An additional end of term charge of $0.9 million will be due on April 1, 2020 or upon repayment of the principal balance. The additional end of term charge is being accreted over a 30-month term. On June 11, 2019, 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 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 to pay Lender $6.0 million of the $10.0 million payable under the EMRE License Agreement 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. In the Ninth Hercules Amendment, the term “Amendment Period” is defined as the period from and after June 11, 2019 through the earlier of (i) August 9, 2019 and (ii) the occurrence of any event of default under the Ninth Hercules Amendment. The Hercules Agreement was further modified by the Tenth Hercules Amendment described below. On July 24, 2019, 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 tenth amendment to the Hercules Agreement (the “Tenth Hercules Amendment”). In the Tenth Hercules Amendment, the “Amendment Period” is defined as the period from and after July 24, 2019 through the earlier of (i) September 30, 2019 and (ii) the occurrence of any event of default under the Tenth Hercules Amendment; provided, however, that in the event that the outstanding balance of the secured obligations (including accrued interest, fees, costs, and charges) has been paid down to an amount that is less than or equal to $5.0 million on or before September 30, 2019, the Amendment Period shall be extended automatically through the earlier of (i) October 22, 2019 and (ii) the occurrence of any event of default under the Tenth Hercules Amendment. Under the Tenth Hercules Amendment, Borrower has agreed, among other things, to: (a) no later than July 25, 2019, pay Lender $4.0 million to be applied towards the outstanding balance of the loan; (b) from and after July 24, 2019 through the end of the Amendment Period under the Tenth Hercules Amendment, pay Lender, on the third trading day of each week (each, an “ATM Payment Date”) following a week in which the Company issues shares of its common stock under the Sales Agreement or any similar or replacement agreement (each such week, an “ATM Issuance Period”), an amount equal to 30% of the net proceeds, after deducting commissions and any offering-related expenses, of such issuances (“Net ATM Proceeds”), if any, received in cash by Borrower from such issuances, if any, during the ATM Issuance Period completed immediately prior to such ATM Payment Date, which amount shall be applied towards the outstanding balance of the loan; and (c) pay to Lender an interest-only payment on the outstanding principal balance of the loan at the term loan interest rate, which payment shall be due and payable on September 1, 2019; provided, however, that in the event the Amendment Period under the Tenth Hercules Amendment is extended to October 22, 2019 (as described above), Borrower shall pay to Lender an interest and amortization payment on the outstanding principal balance of the secured obligations at the term loan interest rate, which payment shall be due and payable on October 1, 2019. Borrower has further agreed that interest at the default rate (which is an additional 5% per annum against outstanding obligations), which has been accruing from June 3, 2019, will continue to accrue and be due and payable, subject to the terms of the Tenth Hercules Amendment; 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 under the Tenth Hercules Amendment (as such may be extended as described above), Lender will fully and unconditionally waive its right to payment of accrued and unpaid default rate interest. The accrued and unpaid default rate interest totaled $0.1 million as of July 31, 2019. 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 under the Tenth Hercules Amendment. The Hercules Agreement contains certain representations and warranties, affirmative and negative covenants, and events of default, including the occurrence of a circumstance that would reasonably be expected to have a material adverse effect, that entitle Hercules to cause the indebtedness under the agreement to become immediately due and payable. The occurrence of an event of default under the Hercules Agreement also constitutes or may result in an event of default under, and causes or may cause the acceleration of, a number of material financial obligations of the Company, including the loan from the State of Connecticut, the loan from Connecticut Green Bank, and the project finance facilities with Generate Lending, PNC and Fifth Third. The occurrence of an event of default under the Hercules Agreement also constitutes a triggering event under the Series D Certificate of Designations. As collateral for obligations under the Hercules Agreement, the Company granted Hercules a security interest in FuelCell Energy, Inc.’s existing and thereafter-acquired assets except for intellectual property and certain other excluded assets. The collateral does not include assets held by FuelCell Finance or any project subsidiary thereof. The Company may continue to collateralize and finance its project subsidiaries through other lenders and partners. On December 13, 2018, FuelCell Finance’s wholly owned subsidiary, Central CA Fuel Cell 2, LLC, drew a construction loan advance of $5.8 million under the NRG loan facility. This advance was used to support the completion of construction of the 2.8 MW Tulare BioMAT project in California. In conjunction with the December 13, 2018 draw, FuelCell Finance and NRG entered into an amendment to the NRG loan agreement to revise the definitions of the terms “Maturity Date” and “Project Draw Period” under the NRG loan agreement and to make other related revisions. Pursuant to this amendment, FuelCell Finance and its subsidiaries could only request draws through December 31, 2018 and the Maturity Date of each note was the earlier of (a) March 31, 2019 and (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. As of July 31, 2019, there have been no other drawdowns under the NRG loan facility. Prior to July 31, 2019, the Maturity Date was subsequently extended through amendments to the NRG loan agreement on March 29, 2019 (the “Third Amendment”), June 13, 2019 and July 11, 2019 (the “Fifth Amendment”). In connection with the Third Amendment, the Company agreed to make an additional payment of $750 thousand at the Maturity Date, which is recorded in interest expense on the Consolidated Statement of Operations. In addition, the Fifth Amendment, which was in effect as of the end of the quarter, extended the Maturity Date of each note to the earlier of (a) August 9, 2019, (b) the commercial operation date or substantial completion date, as applicable, with respect to the fuel cell project owned by Central CA Fuel Cell 2, LLC, and (c) closing of a refinancing of indebtedness; provided, however, in the event NRG determines, in its sole discretion, that the Company is not making sufficient progress toward the completion of the construction of the 2.8 MW Tulare BioMAT project in California, including but not limited to delivery of a mutually agreed plan of completion by no later than July 19, 2019, NRG may accelerate the Maturity Date on the date of such determination. Refer to Note 20. “Subsequent Events” for information regarding an additional amendment to the terms of the NRG loan agreement, including a further extension of the Maturity Date. On December 21, 2018, the Company, through its indirect wholly-owned subsidiary FuelCell Energy Finance II, LLC (“FCEF II”), entered into a Construction Loan Agreement (as amended from time to time, the “Generate Agreement”) with Generate Lending pursuant to which Generate Lending agreed (the “Commitment”) to make available to FCEF II a credit facility in an aggregate principal amount of up to $100.0 million (the “Generate Facility”) to fund the manufacture, construction, installation, commissioning and start-up of stationary fuel cell projects to be developed by the Company on behalf of FCEF II during the Availability Period (as defined below). Fuel cell projects must meet certain conditions to be determined to be “Approved Projects” under the Generate Facility. If approved by Generate Lending at its sole discretion, the Generate Facility may be comprised of multiple loans to individual Approved Projects (each, a “Working Capital Loan”). Each Working Capital Loan will be sized to the lesser of (i) 100% of the construction budget and (ii) the invested amount that allows Generate Lending to achieve a 10% unlevered, after-tax inefficient internal rate of return. Approved Projects will be funded at milestones on a cost incurred basis. FCEF II and the Company will contribute any additional equity required to construct an Approved Project on a pari-passu basis with the Working Capital Loans. The Commitment to provide Working Capital Loans will remain in place for thirty-six months from the date of the Generate Agreement (the “Availability Period”). Interest will accrue at 9.5% per annum, calculated on a 30/360 basis, on all outstanding principal, paid on the first business day of each month. The initial draw amount under the Generate Facility, funded at closing, was $10.0 million. The initial draw reflects loan advances for the first Approved Project under the Generate Facility, the Bolthouse Farms 5 MW project in California. The maturity date for the outstanding principal amount of each Working Capital Loan will be the earlier of (a) the achievement of the Commercial Operation Date under the Engineering, Procurement and Construction (“EPC”) Agreement for such Approved Project, (b) ninety days prior to the required Commercial Operation Date under the Revenue Contract (as defined in the Generate Agreement), or (c) upon certain defaults by FCEF II. As of September 1, 2019, Generate Lending has the right to issue a notice to FCEF II that all Working Capital Loans shall be due and payable on September 30, 2019. If Generate Lending delivers such notice, all of the Working Capital Loans, together with all accrued and unpaid interest thereon, shall be due and payable in their entirety, without penalty or premium. Further, if Generate Lending delivers such notice, FCEF II may prepay all then outstanding Working Capital Loans at any time prior to September 30, 2019. Mandatory prepayments are required in the event of (i) material damage or destruction to an Approved Project, (ii) termination or default under an Approved Project’s Revenue Contract, (iii) a change of control, or (iv) failure to achieve Substantial Completion as defined under the EPC Agreement for such Approved Project by the required dates. Refer to Note 20. “Subsequent Events” for information regarding recent amendments to the terms of the Generate Agreement. On January 9, 2019, the Company, through its indirect wholly-owned subsidiary TRS Fuel Cell, LLC, entered into a Loan and Security Agreement (the “Enhanced Capital Loan Agreement”) with Enhanced Capital Connecticut Fund V, LLC in the amount of $1.5 million. Interest will accrue at a rate of 6.0% per annum, calculated on a 30/360 basis, on all outstanding principal, paid on the first business day of each month. The loan maturity date is three years from the date of the Enhanced Capital Loan Agreement upon which the outstanding principal and accrued interest will be payable. On February 28, 2019, the Company, through its indirect wholly-owned subsidiary, Groton Station Fuel Cell, LLC (“Groton Borrower”), entered into a Construction Loan Agreement (the “Groton Agreement”) with Fifth Third pursuant to which Fifth Third agreed to make available to Groton Borrower a construction loan facility in an aggregate principal amount of up to $23.0 million (the “Groton Facility”) to fund the manufacture, construction, installation, commissioning and start-up of the 7.4 MW fuel cell power plant for the Connecticut Municipal Electric Energy Cooperative located on the U.S. Navy submarine base in Groton, Connecticut (the “Groton Project”). Groton Borrower made an initial draw under the Groton Facility on the date of closing of $9.7 million and made a draw of $1.4 million in April 2019. The total outstanding balance as of July 31, 2019 was $11.1 million. Amounts borrowed under the Groton Facility bear interest at a rate equal to the sum of the one-month LIBOR Rate plus 2.25%. Regular monthly payments are interest-only. Amounts borrowed under the Groton Facility may be prepaid at any time without penalty. The maturity date of the Groton Facility will be the earlier of (a) October 31, 2019, (b) the commercial operation date of the Groton Project, or (c) one business day after receipt of proceeds of debt financing (i.e., take out financing) in an amount sufficient to repay the outstanding indebtedness under the Groton Facility. Mandatory prepayments are required in the event of material damage or destruction to the Groton Project or a change of control of Groton Borrower. The Company has agreed to guarantee Groton Borrower’s obligations under the Groton Agreement. In addition, Groton Borrower’s obligations under the Groton Agreement are secured by a first mortgage lien on Groton Borrower’s leasehold interest in the Groton Project site, a security interest in the Groton Project assets, including material Groton Project related contracts such as the power purchase agreement and engineering, procurement and construction agreement, and the Company’s equity interest in the Groton Borrower. The Groton Agreement contains customary representations and warranties, affirmative and negative covenants, and events of default that entitle Fifth Third to cause the indebtedness under the Groton Facility to become immediately due and payable. Refer to Note 20. “Subsequent Events” for information regarding an amendment to the terms of the Groton Agreement. Deferred finance costs relate primarily to (i) sale-leaseback transactions entered into with PNC which are being amortized over the ten-year term, (ii) payments under the Hercules Agreement, which are being amortized over the term of the loan and (iii) payments under the loans obtained to purchase BFC which are being amortized over the term of the loans.

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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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