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Long-Term Debt, Financing Leases and Other Borrowings | 6 Months Ended
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Mar. 31, 2021
Debt Disclosure [Abstract] |
Long-Term Debt, Financing Leases and Other Borrowings |
8. | Long-Term Debt, Financing Leases and Other Borrowings
Long-term debt as of March 31, 2021 and September 30, 2020, consisted of the following (in thousands):
|  | March 31, |  |  | September 30, |
|  | 2021 |  |  | 2020 |
Notes payable to financial institution, collateralized by the underlying |  |  |  |  |  |  |  |
aircraft, due 2022(1)(2) |  | $ | — |  |  | $ | 41,472 |
Notes payable to financial institution, collateralized by the underlying |  |  |  |  |  |  |  |
aircraft, due 2024(3) |  |  | — |  |  |  | 55,674 |
Senior and subordinated notes payable to secured parties, collateralized |  |  |  |  |  |  |  |
by the underlying aircraft, due 2027(4) |  |  | 106,092 |  |  |  | 105,887 |
Notes payable to secured parties, collateralized by the underlying |  |  |  |  |  |  |  |
aircraft, due 2028(5) |  |  | 162,247 |  |  |  | 172,137 |
Senior and subordinated notes payable to secured parties, collateralized |  |  |  |  |  |  |  |
by the underlying aircraft, due 2028(6) |  |  | 130,505 |  |  |  | 138,114 |
Senior and subordinated notes payable to secured parties, collateralized |  |  |  |  |  |  |  |
by the underlying aircraft, due 2022(7) |  |  | — |  |  |  | 47,319 |
Senior and subordinated notes payable to secured parties, collateralized |  |  |  |  |  |  |  |
by the underlying aircraft, due 2022(8) |  |  | — |  |  |  | 29,682 |
Notes payable to financial institution due 2020(10) |  |  | 1,523 |  |  |  | 1,523 |
Notes payable to financial institution, collateralized by the underlying |  |  |  |  |  |  |  |
equipment, due 2020(11) |  |  | — |  |  |  | 4,182 |
Other obligations due to financial institution, collateralized by the underlying |  |  |  |  |  |  |  |
equipment, due 2023(12) |  |  | 5,663 |  |  |  | 6,864 |
Notes payable to financial institution, collateralized by the underlying |  |  |  |  |  |  |  |
equipment, due 2024(13) |  |  | 54,573 |  |  |  | 63,341 |
Notes payable to financial institution, collateralized by the underlying |  |  |  |  |  |  |  |
aircraft, due 2023(14) |  |  | 39,375 |  |  |  | 48,125 |
Notes payable to financial institution due 2023 (15) |  |  | 5,000 |  |  |  | 6,000 |
Revolving Credit Facility (16) |  |  | 22,930 |  |  |  | 22,930 |
Notes payable to financial institution due 2025 (17) |  |  | 197,525 |  |  |  | — |
Gross long-term debt, including current maturities |  |  | 725,433 |  |  |  | 743,250 |
Less unamortized debt issuance costs |  |  | (10,598 | ) |  |  | — |
Less Notes payable warrants |  |  | (10,797 | ) |  |  | (11,526 | )
Net long-term debt, including current maturities |  |  | 704,038 |  |  |  | 731,724 |
Less current portion |  |  | (103,980 | ) |  |  | (189,268 | )
Net long-term debt |  | $ | 600,058 |  |  | $ | 542,456 |
(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% and requires monthly principal and interest payments. The loan was paid in full during quarter ended December 31, 2020.
(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% and requires monthly principal and interest payments. In fiscal 2018, the Company repaid $40.0 million related to four CRJ-900 aircraft. During quarter ended December 31, 2020, the company paid the remaining balance in full.
(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. The loan was paid in full during quarter ended December 31, 2020.
(4) | 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% 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.
(6) | 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% 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% and require quarterly principal and interest payments. The subordinated notes payable of $29.8 million bear interest at three month LIBOR plus 7.50% and require quarterly principal and interest payments. The loan was paid in full during quarter ended December 31, 2020.
(8) | 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 three-month LIBOR plus 3.50% and require quarterly principal and interest payments. The subordinated notes payable bear interest at the three-month LIBOR plus 4.50% and require quarterly principal and interest payments. The loan was paid in full during quarter ended December 31, 2020.
(1 0) | 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% and requires quarterly principal and interest payments.
(11) | In fiscal 2016-2019, the Company financed certain flight equipment maintenance costs with $26.1 million in debt. The debt bears interest at the three-month LIBOR plus a spread ranging from 2.93% to 3.21%and requires quarterly principal and interest payments. The debt is subject to a fixed charge ratio covenant. The loan was paid in full during quarter ended December 31, 2020.
(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% 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% and requires monthly principal and interest payments. The interest rate reduced from 5.25% to 5.00% in 1st 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% and requires monthly principal and interest payments. The interest rate reduced from 5.25% to 5.00% in 1st 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%. During quarter ended June 30, 2020, $23.0 million was drawn to cover operational needs.
(17) | On October 30, 2020, the Company entered into a loan and guarantee agreement with United States Department of Treasury for a secured loan facility of up to $200.0 million that matures on October 30, 2025. On October 30, 2020, the Company borrowed $43.0 million and on November 13, 2020, the Company borrowed an additional $152.0 million. These amounts bear interest at the three-month LIBOR plus 3.50% which was paid-in-kind and capitalized into the balance of the loans for the first interest payment date on December 15, 2020. No further borrowings are available under the Loan and Guarantee Agreement.
Principal maturities of long-term debt as of March 31, 2021, and for each of the next five years are as follows (in thousands):
March 31, 2021 |  | Total Principal |
Remainder of 2021 |  | $ | 59,013 |
2022 |  |  | 113,682 |
2023 |  |  | 89,462 |
2024 |  |  | 61,209 |
2025 |  |  | 56,526 |
Thereafter |  |  | 345,541 |
|  | $ | 725,433 |
The net book value of collateralized aircraft and equipment as of March 31, 2021 was $1,060.0 million. Enhanced Equipment Trust Certificate ("EETC") 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 March 31, 2021 Mesa has $162.2 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. CIT Revolving Credit Facility 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 March 31, 2021, $22.9 million has been drawn on the revolver. Future borrowings, if any, under this facility are subject to, among other things, the Company having sufficient unencumbered assets to meet the borrowing base requirements under the facility. Loan agreement with United States Department of Treasury On October 30, 2020, the Company entered into a Loan and Guarantee Agreement with United States Department of Treasury (the “U.S. Treasury”) for a secured loan facility of up to $200.0 million that matures in October 2025 (“the Treasury Loan Agreement”). On October 30, 2020, the Company borrowed $43.0 million (“the $43M Treasury Loan”) and on November 13, 2020, the Company borrowed an additional $152.0 million (“the $152M Treasury Loan”), collectively referred to as the “Treasury Term Loan Facility”. No further borrowings are available under the Treasury Loan Agreement. The Company also issued warrants to purchase shares of common stock to the U.S. Treasury. The Loan and Guarantee Agreement bear interest at a variable rate equal to (a)(i) the LIBOR rate divided by (ii) one minus the Eurodollar Reserve Percentage plus (b) 3.50%. Accrued interest on the loans will be payable in arrears on the first business day following the 14th day of each March, June, September and December, beginning with December 15, 2021. All principal amounts outstanding under the Loan and Guarantee Agreement are due and payable in a single installment on October 30, 2025 (the “Maturity Date”). Interest will be paid by increasing the principal amount of the loan by the amount of such interest due on an interest payment date for the first 12 months. Mesa's obligations under the Treasury Loan Agreement are secured by certain aircraft, aircraft engines, accounts receivable, ground service equipment and tooling (collectively, the “Collateral”). The obligations under the Loan Agreement are guaranteed by the Company and Mesa Air Group Inventory Management. The proceeds may be used for general corporate purposes and operating expenses, to the extent permitted by the CARES Act. Voluntary prepayments of loans under the Loan Agreement may be made, in whole or in part, by Mesa Airlines, without premium or penalty, at any time and from time to time. Amounts prepaid may not be reborrowed. Mandatory prepayments of loans under the Loan Agreement are required, without premium or penalty, to the extent necessary to comply with the covenants discussed below, certain dispositions of the Collateral, certain debt issuances secured by liens on the Collateral and certain insurance payments related to the Collateral. In addition, if a “change of control” (as defined in the Loan Agreement) occurs with respect to Mesa Airlines, Mesa Airlines will be required to repay the loans outstanding under the Loan Agreement. The Loan Agreement requires the Company, under certain circumstances, including within ten (10) business days prior to the last business day of March and September of each year, beginning March 2021, to appraise the value of the Collateral and recalculate the collateral coverage ratio. If the calculated collateral coverage ratio is less than 1.6 to 1.0, Mesa Airlines will be required either to provide additional Collateral (which may include cash collateral) to secure its obligations under the Loan Agreement or repay the term loans under the Loan Agreement, in such amounts that the recalculated collateral coverage ratio, after giving effect to any such additional Collateral or repayment, is at least 1.6 to 1.0. The Loan Agreement contains two financial covenants, a minimum collateral coverage ratio and a minimum liquidity level. The Loan Agreement also contains customary negative and affirmative covenants for credit facilities of this type, including, among others: (a) limitations on dividends and distributions; (b) limitations on the creation of certain liens; (c) restrictions on certain dispositions, investments and acquisitions; (d) limitations on transactions with affiliates; (e) restrictions on fundamental changes to the business, and (f) restrictions on lobbying activities. Additionally, the Company is required to comply with the relevant provisions of the CARES Act, including limits on employment level reductions after September 30, 2020, restrictions on dividends and stock buybacks, limitations on executive compensation, and requirements to maintain certain levels of scheduled service. In connection with the Loan and Guarantee Agreement and as partial compensation to Treasury for the provision of financial assistance under the Loan and Guarantee Agreement, the Company issued to Treasury warrants to purchase an aggregate of 4,899,497 shares of the Company’s common stock at an exercise price of $3.98 per share, which was the closing price of the Common Stock on The Nasdaq Stock Market on April 9, 2020. The exercise price and number of shares of common stock issuable under the Warrants are subject to adjustment as a result of anti-dilution provisions contained in the Warrants for certain stock issuances, dividends, and other corporate actions. The warrants expire on the fifth anniversary of the date of issuance and are exercisable either through net share settlement or net cash settlement, at the Company’s option. For accounting purposes, the fair value for the Treasury Loan Warrant Shares is estimated using a Black-Scholes option pricing model and recorded in stockholders' equity with an offsetting debt discount to the Treasury Term Loan Facility in the condensed consolidated balance sheet. The Company incurred $3.1 million in debt issuance costs relating to the Loan and Guarantee Agreement. In accordance with the applicable guidance, Mesa allocated the debt issuance costs between the Treasury Loan and related warrants. At funding on October 30, 2020, the $43M Treasury Loan was recorded net of $0.7 million in capitalized debt issuance costs. At funding on November 13, 2020, the $152M Treasury Loan was recorded net of $2.3 million in capitalized debt issuance costs. The remaining $0.1 million in debt issuance costs was allocated to the warrants as a reduction to the warrant value within additional paid-in capital. Debt issuance costs allocated to the debt are amortized into interest expense using the effective interest method over the term of the related loan. Debt Repayment Prior to the November 13, 2020 funding of the $152M Treasury Loan, the Company repaid $167.7 million in existing aircraft debt covering 44 aircraft, including indebtedness under its (a) Senior Loan Agreements, dated June 27, 2018, (b) Junior Loan Agreements, also dated June 27, 2018, (c) Credit Agreements, dated January 31, 2007, April 16, 2014, and May 23, 2014, (d) Senior Loan Agreements, dated December 27, 2017, and (e) Junior Loan Agreements, also dated December 27, 2017 (collectively, “the EDC Loans”). The Company made payments totaling $164.1 million to repay the EDC Loans, consisting of principal of $167.7 million, and a $3.6 million discount on the balance owed. Additionally, in connection with the repayment, $2.5 million of unamortized original issue discount and deferred financing costs were recorded as a loss on debt extinguishment, resulting in a net gain on extinguishment of $1.0 million recorded within other income. As of March 31, 2021, the Company is in compliance will all debt covenants.

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- Definition The entire disclosure for debt and capital lease obligations can be reported. 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. Also includes descriptions and amounts of capital leasing arrangements that consist of direct financing, sales type and leveraged leases. Disclosure may include the effect on the balance sheet and the income statement resulting from a change in lease classification for leases that at inception would have been classified differently had guidance been in effect at the inception of the original lease. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 840 -URI http://asc.fasb.org/topic&trid=2208923 Reference 2: 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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