XML 27 R16.htm IDEA: XBRL DOCUMENT v3.19.2
Note 9 - Debt
 3 Months Ended
Apr. 30, 2019
Notes to Financial Statements  
Debt Disclosure [Text Block]
Note
9
- Debt
 
Debt totaled $
13.3
 million at
April 30, 2019,
a net decrease of $
3.0
 million since
January 
31,
2019.
 
Revolving lines North America
. 
On
September 20, 2018,
the Company and certain of its U.S. and Canadian subsidiaries (collectively, together with the Company, the “North American Loan Parties”) entered into a new Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association, as administrative agent and lender (“PNC”), providing for a new
three
-year
$18
million Senior Secured Revolving Credit Facility, subject to a borrowing base including various reserves (the “Senior Credit Facility”). The Senior Credit Facility replaced the Company’s then existing
$15
million Credit and Security Agreement, dated
September 24, 2014,
among various subsidiaries of the Company and Bank of Montreal, as successor by assignment to BMO Harris Bank N.A., as amended (the “Prior Credit Agreement”).
 
The Company initially used borrowings under the new Senior Credit Facility to pay off outstanding amounts under the Prior Credit Agreement (which totaled approximately USD
$3,773,823
plus CAD
4,794,528
) and cash collateralize a letter of credit (USD
$154,500
). The Company has used proceeds from the new Senior Credit Facility for on-going working capital needs, and expects to continue using this facility to fund future capital expenditures, working capital needs and other corporate purposes. Borrowings under the Senior Credit Facility bear interest at a rate equal to an alternate base rate or London Interbank Offered Rate ("LIBOR"), plus, in each case, an applicable margin.  The applicable margin is based on average quarterly undrawn availability with respect to the Senior Credit Facility.  Interest on alternate base rate borrowings are generally payable monthly in arrears and interest on LIBOR borrowings are generally payable in arrears on the last day of each interest period.  Additionally, the Company is required to pay a
0.375%
per annum facility fee on the unused portion of the Senior Credit Facility.  The facility fee is payable quarterly in arrears.
 
Subject to certain exceptions, borrowings under the Senior Credit Facility are secured by substantially all of the assets of the Company and certain assets of its North American subsidiaries. The North American Loan Parties’ obligations under the Senior Credit Facility are guaranteed by Perma-Pipe Canada, Inc. The Senior Credit Facility will mature on
September 20, 2021.
Subject to certain qualifications and exceptions, the Senior Credit Facility contains covenants that, among other things, restrict the North American Loan Parties’ ability to create liens, merge or consolidate, consummate acquisitions, make investments, dispose of assets, incur debt, and pay dividends and other distributions. In addition, the North American Loan Parties cannot allow capital expenditures to exceed 
$3.0
million annually (plus a limited carryover of unused amounts).
 
The Senior Credit Facility also contains financial covenants requiring (i) the North America Loan Parties to achieve a ratio of its EBITDA (with certain additional adjustments) to the sum of scheduled cash principal payments on indebtedness for borrowed money and interest payments on the advances under the Senior Credit Facility (excluding from the calculation items related to the financial performance of the Company’s foreign subsidiaries
not
party to the Credit Agreement) to be
not
less than
1.10
to
1.00
for the
nine
-month period ending
April 30, 2019
and for the quarter ending
July 31, 2019
and each quarter end thereafter on a trailing
four
-quarter basis; and (ii) the Company and its subsidiaries (including the Company’s foreign subsidiaries
not
party to the Credit Agreement) to achieve a ratio of its EBITDA (with certain additional adjustments) to the sum of scheduled cash principal payments on indebtedness for borrowed money and interest payments on the advances under the Senior Credit Facility of
not
less than
1.10
to
1.00
for each quarter end on a trailing
four
-quarter basis. The Company was in compliance with this requirement as of
April 30, 2019. 
 
The Senior Credit Facility contains customary events of default. If an event of default occurs and is continuing, then PNC
may
terminate all commitments to extend further credit and declare all amounts outstanding under the Senior Credit Facility due and payable immediately. In addition, if any of the North American Loan Parties or certain of their subsidiaries become the subject of voluntary or involuntary proceedings under any bankruptcy, insolvency or similar law, then any outstanding obligations under the Senior Credit Facility will automatically become immediately due and payable. Borrowings under the Senior Credit Facility will bear interest at a rate of
2.00%
per annum in excess of the otherwise applicable rate while a bankruptcy event of default exists or, upon the lenders’ request, during the continuance of any other event of default.
 
As of
April 30, 2019,
the Company had borrowed an aggregate of
$5.6
 million;
$0.6
million at
8.5%
and
$5.0
million at
6.49%,
at a weighted average rate of
6.72%,
and the Company had
$2.8
 million available to them under the Senior Credit Facility. 
Revolving lines foreign
.
The Company also has credit arrangements used by its Middle Eastern subsidiaries. These credit arrangements are in the form of overdraft facilities and project financing at rates competitive in the countries in which the Company operates. The lines are secured by certain equipment, certain assets (such as accounts receivable and inventory), and a guarantee by the Company. Some credit arrangement covenants require a minimum tangible net worth to be maintained, including maintaining certain levels of intercompany subordinated debt. In addition, some of the revolving credit facilities restrict payment of dividend
s. On
April 30, 2019 
the Company was in compliance with the covenants under the credit arrangements. On
April 30, 2019,
interest rates were based on the Emirates Inter Bank Offered Rate (EIBOR) plus
3.5%
per annum, with a minimum interest rate of
4.5%
per annum. On
April 30, 2019
, the Company's interest rates ranged from
6.15%
to
6.30%,
with a weighted average rate of
6.30%,
an
d the Company could borrow
$9.0
 million
under these credit arrangements. On
April 30, 2019, 
$5.9
 mi
llion of availability was used to support letters of credit to guarantee amounts committed for inventory purchases and for performance guarantees. On
April 30, 2019,
the Company had borrowed
$0.5
 milli
on, and had an addition
al
$2.6
 mill
ion available. The foreign revolving lines balances as of
April 30, 2019 
and
January 31, 2019,
were included as current maturities of long-term debt in the Company's consolidated balance sheets. 
Mortgages.
On
July 
28,
2016,
the Company borrowed
8.0
million CAD (approximately
$6.1
million at the prevailing exchange rate on the transaction date) from a bank in Canada under a mortgage note secured by the Company's manufacturing facility located in Alberta, Canada, that matures on
December 
23,
2042.
The interest rate is variable, currently a
t 
6.05%,
with mon
thly payments of
37
 thousand CAD (approximately
$28
thousand) for interest; and monthly payments of
27
thousand CAD (approximately
$20
thousand) for principal. Principal payments began
January 2018.
On
June 
19,
2012,
the Company borrowed
$1.8
million under a mortgage note secured by its manufacturing facility in Lebanon, Tennessee. The proceeds were used for payment of amounts borrowed. The loan bears interest at
4.5%
with monthly payments of
$13
thousand for both principal and interest and matures
July 
1,
2027.
On
June 
19,
2022,
and on the same day of each year thereafter, the interest rate shall adjust to the prime rate, provided that the applicable interest rate shall
not
adjust more than
2.0%
per annum and shall be subject to a ceiling of
18.0%
and a floor of
4.5%.