Long-Term Debt and Other Borrowings

12 Months Ended

Sep. 30, 2020

9.	Long-Term Debt and Other Borrowings

Long-term debt as of September 30, 2020 and 2019, consisted of the following (in thousands):

	September 30,			September 30,
	2020			2019
Notes payable to financial institution, collateralized by the underlying aircraft, due 2022⁽¹⁾⁽²⁾	$	41,472		$	49,795
Notes payable to financial institution, collateralized by the underlying aircraft, due 2024⁽³⁾		55,674			60,761
Senior and subordinated notes payable to secured parties, collateralized by the underlying aircraft, due 2027⁽⁴⁾		105,887			110,912
Notes payable to secured parties, collateralized by the underlying aircraft, due 2028⁽⁵⁾		172,137			191,168
Senior and subordinated notes payable to secured parties, collateralized by the underlying aircraft, due 2028⁽⁶⁾		138,114			152,945
Senior and subordinated notes payable to secured parties, collateralized by the underlying aircraft, due 2022⁽⁷⁾		47,319			71,998
Senior and subordinated notes payable to secured parties, collateralized by the underlying aircraft, due 2022⁽⁸⁾		29,682			47,309
Notes payable to financial institution, collateralized by the underlying equipment, due 2020⁽⁹⁾		—			1,659
Notes payable to financial institution due 2020⁽¹⁰⁾		1,523			2,329
Notes payable to financial institution, collateralized by the underlying equipment, due 2020⁽¹¹⁾		4,182			6,962
Other obligations due to financial institution, collateralized by the underlying equipment, due 2023⁽¹²⁾		6,864			8,530
Notes payable to financial institution, collateralized by the underlying equipment, due 2024⁽¹³⁾		63,341			80,153
Notes payable to financial institution, collateralized by the underlying aircraft, due 2023⁽¹⁴⁾		48,125			65,625
Notes payable to financial institution, collateralized by the underlying due 2023 ⁽¹⁵⁾		6,000			8,000
Working capital draw loan, used to cover operational needs ⁽¹⁶⁾		22,930			—
Gross long-term debt, including current maturities		743,250			858,145
Less unamortized debt issuance costs		(11,526	)		(14,822	)
Net long-term debt, including current maturities		731,724			843,323
Less current portion		(189,268	)		(165,900	)
Net long-term debt	$	542,456		$	677,423

⁽¹⁾	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% (2.40% at September 30, 2020) and requires monthly principal and interest payments.

⁽²⁾	In fiscal 2014, the Company financed ten CRJ-900 aircraft for $88.4 million. The debt bears interest at the monthly LIBOR plus 1.95% (2.10% at September 30, 2020) and requires monthly principal and interest payments. In fiscal 2018, the Company repaid $40.0 million related to four CRJ-900 aircraft.

⁽³⁾	In fiscal 2014, the Company financed eight CRJ-900 aircraft with $114.5 million in debt. The debt bears interest at 5.00% and requires monthly principal and interest payments.

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In fiscal 2015, the Company financed seven CRJ-900 aircraft with $170.2 million in debt. The senior notes payable of $151.0 million bear interest at monthly LIBOR plus 2.71% (2.86% at September 30, 2020) and require monthly principal and interest payments. The subordinated notes payable is 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.

⁽⁵⁾	In fiscal 2016, the Company financed ten E-175 aircraft with $246.0 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.

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In fiscal 2016, the Company financed eight E-175 aircraft with $195.3 million in debt. The senior notes payable of $172.0 million bear interest at the three-month LIBOR plus a spread ranging from 2.20% to 2.32% (2.43% to 2.55% at September 30, 2020) and require quarterly principal and interest payments. The subordinated notes payable bear interest at 4.50% and require quarterly principal and interest payments.

⁽⁷⁾

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 leased, with $69.6 million in debt. The senior notes payable of $65.8 million bear interest at the three-month LIBOR plus 3.50% (3.73% at September 30, 2020) and require quarterly principal and interest payments. The subordinated notes payable of $29.8 million bear interest at three month LIBOR plus 7.50% (7.73% at September 30, 2020) and require quarterly principal and interest payments.

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InDecember 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 three-month LIBOR plus 3.50% (3.73% at September 30, 2020) and require quarterly principal and interest payments. The subordinated notes payable bear interest at the three-month LIBOR plus 4.50% (4.73% at September 30, 2020) and require quarterly principal and interest payments.

⁽⁹⁾	In fiscal 2015, the Company financed certain flight equipment with $8.3 million in debt. The debt bears interest at 5.163% and was paid off in August 2020.

⁽¹⁰⁾	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 three-month LIBOR plus 3.07% (3.30% at September 30, 2020) and requires quarterly principal and interest payments.

⁽¹¹⁾

In fiscal 2016-2019, the Company financed certain flight equipment. The debt bears interest at the three-month LIBOR plus a spread ranging from 2.93% to 3.21% (3.16% to 3.44% at September 30, 2020) and requires quarterly principal and interest payments. The debt is subject to a fixed charge ratio covenant. As of September 30, 2020, the Company was in compliance with this covenant.

⁽¹²⁾	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 9.128% and the leases requires monthly payments.

⁽¹³⁾	In January 2019, the Company financed certain flight equipment with $91.2 million in debt. The debt bears interest at the monthly LIBOR plus 3.10% (3.25% at September 30, 2020) and requires monthly principal and interest payments.

⁽¹⁴⁾

In June 2019, the Company financed ten CRJ-700 aircraft with $70.0 million in debt, which were previously leased. The debt bears interest at the monthly LIBOR plus 5.00% (5.15% at September 30, 2020) and requires monthly principal and interest payments. The interest rate reduced from 5.25% to 5.00% in 1^st quarter, 2020 due to United Airlines extension of CRJ-700.

⁽¹⁵⁾

On September 27,2019, the Company financed certain flight equipment for $8.0 million. The debt bears interest at the monthly LIBOR plus 5.00% (5.15% at September 30, 2020) and requires monthly principal and interest payments. The interest rate reduced from 5.25% to 5.00% in 1^st quarter, 2020 due to United Airlines extension of CRJ-700.

⁽¹⁶⁾

On September 25, 2019, the company extended the term on their $35.0 million working capital draw loan by three years, which now terminates in September 2022. Interest is assessed on drawn amounts at one-month LIBOR plus 3.75%. As of September 30, 2020, $23.0 million was drawn to cover operational needs.

Principal maturities of long-term debt as of September 30, 2020, and for each of the next five years are as follows (in thousands):

	Total Principal
Periods Ending September 30,	Amount
2021	$	189,268
2022		152,517
2023		126,095
2024		71,033
2025		56,526
Thereafter		147,811
	$	743,250

The net book value of collateralized aircraft and equipment as of September 30, 2020 was $1,093.0 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 September 30, 2020, Mesa has $172.1 million of equipment notes outstanding issued under the EETC financing included in long-term debt on the 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 January 28, 2019, the Company entered into a Term Loan Agreement (the "Term Loan") pursuant to which the lenders thereunder lent the Company term loans in the aggregate principal amount of $91.2 million. Borrowings under the Term Loan bear interest at LIBOR plus 3.10%. This interest rate is significantly lower than the interest rate under the Company's Spare Engine Facility (defined above), which the Term Loan refinanced and replaced. The Spare Engine Facility accrued interest at LIBOR plus 7.25%. The Term Loan has a term of five years, with principal and interest payments due monthly over the term of the loan in accordance with an amortization schedule. The Company recorded a loss on extinguishment of debt of $3.6 million, due to a $1.9 million write-off of financing fees and $1.7 million in prepayment penalties, in connection with the repayment of the Spare Engine Facility.

On June 14, 2019, the Company completed the purchase of ten CRJ-700 aircraft, which were previously leased under the GECAS Lease Facility, for $70.0 million. The Company financed the aircraft purchase with $70.0 million in new debt. The notes payable of $70.0 million require monthly payments of principal and interest through fiscal 2023 bearing interest at LIBOR plus 5.00%. The Company recorded non-cash lease termination expense of $9.5 million in connection with the lease buyout.

On September 25, 2019, the Company extended the term on their $35 million working capital draw loan by three years, which now terminates in September 2022. Interest is assessed on drawn amounts at one-month LIBOR plus 3.75%. In the 2^nd quarter 2020, $23.0 million was drawn to cover operational needs.

On September 27, 2019, the Company financed certain flight equipment for $8.0 million in new debt. The debt of $8.0 million require monthly payments of principal and interest through fiscal 2023 bearing interest at Libor plus 5.0%.

On April 9, 2020, the Company entered into a letter amendment with lender, Export Development Canada (“EDC”), which provided for the deferral of scheduled principle payments beginning on March 19, 2020 through September 30, 2020. As of September 30, 2020, the Company had deferred 28.0 million of scheduled principal payments. On October 29, 2020 and November 12, 2020, the Company entered into subsequent letter amendments with EDC extending the principal deferrals through and including August 2, 2020. Amounts deferred are due in lump sum payment on August 2, 2020, there were no other amendments to the terms of the debt agreement with EDC resulting from the letter amendments. As further discussed in Note 18 to the consolidated financial statements, the Company repaid $145 million of existing aircraft debt subsequent to year end, which included repayment of $19.9 million of the previously deferred principal payments owed to EDC as of September 30, 2020.

In June 2020, the Company amended their RASPRO aircraft lease agreement to defer $4.0 million of a lease payment otherwise due in June 2020. Per the amended agreement dated June 5, 2020, the Company is to pay this amount over the period of September 2021 through March 2024. The company made the accounting election available for COVID-19 related concession provided by a lessor. This event is not a lease modification and requires no changes to current accounting treatment.