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LONG-TERM DEBT

6 Months Ended

Mar. 31, 2012

6. LONG-TERM DEBT

A summary of Barnwell’s long-term debt is as follows:

	March 31,				September 30,
	2012				2011
Canadian revolving credit facility		$	12,000,000			$	12,000,000
Real estate loan		11,044,000				11,714,000
		23,044,000				23,714,000
Less: current portion		(11,044,000		)		(12,314,000		)
Total long-term debt		$	12,000,000			$	11,400,000

Canadian revolving credit facility

In February 2012, Barnwell’s credit facility at Royal Bank of Canada, a Canadian bank, was renewed through April 2013 for $20,000,000 Canadian dollars, unchanged from the prior year amount, or US$20,018,000 at the March 31, 2012 exchange rate. Unused credit available under this facility was US$8,018,000 and the interest rate on the facility was 3.0% at March 31, 2012.

The renewed facility is available in U.S. dollars at the London Interbank Offer Rate plus 2.50%, at the Royal Bank U.S. base rate plus 1.50%, or in Canadian dollars at the Royal Bank prime rate plus 1.50%. A standby fee of 0.6250% per annum is charged on the unused facility balance. Under the financing agreement with Royal Bank of Canada, the facility is reviewed annually, with the next review planned for April 2013. Subject to that review, the facility may be extended one year with no required debt repayments for one year or converted to a two-year term loan by the bank. If the facility is converted to a two-year term loan, Barnwell has agreed to the following repayment schedule of the then outstanding loan balance: first year of the term period – 20% (5% per quarter), and in the second year of the term period – 80% (5% per quarter for the first three quarters and 65% in the final quarter). Based on the terms of this agreement, if Royal Bank of Canada were to convert the facility to a two-year term loan upon its next review in April 2013, Barnwell would be obligated to make quarterly principal and interest repayments beginning in July 2013. As no debt repayments will be required on or before March 31, 2013, the entire outstanding loan balance at March 31, 2012 is classified as long-term debt.

Real estate loan

Barnwell, together with its real estate joint venture, Kaupulehu 2007, has a non-revolving real estate loan with a Hawaii financial institution. Principal and interest are paid monthly and are determined based on a loan amortization schedule.

Monthly payments of principal and interest are due on the first day of each month and will change as a result of an annual change in the interest rate, the sale of a house or the sale of a residential parcel. The interest rate adjusts each April for each of the remaining six 1-year periods of the loan term to the lender’s then prevailing interest rate for similarly priced commercial mortgage loans or a floating rate equal to the lender’s base rate. The interest rate on the loan at March 31, 2012 was 3.67%. Any unpaid principal balance and accrued interest will be due and payable on April 1, 2018.

The loan is collateralized by, among other things, a first mortgage on Kaupulehu 2007’s lots together with all improvements thereon. Kaupulehu 2007 will be required to make a principal payment upon the sale of a house or a residential parcel in the amount of the net sales proceeds of the house or residential parcel; the loan agreement defines net sales proceeds as the gross sales proceeds for the house or residential parcel, less reasonable commissions and normal closing costs.

The loan agreement contains provisions requiring us to maintain compliance with certain covenants including a consolidated debt service coverage ratio, a consolidated total liabilities to tangible net worth ratio, and a maximum loan to value ratio. As of March 31, 2012, we were in compliance with the loan covenants.

Both houses collateralizing the loan are currently available for sale, therefore, the entire balance outstanding at March 31, 2012 under the term loan has been classified as a current liability.