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Borrowings | 6 Months Ended
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Dec. 31, 2020
Debt Disclosure [Abstract] |
Borrowings | 11. Borrowings Related party borrowings of the Company’s subsidiaries are summarized in the following table:
(in thousands) |  | Subsidiaries |  | December 31, 2020 |  |  | June 30, 2020 |
Corbel Facility |  | DME Inc. and subsidiaries |  | $ | - |  |  | $ | 25,106 |
GP Corp. Note |  | GP Corp. |  |  | 3,072 |  |  |  | 3,072 |
Total principal |  |  |  | $ | 3,072 |  |  | $ | 28,178 |
Unamortized debt issuance cost |  |  |  |  | - |  |  |  | (275 | )
Total long-term related party notes payable |  |  |  |  | 3,072 |  |  |  | 27,903 |
Less current portion of related party notes payable |  |  |  |  | (76 | ) |  |  | (1,418 | )
Related party notes payable, net of current portion |  |  |  | $ | 2,996 |  |  | $ | 26,485 |
The Company’s subsidiaries’ other outstanding borrowings are summarized in the following table:
(in thousands) |  | Subsidiaries |  | December 31, 2020 |  |  | June 30, 2020 |
DME Revolver |  | DME Inc. and subsidiaries |  | $ | - |  |  | $ | 3,900 |
Equipment Financing |  | DME Inc. and subsidiaries |  |  | 1,877 |  |  |  | 2,230 |
Senior Note |  | CRIC IT |  |  | 48,868 |  |  |  | 50,004 |
Subordinated Note |  | CRIC IT |  |  | 4,098 |  |  |  | 3,803 |
Total principal |  |  |  | $ | 54,843 |  |  | $ | 59,937 |
Unamortized debt premiums |  |  |  |  | 3,262 |  |  |  | 3,251 |
Unamortized debt discounts and issuance costs |  |  |  |  | (1,867 | ) |  |  | (1,956 | )
Total other outstanding borrowings |  |  |  |  | 56,238 |  |  |  | 61,232 |
Less current portion of other outstanding borrowings |  |  |  |  | (4,168 | ) |  |  | (8,255 | )
Other outstanding borrowings, net of current portion |  |  |  | $ | 52,070 |  |  | $ | 52,977 |
The Company incurred interest expense of $1.3 million and $1.6 million for the three months ended December 31, 2020 and 2019, respectively. The Company incurred interest expenses of $2.7 million and $3.3 million for the six months ended December 31, 2020 and 2019, respectively. The Company’s aggregate future required principal debt repayments are summarized in the following table:
(in thousands) |  | Principal Due |
For the six months ending June 30, 2021 |  | $ | 2,486 |
For the year ending June 30, 2022 |  |  | 3,107 |
For the year ending June 30, 2023 |  |  | 2,835 |
For the year ending June 30, 2024 |  |  | 2,982 |
For the year ending June 30, 2025 |  |  | 3,202 |
Thereafter |  |  | 55,476 |
Total |  | $ | 70,088 |
Outstanding principal on related party borrowings |  | $ | 3,072 |
Outstanding principal on other borrowings |  |  | 54,843 |
Future interest to be paid-in-kind |  |  | 12,173 |
Total future required principal payments |  | $ | 70,088 |
Additional details of each borrowing by operating segment are discussed below. Durable Medical Equipment In connection with the acquisition of 80.1% of DME Inc., the Company assumed a secured note (Corbel Facility) with a principal balance of $8.5 million, which was amended and increased to $25 million concurrent with the closing of the first acquisition of the durable medical equipment businesses. In addition, the Company assumed and expanded a revolving line of credit agreement (DME Revolver) with a principal balance of $0.8 million, which was amended and increased to $6.3 million at the date of acquisition. The Company amended and borrowed an additional $3.4 million under the Corbel Facility in June 2019. The remaining outstanding principal balance of $24.8 million was repaid on December 29, 2020. The repayment included deferred structuring fees of $0.6 million, prepayment premiums and settlement fees of $1.0 million, and lender legal fees of $0.1 million. In addition, upon repayment, the Company wrote off the remaining unamortized debt issuance costs of $0.2 million, resulting in an aggregate $1.9 million loss on extinguishment of debt. The Corbel Facility was held by Corbel, a related party, which also holds a non-controlling interest in DME Inc. and HC LLC Series A-1 Preferred Stock. See Note 5 – Related Party Transactions and Note 14 – Non-Controlling Interests and Preferred Stock of Subsidiaries. Principal payments and interest expense incurred on the Corbel Facility are summarized in the following table:
|  | For the three months ended December 31, |  |  | For the six months ended December 31, |
(in thousands) |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Principal payments |  | $ | 24,752 |  |  | $ | 355 |  |  | $ | 25,106 |  |  | $ | 1,316 |
Interest expense |  |  | 635 |  |  |  | 1,603 |  |  |  | 1,296 |  |  |  | 2,458 |
The DME Revolver had a balance of $0.0 million at December 31, 2020 and allows for borrowings up to $10 million, subject to a fixed percentage of qualifying accounts receivables and inventories related to the durable medical equipment business operations. Borrowings under the line of credit are due on November 29, 2022 and accrue interest at a variable rate of the prime rate plus 0.4% per annum. At December 31, 2020 the interest rate was 3.7%. Interest is payable monthly in arrears. The Company has the option to prepay the borrowings without any penalty. The Company has classified all borrowings under the DME Revolver as long-term in the condensed consolidated balance sheets as of December 31, 2020 based on the maturity date of the facility. The borrowings under the DME Revolver are collateralized by the assets of the durable medical equipment business and DME Inc. is required to meet certain financial covenants. The DME Revolver includes covenants that restrict DME Inc. business operations to its current business, limit additional indebtedness, liens, asset dispositions and investments, require compliance and maintenance of licenses and government approvals and other customary conditions. Events of default include the failure to pay amounts when due, bankruptcy, or violation of covenants, including a change in control of DME Inc. DME Inc. must also comply with a fixed-charge coverage and leverage ratio financial covenants, which are based in part on the DME Inc. EBITDA levels. T he DME Revolver are non-recourse to the Company. DME Inc’s operating subsidiaries also utilize equipment financing debt to fund certain inventory and equipment purchases from suppliers. These equipment financing debt agreements are entered into with 3rd party banks and are generally payable in equal installments over terms of one to three years, depending on the nature of the underlying purchases being financed. The debt is secured by the inventory and equipment, as applicable, of the operating subsidiaries entering into the agreements, and the long-term agreements have implicit interest rates between 7 – 8%. During the six months ended December 31, 2020 and 2019, the Company financed $1.6 million and $1.3 million, respectively, in inventory and equipment through such financing agreements. Investment Management The GP Corp. Note matures in November 2026, accrues interest at a variable rate of three-month LIBOR plus 3.0% per annum and is secured by a profit sharing agreement related to GECM’s management of GECC. At December 31, 2020 the interest rate was 3.2%. The GP Corp. Note requires quarterly interest only payments and annual principal payments of $0.08 million each June 30. The GP Corp. Note is non-recourse to any of the Company’s operations or net assets not related to GECM’s management services to GECC. The GP Corp. Note may be prepaid at par value at any time with prior written notice to the holders of the GP Corp. Note. Additionally, GECC GP Corp. is required to prepay the GP Corp. Note upon certain material liquidation transactions including any termination of the Profit Sharing Agreement. The GP Corp. Note is held by MAST Capital, a related party. Payments and interest expense incurred on the GP Corp. Note are summarized in the following table:
|  | For the three months ended December 31, |  |  | For the six months ended December 31, |
(in thousands) |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Principal payments |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
Interest expense |  |  | 25 |  |  |  | 44 |  |  |  | 51 |  |  |  | 88 |
Real Estate In connection with the acquisition of the real estate business, the Company’s majority-owned subsidiary, CRIC IT, assumed a senior secured note (Senior Note) with a principal balance of $54.8 million and a subordinated note (Subordinated Note) with a principal balance of $2.7 million at the date of acquisition both due to Wells Fargo Bank Northwest, National as trustee. The Senior Note was recorded at an estimated fair value of $52.2 million, reflecting a discount of $2.6 million from the face amount; and the Subordinated Note was recorded at $5.8 million, reflecting a premium of $3.1 million. The discount and premium amortize over the life of the notes. The Senior Note matures on March 15, 2030, accrues interest at a rate of 3.49% per annum and is secured by a first lien mortgage on the Property and an Assignment of Leases and Rents. The Senior Note requires monthly principal and interest payments through the maturity date, with the last payment of $18.4 million on March 15, 2030. The principal and interest due on the Senior Note may be prepaid at the option of the borrower, based on an amount determined by discounting the remaining principal and interest payments at a rate equal to an applicable premium in excess of a rate corresponding to the specified U.S. Treasury security over the remaining average life of the Senior Note. The Subordinated Note matures on March 15, 2030, accrues interest at a rate of 15.0% per annum, and is secured by a second lien mortgage on the Property and an Assignment of Leases and Rents. The Subordinated Note is a capital appreciation note, whereby the monthly interest is capitalized to the principal balance and due at maturity. Accordingly, a $16.3 million payment is due on March 15, 2030. The principal and interest due on the Subordinate Note may be prepaid at the option of the borrower, based on an amount determined by discounting the remaining principal and interest payments at a rate equal to an applicable premium in excess of a rate corresponding to the specified U.S. Treasury security over the remaining average life of the Subordinated Note. The note agreements include negative covenants that restrict the Property Owner’s business operations to ownership and lease of the Property, limit additional indebtedness, require maintenance of insurance and other customary requirements related to the Property. Events of default include non-payment of amounts when due, inability to pay indebtedness or material change in the business operations or financial condition of the Property Owner or the lease tenant that in the Lender’s reasonable determination would reasonably be expected to materially impair the value of the Property, prevent timely repayment of the notes or performance of any material obligations under the note and related agreements. The payments under the notes are also guaranteed on a full and several basis by the non-controlling interest holder of the Property Owner. Both the Senior Note and Subordinated Note are non-recourse to the Company, but are secured by the Property, the rights associated with the Leases and the stock owned by the Company in the Property Owner. See Note 9 – Lessor Operating Leases.

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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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