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DEBT | 12 Months Ended
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Mar. 31, 2020
DEBT |
DEBT | NOTE 12 – DEBT
Long-term debt included the following as of March 31: |  | 2020 |  | 2019
Berkshire Term Loan due January 2022 |  | $ | 2,564,389 |  | $ | 2,656,985
People’s Equipment Loan Facility due April 2021 |  |  | — |  |  | 1,606,953
Obligations under finance leases |  |  | 22,460 |  |  | 33,411
Total debt |  | $ | 2,586,849 |  | $ | 4,297,349
Less: debt issue costs unamortized |  | $ | 20,460 |  | $ | 64,702
Total debt, net |  | $ | 2,566,389 |  | $ | 4,232,647
Less: Current portion of long-term debt |  | $ | 109,829 |  | $ | 822,105
Total long-term debt, net |  | $ | 2,456,560 |  | $ | 3,410,542
The aggregate amounts of scheduled principal maturities of our debt are: 2021 - $109,829 and 2022 - $2,477,020. Berkshire Bank Loan Facility On December 21, 2016, TechPrecision, through Ranor, closed on a Loan Agreement, or the Berkshire Loan Agreement, with Berkshire Bank. Pursuant to the Berkshire Loan Agreement, Berkshire Bank made a term loan to Ranor in the amount of $2,850,000, or the Term Loan, and made available to Ranor a revolving line of credit in the amount of $1,000,000, or the Revolver Loan, and together with the Term Loan, collectively, the Berkshire Loans. The Berkshire Loans are secured by a first lien on all personal and real property of Ranor. Payments on the Term Loan began on January 20, 2017 and will be made in 60 monthly installments of $19,260 each, inclusive of interest at a fixed rate of 5.21% per annum, with all outstanding principal and accrued interest due and payable on December 20, 2021. A prepayment penalty will apply during the loan term but will not apply if a prepayment is made from either casualty loss insurance proceeds or a condemnation award applicable to any collateral or if a full prepayment is made during the 45‑day period immediately preceding the maturity date. Advances under the Revolver Loan were originally subject to a borrowing base equal to the lesser of (A) $1,000,000 and (B) the sum of (i) 80% of eligible accounts receivable, and (ii) the lesser of (a) 25% of eligible raw material inventory and (b) $250,000. Advances made under the Revolver Loan originally bore interest at a variable rate equal to one-month LIBOR plus 275 basis points. Interest-only payments on advances made under the Revolver Loan will be payable monthly in arrears. Ranor’s obligations under the Berkshire Loan Agreement are guaranteed by TechPrecision. The Company pays, as consideration for the bank’s commitment to make advances under the Revolver Loan, a nonrefundable commitment fee equal to 0.25% per annum on the average daily difference between the amount of $1,000,000 and the aggregate amount of all advances made under the Revolver Loan as of each quarterly period. On December 19, 2018, the Company entered into a Second Modification to Loan Agreement and First Modification and Allonge to Promissory Note with Berkshire Bank, or the Modification. The Modification amended and modified the Berkshire Loan Agreement, and the related Promissory Note dated December 20, 2016 made by Ranor in favor of Berkshire in the stated principal amount of $1,000,000. As of the date of the Modification, there were no amounts outstanding under the Revolver Loan. The maturity date of the Revolver Loan was originally December 20, 2018. Under the Modification, the maturity date of the Revolver Loan was extended until December 20, 2020. The Company paid $7,245 of expenses related to the execution of the Modification, which are classified as other noncurrent assets. On December 23, 2019, TechPrecision, through Ranor, entered into a Third Modification to Loan Agreement, or the Third Modification, and an Amended and Restated Promissory Note with Berkshire Bank. Under the Third Modification, Ranor and Berkshire agreed to increase the maximum principal amount available under the Revolver Loan from $1,000,000 to $3,000,000. Advances under the Revolver Loan are now subject to the lesser of (a) $3,000,000 or (b) the sum of (i) 80% of eligible accounts receivable, plus (ii) the lesser of (x) 25% of Eligible Raw Material Inventory, and (y) $250,000, plus (iii) 50% of the Appraised Value of the Eligible Equipment. The loan agreement is available for refinancing existing indebtedness and for working capital and general corporate purposes. Additionally, the parties agreed to lower the interest rate on advances made under the Revolver Loan at a variable rate equal to the one-month LIBOR plus 225 basis points. The Third Modification contains customary LIBOR replacement provisions. The Third Modification also excludes the balance of the Revolver Loan from the Loan-to-Value Ratio covenant calculations and excluded the Company's then-anticipated repayment of its obligations to People's Capital and Leasing Corp from the calculation of the financial covenants. The Company repaid People's in full in January 2020, and the debt service requirements related to the People's obligations was eliminated for purposes of the Debt Service Coverage Ratio covenant calculations and the debt service related to the People's financing was eliminated from covenant testing starting with the December 31, 2019 covenant test. The Company paid $41,628 in costs related to the execution of the Third Modification, which are classified as other noncurrent assets. In fiscal 2020 we amortized $15,260 of deferred financing costs related to the initial term of our revolving line of credit. The maturity date of the Revolver Loan remains December 20, 2020, and all other material terms of the Loan Agreement and Line of Credit Note were unchanged. There were no amounts outstanding under the Revolver Loan at March 31, 2020 and March 31, 2019. The Berkshire Loans may be accelerated upon the occurrence of an “Event of Default” (as defined in the Berkshire Loan Agreement). Events of Default include (i) the failure to pay any monthly installment payment before the tenth day following the due date of such payment; (ii) the failure of Ranor or TechPrecision to observe, perform or pay any obligations under the Berkshire Loan Agreement or any other obligation to Berkshire; (iii) the failure of Ranor or TechPrecision to pay any indebtedness in excess of $100,000 (other than the Berkshire Loans) when due; (iv) any representation or warranty of Ranor or TechPrecision in the Berkshire Loan Agreement and related documents, or the Loan Documents, being proven to have been incorrect, in any material respect, when made; (v) the failure of Ranor to discharge any attachment, levy or distraint on its property; (vi) any default by Ranor or TechPrecision under any of the collateral security documents executed in connection with the Berkshire Loan Agreement past any applicable grace period; (vii) the failure of Ranor or TechPrecision to file or pay taxes when due, unless such taxes are being contested in a manner permitted under the Loan Documents; (viii) a change in ownership or control of Ranor or change in management of Ranor where either the chief executive officer or chief financial officer as of December 21, 2016 is replaced without Berkshire Bank’s prior consent; (ix) Ranor or TechPrecision ceasing to do business as a going concern, making an assignment for the benefit of creditors, or commencing a bankruptcy or other similar insolvency proceeding; and (x) the entry of a judgment against Ranor or TechPrecision in excess of $150,000. Some of the Events of Default are subject to certain cure periods. Subject to the lapse of any applicable cure period, a default under the Berkshire Loans could cause the acceleration of all outstanding obligations under the Berkshire Loans. Pursuant to the Berkshire Loan Agreement, the Company covenants to cause its balance sheet leverage to be less than or equal to 2.50 to 1.00 for the fiscal year ending March 31, 2019 and each fiscal year end thereafter. The Berkshire Loan Agreement also contains a covenant whereby the Company is required to maintain a debt service coverage ratio, or DSCR, of at least 1.2 to 1.0 during the term of the Berkshire Loans. The DSCR is measured at the end of each fiscal quarter of the Company. The Company was in compliance with all of the financial covenants at March 31, 2020 and March 31, 2019. Other unamortized debt issue costs at March 31, 2020 and March 31, 2019 were $20,460 and $32,982, respectively. Ranor's annual capital expenditures cannot exceed $1,500,000 for the fiscal year ending March 31, 2020 and each fiscal year thereafter. The Berkshire Loan Agreement contains an additional covenant whereby Ranor is required to maintain a loan to value ratio of not greater than 0.75 to 1.00, to be measured by appraisal not more frequently than one time during each 365-day period. Collateral securing the above obligations comprises all personal and real property of TechPrecision and Ranor, including cash, accounts receivable, inventories, equipment, and financial assets. People’s Capital and Leasing Corp. Equipment Loan Facility On April 26, 2016, TechPrecision, through Ranor, executed and closed a Master Loan and Security Agreement No. 4180, as supplemented with Schedule No. 001, or, together, the MLSA, with People’s. The MLSA is dated and became effective as of March 31, 2016. Loan proceeds were disbursed to Ranor on April 26, 2016. Pursuant to the MLSA, People’s loaned $3,011,648 to Ranor, or the People’s Loan. The People’s Loan was secured by a first lien on certain machinery and equipment of Ranor, or the Equipment Collateral. Payments on the People’s Loan were to be made in 60 monthly installments of $60,921 each, inclusive of interest at a fixed rate of 7.90% per annum. The first monthly installment payment was paid on May 26, 2016. A prepayment penalty applied during the first four years of the loan term. Ranor’s obligations under the MLSA were guaranteed by TechPrecision. The Company covenanted to maintain a DSCR of at least 1.5 to 1.0 during the term of the People’s Loan. The DSCR was measured at the end of each fiscal year of the Company. The People’s Loan was subjected to acceleration upon the occurrence of an “Event of Default” (as defined in the MLSA). Some of the Events of Default were subject to certain cure periods. The Company was in compliance with all of the financial covenants at March 31, 2019. On October 4, 2016, TechPrecision and Ranor became committed to Schedule No. 002 to the MLSA, or Schedule 002. Pursuant to Schedule 002, People’s made an additional loan in the amount of $365,852, or the Additional People’s Loan, to Ranor upon the terms and conditions set forth in the MLSA and Schedule 002. Ranor was to repay the Additional People’s Loan in monthly installments of principal and interest of $7,399 over 60 months. The Additional People’s Loan was guaranteed by TechPrecision pursuant to the original Corporate Guaranty from TechPrecision in favor of People’s dated March 31, 2016. The Additional People’s Loan was secured by a security interest in certain machinery and equipment of Ranor as provided in Schedule 002. On December 21, 2016, TechPrecision and Ranor closed on an Amendment to the MLSA, or the MLSA Amendment, with People’s. The MLSA Amendment, dated as of December 20, 2016, amended the definition of “Permitted Liens” under the MLSA to include the liens held by Berkshire Bank pursuant to the terms of the Berkshire Loan Agreement and to delete the reference to the liens held by a former creditor of the Company. On January 16, 2020, TechPrecision through Ranor repaid in full Ranor's indebtedness under Schedule No. 002, to the MLSA. Upon the payment of approximately $147,000, which amount included a 1% prepayment penalty of approximately $1,400, all commitments under Schedule 002 to the MSLA were terminated, and People's discharged and released all guarantees and liens existing in connection with such loan, thereby terminating such loan agreement schedule. On January 17, 2020, the Company, through Ranor, repaid in full Ranor's indebtedness under Schedule 001 to the MSLA. Upon the payment of approximately $936,000, which amount included a 1% prepayment penalty of approximately $9,200, all commitments under Schedule 001 to the MSLA were terminated, and People's discharged and released all guarantees and liens existing in connection with such loan, thereby terminating such loan agreement schedule. As all previously outstanding obligations under the MSLA have been satisfied in full, Ranor is no longer bound by any material terms of the MSLA. In January 2020, the Company paid a prepayment penalty of $10,670 in the aggregate in connection with the debt termination, and we expensed unamortized debt issue costs of $31,720 during fiscal 2020. Finance Lease See Note 13 for information regarding our obligations under the finance lease.

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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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