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Long-Term Debt and Other Borrowings | 9 Months Ended
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Jun. 30, 2018
Long-Term Debt and Other Borrowings |
8. | Long-Term Debt and Other Borrowings
Long-term debt as of June 30, 2018 and September 30, 2017, consisted of the following (in thousands):
|  | June 30, |  |  | September 30, |
|  | 2018 |  |  | 2017 |
Notes payable to financial institution, collateralized by the underlying aircraft, due 2019(1)(2) |  | $ | 7,049 |  |  | $ | 58,254 |
Notes payable to financial institution, collateralized by the underlying aircraft, due 2022(3)(4) |  |  | 72,839 |  |  |  | 113,611 |
Notes payable to financial institution, collateralized by the underlying aircraft, due 2024(5) |  |  | 74,822 |  |  |  | 82,776 |
Senior and subordinated notes payable to secured parties, collateralized by the underlying aircraft, due 2027(6) |  |  | 125,460 |  |  |  | 137,028 |
Notes payable to secured parties, collateralized by the underlying aircraft, due 2028(7) |  |  | 217,930 |  |  |  | 226,399 |
Senior and subordinated notes payable to secured parties, collateralized by the underlying aircraft, due 2028(8) |  |  | 170,777 |  |  |  | 181,115 |
Senior and subordinated notes payable to secured parties, collateralized by the underlying aircraft, due 2022(17) |  |  | 97,069 |  |  |  | — |
Notes payable to financial institution, collateralized by the underlying equipment, due 2022(9) |  |  | 89,807 |  |  |  | 93,031 |
Senior and subordinated notes payable to secured parties, collateralized by the underlying aircraft, due 2022(10) |  |  | 67,282 |  |  |  | — |
Notes payable to financial institution, collateralized by the underlying equipment, due 2020(11) |  |  | 3,732 |  |  |  | 4,976 |
Notes payable to financial institution due 2020(12) |  |  | 4,867 |  |  |  | 6,390 |
Notes payable to financial institution, collateralized by the underlying equipment, due 2020(13) |  |  | 17,749 |  |  |  | 9,158 |
Notes payable to financial institution due 2019(14) |  |  | 9,055 |  |  |  | 18,530 |
Working capital draw loan, collateralized by certain flight equipment and spare parts(15) |  |  | 25,650 |  |  |  | 25,650 |
Other obligations due to financial institution, collateralized by the underlying equipment, due 2023(16) |  |  | 10,014 |  |  |  | — |
Total long-term debt |  |  | 994,102 |  |  |  | 956,918 |
Less current portion |  |  | (149,936 | ) |  |  | (140,466 | )
Less unamortized debt issuance costs |  |  | (15,679 | ) |  |  | (12,578 | )
Long-term debt—excluding current portion |  | $ | 828,487 |  |  | $ | 803,874 |
(1) | In fiscal 2005, the Company financed five CRJ-900 aircraft with $118 million in debt. The debt bears interest at the monthly London InterBank Offered Rate (“LIBOR”), plus 3% (5.092% at June 30, 2018) and requires monthly principal and interest payments.
(2) | In fiscal 2004, the Company financed five CRJ-700 and nine CRJ 900 aircraft with $254.7 million in debt. The debt bears interest at the monthly LIBOR plus 3% (5.092% at June 30, 2018) and requires monthly principal and interest payments.
(3) | In fiscal 2007, the Company financed three CRJ-900 and three CRJ-700 aircraft for $120.3 million. The debt bears interest at the monthly LIBOR plus 2.25% (4.342% at June 30, 2018) and requires monthly principal and interest payments.
(4) | In fiscal 2014, the Company financed 10 CRJ-900 aircraft for $88.4 million. The debt bears interest at the monthly LIBOR plus a spread ranging from 1.95% to 7.25% (4.042% to 9.342% at June 30, 2018) and requires monthly principal and interest payments.
(5) | In fiscal 2014, the Company financed eight CRJ-900 aircraft with $114.5 million in debt. The debt bears interest at 5% and requires monthly principal and interest payments.
(6) | In fiscal 2015, the Company financed seven CRJ-900 aircraft with $170.2 million in debt. The senior notes payable of $151 million bear interest at monthly LIBOR plus 2.71% (4.802% at June 30, 2018) and require monthly principal and interest payments. The subordinated notes payable are noninterest-bearing and become payable in full on the last day of the term of the notes. The Company has imputed an interest rate of 6.25% on the subordinated notes payable and recorded a related discount of $8.1 million, which is being accreted to interest expense over the term of the notes.
(7) | In fiscal 2016, the Company financed 10 E-175 aircraft with $246 million in debt under an EETC financing arrangement (see discussion below). The debt bears interest ranging from 4.75% to 6.25% and requires semi-annual principal and interest payments.
(8) | In fiscal 2016, the Company financed eight E-175 aircraft with $195.3 million in debt. The senior notes payable of $172 million bear interest at the three-month LIBOR plus a spread ranging from 2.20% to 2.32% (4.537% to 4.657% at June 30, 2018) and require quarterly principal and interest payments. The subordinated notes payable bear interest at 4.50% and require quarterly principal and interest payments.
(9) | In fiscal 2017, the Company financed certain flight equipment with $99.1 million in debt. The debt bears interest at the monthly LIBOR (rounded to the nearest 16th) plus 7.25% (9.342% at June 30, 2018) and requires monthly principal and interest payments.
(10) | In December 2017, the Company refinanced nine CRJ-900 aircraft with $74.9 million in debt. The senior notes payable of $46.9 million bear interest at the monthly LIBOR plus 3.50% (5.592% at June 30, 2018) and require quarterly principal and interest payments. The subordinated notes payable bear interest at the monthly LIBOR plus 4.50% (6.592% at June 30, 2018) and require quarterly principal and interest payments.
(11) | In fiscal 2015, the Company financed certain flight equipment with $8.3 million in debt. The debt bears interest at 5.163% and requires monthly principal and interest payments.
(12) | In fiscal 2015 and 2016, the Company financed certain flight equipment maintenance costs with $10.2 million in debt. The debt bears interest at the monthly LIBOR plus 3.07% (5.162% at June 30, 2018) and requires quarterly principal and interest payments.
(13) | In fiscal 2016 and 2017, the Company financed certain flight equipment maintenance costs with $11.9 million in debt. The debt bears interest at the three-month LIBOR plus a spread ranging from 2.93% to 2.96% (5.267% to 5.297% at June 30, 2018) and requires quarterly principal and interest payments. The debt is subject to a fixed charge ratio covenant. As of June 30, 2018, the Company was in compliance with this covenant.
(14) | In fiscal 2017, the Company financed certain flight equipment maintenance costs with $25 million in debt. The debt bears interest at the three-month LIBOR plus 3.30% (5.637% at June 30, 2018) and requires quarterly principal and interest payments. The debt is subject to a fixed charge ratio covenant. As of June 30, 2018, the Company was in compliance with this covenant.
(15) | In fiscal 2016, the Company obtained a $35 million working capital draw loan, which terminates in August 2019. Interest is assessed on drawn amounts at one-month LIBOR plus 4.25% (6.342% at June 30, 2018). The line was drawn upon during fiscal 2017. The working capital draw loan is subject to an interest and rental coverage ratio covenant. As of June 30, 2018, the Company was in compliance with this covenant.
(16) | In February 2018, the Company leased two spare engines. The leases were determined to be capital as the leases contain a bargain purchase option at the end of the term. Imputed interest is 9.13% and the leases requires monthly payments.
(17) | In June 2018, the Company refinanced six CRJ-900 aircraft with $27.5 million in debt and financed nine CRJ-900 aircraft, which were previously lease, with $69.6 million in debt. The senior notes payable of $67.3 million bear interest at the three-month LIBOR plus 3.50% (5.837% at June 30, 2018) and require quarterly principal and interest payments. The subordinated notes payable bear interest at the three month LIBOR plus 7.50% (9.837% at June 30, 2018) and require quarterly principal and interest payments.
Principal maturities of long-term debt as of June 30, 2018, and for each of the next five years are as follows (in thousands):
Periods Ending September 30, |  | Total Principal Amount |
Remainder of 2018 |  |  | 40,260 |
2019 |  |  | 176,519 |
2020 |  |  | 152,316 |
2021 |  |  | 146,218 |
2022 |  |  | 141,917 |
The net book value of collateralized aircraft and equipment as of June 30, 2018 was $1,170.4 million. In December 2015, an Enhanced Equipment Trust Certificate (“EETC”) pass-through trust was created to issue pass-through certificates to obtain financing for new E-175 aircraft. At June 30, 2018 Mesa has $217.9 million of equipment notes outstanding issued under the EETC financing included in long-term debt on the condensed consolidated balance sheets. The structure of the EETC financing consists of a pass-through trust created by Mesa to issue pass-through certificates, which represent fractional undivided interests in the pass-through trust and are not obligations of Mesa. The proceeds of the issuance of the pass-through certificates were used to purchase equipment notes which were issued by Mesa and secured by its aircraft. The payment obligations under the equipment notes are those of Mesa. Proceeds received from the sale of pass-through certificates were initially held by a depositary in escrow for the benefit of the certificate holders until Mesa issued equipment notes to the trust, which purchased such notes with a portion of the escrowed funds. Mesa evaluated whether the pass-through trust formed for its EETC financing is a Variable Interest Entity (“VIE”) and required to be consolidated. The pass-through trust was determined to be a VIE, however, the Company has determined that it does not have a variable interest in the pass-through trust, and therefore, has not consolidated the pass-through trust with its financial statements. On June 27, 2018, the Company refinanced $16.0 million of debt on six CRJ-900 aircraft (due in 2019), with $27.5 million of debt, resulting in net cash proceeds to the Company of $10.4 million after transaction related fees. The notes payable require quarterly payments of principal and interest through fiscal 2022 bearing interest at LIBOR plus 3.50%. On June 28, 2018, the Company purchased nine CRJ-900 aircraft, which were previously leased under the GECAS Lease Facility, for $76.5 million. The Company financed the aircraft purchase with $69.6 million in new debt and proceeds from the June 2018 aircraft refinancing. The notes payable of $69.6 million require quarterly payments of principal and interest through fiscal 2022 bearing interest at LIBOR plus a spread ranging from 3.50% for the senior promissory notes to 7.50% for the subordinated promissory notes. The Company recorded non-cash lease termination expense of $15.1 million in connection with the lease buyout. Also, as part of the transaction, the Company (i) received $4.5 million of future goods and services credits and $5.6 million of loan forgiveness for loans with a maturity date in 2027 from the aircraft manufacturer, and (ii) mutually agreed with GE Capital Aviation Services LLC to terminate the GE Warrant.

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- Definition The entire disclosure for long-term debt. + 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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