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DEBT AND CREDIT AGREEMENTS
 3 Months Ended
Mar. 31, 2012
DEBT AND CREDIT AGREEMENTS  
DEBT AND CREDIT AGREEMENTS

 

 

NOTE 8 — DEBT AND CREDIT AGREEMENTS

 

The Company’s outstanding debt balances as of March 31, 2012 and December 31, 2011 consisted of the following:

 

 

 

March 31,

 

December 31,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Term loans and notes payable

 

$

6,788

 

$

6,999

 

Less: Current portion

 

(2,190

)

(2,202

)

Long-term debt, net of current maturities

 

$

4,598

 

$

4,797

 

 

Credit Facilities

 

Investors Community Bank Loans

 

On April 7, 2008, the Company’s wholly-owned subsidiary R.B.A. Inc. (“RBA”) executed four promissory notes with Investors Community Bank (“ICB”) in the aggregate principal amount of approximately $3,781. Three of these notes were term notes, with initial principal balances totaling $2,049, bearing interest at fixed rates ranging from 5.65% to 6.85% per annum, with maturities ranging from October 2012 to April 2013 (collectively, the “ICB Notes”). The fourth note was a line of credit note, which has been repaid in full.

 

Pursuant to the merger of RBA into the Company’s wholly-owned subsidiary Broadwind Towers, Inc. (f/k/a Tower Tech Systems Inc.) (“Broadwind Towers”) on December 31, 2009, the loans evidenced by the ICB Notes (collectively, the “ICB Loans”) were modified pursuant to a Master Amendment among ICB, Broadwind Towers and the Company (as guarantor) (the “Master Amendment”). Under the terms of the Master Amendment, Broadwind Towers agreed to a number of security and financial covenants. As the outstanding balances under the ICB Loans have declined, certain of these requirements have been removed through subsequent amendments to the Master Amendment. The remaining security requirements are that Broadwind Towers maintain a depository relationship of not less than $700 with ICB and maintain a debt service ratio of not less than 1.25 to 1.0 at all times. The ICB Loans are also secured by a mortgage on a facility owned by Broadwind Towers in Clintonville, Wisconsin, and by a guarantee from the Company. As of March 31, 2012, (i) the total amount of outstanding indebtedness under the ICB Notes was $1,031, (ii) the effective per annum interest rate under the ICB Notes was 5.72%, and (iii) Broadwind Towers was in compliance with all covenants under the documents evidencing and securing the ICB Loans.

 

Great Western Bank Loan

 

On April 28, 2009, Broadwind Towers entered into a Construction Loan Agreement with Great Western Bank (“GWB”), pursuant to which GWB agreed to provide up to $10,000 in financing (the “Construction Loan”) to fund construction of Broadwind Towers’ wind tower manufacturing facility in Brandon, South Dakota (the “Brandon Facility”). Pursuant to a Change in Terms Agreement dated April 5, 2010 between GWB and Broadwind Towers, the Construction Loan was converted to a term loan (the “GWB Term Loan”) providing for monthly payments of principal plus interest, extending the maturity date to November 5, 2016, reducing the principal amount to $6,500, and changing the per annum interest rate to 8.5%.

 

The GWB Term Loan is secured by a first mortgage on the Brandon Facility and all fixtures and proceeds relating thereto, pursuant to a Mortgage and a Commercial Security Agreement, each between Broadwind Towers and GWB, and by a Commercial Guaranty from the Company. In addition, the Company has agreed to subordinate all intercompany debt with Broadwind Towers to the GWB Term Loan. The GWB Term Loan contains representations, warranties and covenants that are customary for a term financing arrangement and contains no financial covenants. As of March 31, 2012, the total outstanding indebtedness under the GWB Term Loan was $4,583, which is recorded as Liabilities Held for Sale within the consolidated balance sheet in light of the Company having initiated a process to sell the Brandon Facility.

 

Wells Fargo Account Purchase Agreements

 

On September 29, 2010, the Company’s wholly-owned subsidiaries Broadwind Towers, Brad Foote Gear Works, Inc. (“Brad Foote”), Broadwind Services, LLC f/k/a Energy Maintenance Service, LLC (“Broadwind Services”) (collectively, the “Subsidiaries”), and Badger entered into account purchase agreements (the “AP Agreements”) with Wells Fargo Business Credit, a division of Wells Fargo Bank, N.A. (“Wells Fargo”). Under the AP Agreements, when requested by the Company, Wells Fargo will advance funds against certain receivables arising from sales of the Subsidiaries’ products and services. In connection with the entry into the AP Agreements, the Company and each Subsidiary executed guaranties (including cross-guaranties) in favor of Wells Fargo. With respect to the Subsidiaries, the AP Agreements contain provisions providing for cross-defaults and cross-collateralization. In addition, each Subsidiary has granted to Wells Fargo a security interest against all financed receivables and related collateral. Prior to entering into the AP Agreements, there was no material relationship between the Company, the Subsidiaries and Wells Fargo.

 

Under the terms of the AP Agreements, when requested by the Company, Wells Fargo will advance approximately 80% of the face value of eligible receivables to the Subsidiaries. Wells Fargo will have full recourse to the Subsidiaries for collection of the financed receivables. The aggregate facility limit of the AP Agreements is $10,000. For Wells Fargo’s services under the AP Agreements, the Subsidiaries have agreed to pay Wells Fargo (i) a floating discount fee of the then-prevailing LIBOR plus 3.75% per annum on the sum of the outstanding financed accounts, (ii) an annual facility fee of 1% of the aggregate facility limit, and (iii) an annual unused line fee of 0.042% on the portion of the credit facility which is unused. The initial term of the AP Agreements ends on September 29, 2013. If the AP Agreements are terminated prior to this date, an early termination fee of up to 2% of the aggregate facility limit may apply. On October 19, 2011 the AP Agreements were amended to modify the month-end minimum total cash balance requirement from $5,000 to the greater of $2,000 or the outstanding purchased amount, not to exceed $5,000.

 

In connection with the sale of Badger to a third party purchaser in March 2011, the AP Agreement between Badger and Wells Fargo and the guaranty provided by Badger to Wells Fargo with respect to the other AP Agreements were each terminated, pursuant to an Omnibus Amendment to Account Purchase Agreements and Guaranties dated as of March 4, 2011, by and among the Company, the Subsidiaries and Wells Fargo.

 

During the first quarter of 2012 the Company financed approximately $4,238 of accounts receivable with Wells Fargo. At March 31, 2012, $2,917 of financed receivables remained outstanding, and the Subsidiaries had the ability to draw up to an additional $7,083.

 

Selling Shareholder Notes

 

On May 26, 2009, the Company entered into a settlement agreement (the “Settlement Agreement”) with the former owners of Brad Foote, including J. Cameron Drecoll, who served as the Company’s Chief Executive Officer and a member of its Board of Directors until December 1, 2010. The Settlement Agreement related to the post-closing escrow established in connection with the Company’s acquisition of Brad Foote. Under the terms of the Settlement Agreement, among other terms, the Company issued three promissory notes to the former owners in the aggregate principal amount of $3,000 (the “Selling Shareholder Notes”). The Selling Shareholder Notes issued to the former owners other than Mr. Drecoll mature on May 28, 2012 and bear interest at a rate of 7% per annum, with interest payments due quarterly. The Selling Shareholder Note issued to Mr. Drecoll in the principal amount of $2,320 pursuant to the terms of the Settlement Agreement (the “Drecoll Note”) also was originally scheduled to mature on May 28, 2012 and bore interest at a rate of 7% per annum, with interest payments due quarterly; however, effective as of July 1, 2011, the Drecoll Note was amended and restated to effect the following modifications: (i) the maturity date was changed to January 10, 2014; (ii) the interest rate was changed to 9% per annum; and (iii) the payment schedule was changed to quarterly payments of principal and interest, such that the Drecoll Note is now self-amortizing with payments that commenced in the fourth quarter of 2011. The Company agreed to pay Mr. Drecoll a restructuring fee in the amount of $10 in connection with the restructuring of the Drecoll Note. As of March 31, 2012, principal of $2,576 and accrued interest of $55 were outstanding under the Selling Shareholder Notes.

 

Other

 

Included in Long Term Debt, Net of Current Maturities is $2,280 associated with the New Markets Tax Credit Agreement described further in Note 16, “New Markets Tax Credit” of these consolidated financial statements.