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DEBT. | 12 Months Ended
--- | ---
Dec. 31, 2019
Debt Disclosure [Abstract] |
DEBT. |
| 8. | DEBT.
Long-term borrowings are summarized as follows (in thousands):
|  | December 31, 2019 |  |  | December 31, 2018 |
Kinergy line of credit |  | $ | 78,338 |  |  | $ | 57,057 |
Pekin term loan |  |  | 39,500 |  |  |  | 43,000 |
Pekin revolving loan |  |  | 32,000 |  |  |  | 32,000 |
ICP term loan |  |  | 12,000 |  |  |  | 16,500 |
ICP revolving loan |  |  | 18,000 |  |  |  | 18,000 |
Parent notes payable |  |  | 65,649 |  |  |  | 66,948 |
|  |  | 245,487 |  |  |  | 233,505 |
Less unamortized debt premium (discount) |  |  | 461 |  |  |  | (690 | )
Less unamortized debt financing costs |  |  | (2,153 | ) |  |  | (1,377 | )
Less short-term portion |  |  | (63,000 | ) |  |  | (146,671 | )
Long-term debt |  | $ | 180,795 |  |  | $ | 84,767 |
Kinergy Line of Credit – Kinergy has an operating line of credit for an aggregate amount of up to $100,000,000. The line of credit matures on August 2, 2022. The credit facility is based on Kinergy's eligible accounts receivable and inventory levels, subject to certain concentration reserves. The credit facility is subject to certain other sublimits, including inventory loan limits. Interest accrues under the line of credit at a rate equal to (i) the three-month London Interbank Offered Rate ("LIBOR"), plus (ii) a specified applicable margin ranging between 1.50% and 2.00%. The applicable margin was 1.50%, for a total rate of 3.90% at December 31, 2019. The credit facility's monthly unused line fee is an annual rate equal to 0.25% to 0.375% depending on the average daily principal balance during the immediately preceding month. Payments that may be made by Kinergy to the Company as reimbursement for management and other services provided by the Company to Kinergy are limited under the terms of the credit facility to $1,500,000 per fiscal quarter. The credit facility also includes the accounts receivable of PAP as additional collateral. Payments that may be made by PAP to the Company as reimbursement for management and other services provided by the Company to PAP are limited under the terms of the credit facility to $500,000 per fiscal quarter. If Kinergy and PAP's monthly excess borrowing availability falls below certain thresholds, they are collectively required to maintain a fixed-charge coverage ratio (calculated as a twelve-month rolling EBITDA divided by the sum of interest expense, capital expenditures, principal payments of indebtedness, indebtedness from capital leases and taxes paid during such twelve-month rolling period) of at least 2.0 and are prohibited from incurring certain additional indebtedness (other than specific intercompany indebtedness). Kinergy and PAP's obligations under the credit facility are secured by a first-priority security interest in all of their assets in favor of the lender. Pacific Ethanol has guaranteed all of Kinergy's obligations under the line of credit. As of December 31, 2019, Kinergy had no unused availability under the credit facility. Pekin Credit Facilities – On December 15, 2016, the Company's wholly-owned subsidiary, Pacific Ethanol Pekin, LLC ("Pekin"), entered into a Credit Agreement (the "Pekin Credit Agreement") with 1st Farm Credit Services, PCA and CoBank, ACB ("CoBank"). On December 15, 2016, under the terms of the Pekin Credit Agreement, Pekin borrowed from 1st Farm Credit Services $64.0 million under a term loan facility that matures on August 20, 2021 (the "Pekin Term Loan") and $32.0 million under a revolving term loan facility that matures on February 1, 2022 (the "Pekin Revolving Loan" and, together with the Pekin Term Loan, the "Pekin Credit Facility"). The Pekin Credit Facility is secured by a first-priority security interest in all of Pekin's assets under the terms of a Security Agreement, dated December 15, 2016, by and between Pekin and CoBank (the "Pekin Security Agreement"). Interest accrues under the Pekin Credit Facility at an annual rate equal to the 30-day LIBOR plus 3.75%, payable monthly. Pekin is required to make quarterly principal payments in the amount of $3.5 million on the Pekin Term Loan beginning on May 20, 2017 and a principal payment of $4.5 million at maturity on August 20, 2021. Pekin is required to pay a monthly fee on any unused portion of the Pekin Revolving Loan at a rate of 0.75% per annum. Prepayment of the Pekin Credit Facility is subject to a prepayment penalty. Under the terms of the Pekin Credit Agreement, Pekin is required to maintain not less than $20.0 million in working capital and an annual debt coverage ratio of not less than 1.25 to 1.0. The Pekin Credit Agreement contains a variety of affirmative covenants, negative covenants and events of default. On August 7, 2017, Pekin amended its term and revolving credit facilities by agreeing to increase the interest rate under the facilities by 25 basis points to an annual rate equal to the 30-day LIBOR plus 4.00%. Pekin and its lender also agreed that Pekin is required to maintain working capital of not less than $17.5 million from August 31, 2017 through December 31, 2017 and working capital of not less than $20.0 million from January 1, 2018 and continuing at all times thereafter. In addition, the required Debt Service Coverage Ratio was reduced to 0.15 to 1.00 for the fiscal year ending December 31, 2017. For the month ended January 31, 2018, Pekin was not in compliance with its working capital requirement due to larger than anticipated repair and maintenance related expenses to replace faulty equipment. Pekin received a waiver from its lender for this noncompliance. Further, the lender decreased Pekin's working capital covenant requirement to $13.0 million for the month ended February 28, 2018, excluding the $3.5 million principal payment due in May 2018 from the calculation. On March 30, 2018, Pekin amended its term loan facility by reducing the amount of working capital it is required to maintain to not less than $13.0 million from March 31, 2018 through November 30, 2018 and not less than $16.0 million from December 1, 2018 and continuing at all times thereafter. In addition, a principal payment in the amount of $3.5 million due for May 2018 was deferred until the maturity date of the term loan. At December 31, 2018 and January 31, 2019, Pekin experienced certain covenant violations under its term and revolving credit facilities. In February 2019, Pekin reached an agreement with its lender to forbear until March 11, 2019 and to defer a $3.5 million principal payment until that date. On March 21, 2019, Pekin amended its term and revolving credit facilities by agreeing to increase the interest rate under the facilities by 125 basis points to an annual rate equal to the 30-day LIBOR plus 5.00%. Pekin and its lender also agreed that it is required to maintain working capital of not less than $15.0 million from March 21, 2019 through July 15, 2019 and working capital of not less than $30.0 million from July 15, 2019 and continuing at all times thereafter. On July 15, 2019, Pekin and its lender agreed to a further amendment extending the aforementioned July 15, 2019 dates to November 15, 2019. On August 6, 2019, Pekin paid its $3,500,000 principal payment scheduled for August 20, 2019. Under these amendments, the lender agreed to temporarily waive financial covenant violations, working capital maintenance violations and intercompany accounts receivable collections violations that occurred with respect to the credit agreement. The lenders also agreed to defer all scheduled principal payments, including further deferral of principal payments in the amount of $3.5 million each due on February 20, 2019 and May 20, 2019. The waivers and principal deferral expired on November 15, 2019, at which time the waivers were to become permanent if PE Central made a contribution to Pekin in an amount equal to $30.0 million, minus the then-existing amount of Pekin's working capital, plus the amount of any accounts receivable owed by PE Central to Pekin, plus $12.0 million, or the Parent Contribution Amount. In addition, if the Parent Contribution Amount was timely received, the lender agreed to waive Pekin's debt service coverage ratio financial covenant for the year ended December 31, 2019. If the Parent Contribution Amount was not timely made, then the temporary waivers would automatically expire. Pekin was also required to pay by November 15, 2019 the aggregate amount of $10.5 million representing all deferred and unpaid scheduled principal payments and all additional scheduled principal payments for the remainder of 2019. On November 15, 2019, Pekin amended its term and revolving credit facilities by agreeing to extend the temporary waiver of violations of financial and other covenants relating to working capital maintenance, intercompany accounts receivable collections, financial projections, cash flow forecasts, and sales reports. The lender also agreed to extend the deferral of all scheduled principal payments payable on February 20, 2019, May 20, 2019 and November 15, 2019 to December 15, 2019. The amendment also made a payment default of $250,000 or more under Kinergy's credit facility or the senior secured notes, or any acceleration of indebtedness, or any termination of any commitment to lend or termination of any forbearance or other accommodation, an event of default. The waivers and principal deferral expired on December 15, 2019. On December 15, 2019, the waivers were to become permanent if PE Central made a contribution to Pekin in an amount equal to the Parent Contribution Amount. In addition, if the Parent Contribution Amount was timely received, the lender agreed to waive Pekin's debt service coverage ratio financial covenant for the year ended December 31, 2019. If the Parent Contribution Amount was not timely made, then the temporary waivers would automatically expire. On December 16, 2019, Pekin amended its term and revolving credit facilities by agreeing to extend the deferral of all scheduled principal payments payable on February 20, 2019, May 20, 2019 and November 20, 2019 to December 20, 2019. On December 20, 2019, Pekin's lender agreed to temporarily waive working capital covenant violations, debt service coverage ratio covenant violations, reporting covenant violations and certain other covenant violations that occurred under the Pekin credit agreement, and replaced those covenants with new EBITDA and production volume covenants. Pekin's lender also agreed to defer all scheduled principal installments payable under the term note on February 20, 2019, May 20, 2019 and November 20, 2019 until August 20, 2021. In addition, Pekin was not required to make its prior scheduled quarterly principal payments of $3.5 million until September 30, 2020, at which time $3.5 million will be due, with the same amount due quarterly thereafter until maturity. Under the amendment, Pekin, collectively with ICP, agreed to pay the lenders an aggregate of $40.0 million on or before September 30, 2020 to reduce the outstanding balances of the term loans under the Pekin credit agreement and the ICP credit agreement. The $40.0 million is an aggregate amount payable to ICP's lender and Pekin's lender, and allocated between them. The $40.0 million is to be funded through asset sales, proceeds of any award, judgment or settlement of litigation, or, at the Company's election, from funds contributed to Pekin by the Company. Following receipt by the lenders under the ICP credit agreement and the Pekin credit agreement, collectively, of $40.0 million in full, and once any loans corresponding to the particular midwestern asset sold are repaid, additional proceeds from the sale of any of the Company's midwestern plant assets will generally be allocated 33/34/33% among ICP's lender and Pekin's lender, collectively, the selling security holders, and the Company, respectively. Proceeds from the sale of any of the Company's western assets will generally be allocated 33/34/33% among Pekin's lender and ICP's lender, collectively, the selling security holders, and the Company, respectively. Pekin's lender also imposed cross-default terms such that, until Pekin's lender and ICP's lender receive $40.0 million, a default under the ICP credit agreement would constitute a default under the Pekin credit agreement. Pekin agreed to provide additional collateral security to support its obligations under the Pekin credit agreement, including second lien positions in the Company's western plants, which will terminate and be released upon Pekin's lender's receipt of $40.0 million. On December 29, 2019, Pekin agreed to amend the secured obligations under its security agreement to include Pekin's unconditional guarantee of the payment of up to an aggregate $40.0 million to satisfy the obligations of ICP to ICP's lender under the ICP credit agreement. On March 20, 2020, Pekin and its lender agreed to defer $1.0 million in aggregate interest payments due March 20, 2020 and April 20, 2020 until May 20, 2020. On that same date, the Company granted to the lender a security interest in all of the Company's equity interests in PE Op Co., which indirectly owns the Company's plants located on the West Coast. The Company and certain subsidiaries also entered into intercreditor agreements with the Pekin and ICP lenders, and the agent for the Company's senior secured noteholders, to address issues of priority and the allocation of proceeds from asset sales. ICP Credit Facilities — On September 15, 2017, ICP, Compeer Financial, PCA ("Compeer"), and CoBank as agent, entered into a Credit Agreement ("ICP Credit Agreement"). Under the ICP Credit Agreement, Compeer agreed to extend to ICP a term loan in the amount of $24,000,000 and a revolving loan in an amount of up to $18,000,000. ICP used the proceeds of the term loan to refinance the Seller Notes. ICP is to make amortizing principal payments in sixteen equal consecutive quarterly installments of $1,500,000 each until September 20, 2021, at which time the entire remaining balance is due and payable. Interest on the unpaid principal amount of the term loan accrues at a rate equal to 3.75% plus the one-month LIBOR index rate. ICP used the proceeds of the revolving term facility to refinance the Seller Notes and for ICP's working capital needs. The revolving loan matures on September 1, 2022. The revolving loan gives ICP the right, in ICP's sole discretion, to permanently reduce from time to time the revolving term commitment in increments of $500,000 by giving CoBank ten days prior written notice. The revolving loan requires ICP to pay CoBank a nonrefundable commitment fee equal to 0.75% per annum multiplied by the average daily positive difference between the amounts of (i) the revolving term commitment, minus (ii) the aggregate principal amount of all loans outstanding under the revolving loan. Interest on the unpaid principal amount of the loan accrues, pursuant to ICP's election of the LIBOR Index Option, at a rate equal to 3.75% plus the one-month LIBOR index rate. Under the terms of the credit facilities, ICP is required to maintain working capital of not less than $8.0 million. In addition, ICP is required to maintain an annual debt service coverage ratio of not less than 1.50 to 1.00 beginning for the year ending December 31, 2018. As of September 30, 2019, ICP had no additional borrowing availability under its revolving credit facility. As of September 30, 2019, ICP did not meet its minimum working capital requirement, however, ICP's lender subsequently waived the minimum working capital deficiency. On December 20, 2019, ICP amended its term and revolving credit facilities under which ICP's lender granted waivers for certain ICP covenant defaults and replaced those covenants with new EBITDA and production volume covenants. ICP's lender also imposed cross-default terms such that, until ICP's lender and Pekin's lender receive an aggregate of $40.0 million, a default under the Pekin credit agreement would constitute a default under the ICP credit agreement. ICP agreed to provide additional collateral security to support its obligations under the ICP credit agreement, including second lien positions in the Company's western plants, which will terminate and be released upon ICP's lender's receipt of an aggregate of $40.0 million. ICP's prior scheduled principal payment of $1.5 million, originally due on December 20, 2019, was deferred to the maturity date of September 20, 2021. Scheduled quarterly principal payments of $1.5 million will resume March 20, 2020. Under the amendment, ICP, collectively with Pekin, agreed to pay the lenders an aggregate of $40.0 million on or before September 30, 2020 to reduce the outstanding balances of the term loans under the ICP credit agreement and the Pekin credit agreement. The $40.0 million is an aggregate amount payable to ICP's lender and Pekin's lender, and allocated between them. The $40.0 million is to be funded through asset sales, proceeds of any award, judgment or settlement of litigation, or, at the Company's election, from funds contributed to ICP by the Company. Following receipt by the lenders under the ICP credit agreement and the Pekin credit agreement, collectively, of $40.0 million in full, and once any loans corresponding to the particular midwestern asset sold are repaid, any additional proceeds from a sale of the Company's midwestern plant assets will generally be allocated 33/34/33% among ICP's lender and Pekin's lender, collectively, the selling security holders, and the Company, respectively. Proceeds from the sale of any of the Company's western assets will generally be allocated 33/34/33% among Pekin's lender and ICP's lender, collectively, the selling security holders, and the Company, respectively. On December 29, 2019, ICP agreed to amend the secured obligations under its security agreement to include ICP's unconditional guarantee of the payment of up to an aggregate $40.0 million to satisfy the obligations of Pekin to Pekin's lender under the Pekin credit agreement. As of December 31, 2019 and the filing of this report, the Company believes ICP is in compliance with its working capital requirement. On March 20, 2020, ICP and its lender agreed to defer a $1.5 million principal payment due March 20, 2020 and $0.3 million in aggregate interest payments due March 20, 2020 and April 20, 2020 until May 20, 2020. On that same date, the Company granted to the lender a security interest in all of the Company's equity interests in PE Op Co. The Company and certain of its subsidiaries also entered into intercreditor agreements with the Pekin and ICP lenders, and the agent for the Company's senior secured noteholders, to address issues of priority and the allocation of proceeds from asset sales. Pacific Ethanol, Inc. Notes Payable – On December 12, 2016, Pacific Ethanol entered into a Note Purchase Agreement (the "Note Purchase Agreement") with five accredited investors. On December 15, 2016, under the terms of the Note Purchase Agreement, Pacific Ethanol sold $55.0 million in aggregate principal amount of its senior secured notes to the Investors in a private offering for aggregate gross proceeds of 97% of the principal amount of the Notes sold. On June 26, 2017, the Company entered into a second Note Purchase Agreement with five accredited investors. On June 30, 2017, under the terms of the second Note Purchase Agreement, the Company sold an additional $13.9 million in aggregate principal amount of its senior secured notes to the investors in a private offering for aggregate gross proceeds of 97% of the principal amount of the notes sold (collectively with the notes sold on December 15, 2016, the "Notes"), for a total of $68.9 million in aggregate principal amount of Notes. The Notes had an original maturity date of December 15, 2019 (the "Maturity Date"). Interest on the Notes accrued at a rate equal to (i) the greater of 1% and the three-month LIBOR, plus 7.0% from the closing through December 14, 2017, (ii) the greater of 1% and LIBOR, plus 9% between December 15, 2017 and December 14, 2018, and (iii) the greater of 1% and LIBOR plus 11% between December 15, 2018 and the Maturity Date. The interest rate would increase by an additional 2% per annum above the interest rate otherwise applicable upon the occurrence and during the continuance of an event of default until such event of default has been cured. Interest was payable in cash on the 15th calendar day of each March, June, September and December. Pacific Ethanol is required to pay all outstanding principal and any accrued and unpaid interest on the Notes on the Maturity Date. Pacific Ethanol may, at its option, prepay the outstanding principal amount of the Notes at any time without premium or penalty. The Notes contain a variety of events of default. The payments due under the Notes rank senior to all other indebtedness of Pacific Ethanol, other than permitted senior indebtedness. The Notes contain a variety of obligations on the part of Pacific Ethanol not to engage in certain activities, including that (i) Pacific Ethanol and certain of its subsidiaries will not incur other indebtedness, except for certain permitted indebtedness, (ii) Pacific Ethanol and certain of its subsidiaries will not redeem, repurchase or pay any dividend or distribution on their respective capital stock without the prior consent of the holders of the Notes holding 66-2/3% of the aggregate principal amount of the Notes, other than certain permitted distributions, (iii) Pacific Ethanol and certain of its subsidiaries will not sell, lease, assign, transfer or otherwise dispose of any assets of Pacific Ethanol or any such subsidiary, except for certain permitted dispositions (including the sales of inventory or receivables in the ordinary course of business), and (iv) Pacific Ethanol and certain of its subsidiaries will not issue any capital stock or membership interests for any purpose other than to pay down a portion of all of the amounts owed under the Notes and in connection with Pacific Ethanol's stock incentive plans. The Notes are secured by a first-priority security interest in the equity interest held by Pacific Ethanol in its wholly-owned subsidiary, PE Op. Co., which indirectly owns the Company's plants located on the West Coast. On December 16, 2019, Pacific Ethanol amended the notes to extend the maturity date from December 15, 2019 to December 23, 2019 and amended the interest rate from the greater of 1% and the three-month LIBOR, plus 11% between December 15, 2018 through December 14, 2019, to 15% commencing on September 15, 2019. Under the amendment, Pacific Ethanol also agreed to pay the December 15, 2019 interest payment 50% in cash and 50% in-kind through the issuance of an additional note in the principal amount equal thereto. On December 22, 2019, Pacific Ethanol amended and restated the notes which extended the maturity date from December 23, 2019 to December 15, 2021. Interest on the Notes accrues at a rate of 15% per annum, payable quarterly. In addition, the Company issued 5.5 million shares of its common stock and 5.5 million warrants to the noteholders. The Company evaluated the above amendment and determined that debt extinguishment accounting was appropriate. Therefore, the Company recorded a loss on debt extinguishment of $6,517,000, comprised of the fair value of common stock issued, fair value of warrants issued and fair value of the carrying value of the debt. On March 20, 2020, the Company and the noteholders agreed to defer a $2.5 million aggregate interest payment due March 15, 2020 until May 20, 2020. On that same date, ICP granted a junior lien in certain of its personal property to the noteholders, and PE Central granted a junior lien in certain of its personal property to the noteholders. PE Central also pledged its equity interests in Pacific Aurora, Pekin and ICP in favor of the noteholders. In addition, PE Op Co. and Pacific Ethanol West, LLC, which directly owns the Company's plants located on the West Coast, granted a security interest in certain of their personal property to the noteholders. The Company and certain of its subsidiaries also entered into intercreditor agreements with the Pekin and ICP lenders, and the agent for the Company's senior secured noteholders, to address issues of priority and the allocation of proceeds from asset sales. Maturities of Long-term Debt – The Company's long-term debt matures as follows (in thousands):
December 31: |  |  |
2020 |  | $ | 63,000 |
2021 |  |  | 94,149 |
2022 |  |  | 88,338 |
2023 |  |  | — |
2024 |  |  | — |
|  | $ | 245,487 |

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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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