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Note 9 - Term Loans and Line of Credit Agreements | 3 Months Ended
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Mar. 31, 2020
Notes to Financial Statements |
Debt Disclosure [Text Block] | Note 9. Term Loan s and Line of Credit Agreements New Term Loan Agreement On December 20, 2019, Avalon and certain direct and indirect wholly owned subsidiaries entered into a loan and security agreement (the “New Term Loan Agreement”) with Laurel Capital Corporation which provided for a $23.0 million term loan. The New Term Loan Agreement proceeds were utilized to pay off and refinance the Company’s existing term loan and commercial mortgage agreements, pay down the outstanding balance and associated interest on the Company’s line of credit agreement and pay related transaction costs. The remaining proceeds were deposited into a project fund account for which those proceeds are required to fund future costs of renovating and expanding both The Grand Resort and Avalon Field Club at New Castle. At closing, $10.3 million of the proceeds were used to pay off and refinance amounts outstanding under our term loan agreement with Laurel Capital Corporation, dated December 20, 2016 ( “2016 Term Loan Agreement”), $2.9 million of the proceeds were used to pay off and refinance amounts outstanding under our term loan agreement with Laurel Capital Corporation, dated March 29, 2019 ( “2019 Term Loan Agreement”), $1.7 million of the proceeds were used to pay down the outstanding balance and associated interest on our existing line of credit agreement with Home Savings Bank, dated May 31, 2018, as amended, $0.6 million of the proceeds were used to pay off amounts outstanding under our commercial mortgage agreement with Mercer County State Bank, dated May 13, 2019 ( “Commercial Mortgage”) and $0.3 million of the proceeds were utilized to pay transaction costs. The remaining proceeds of approximately $7.2 million were deposited into a project fund account. At March 31, 2020 and December 31, 2019, loan proceeds of $5.5 and $7.2 million, respectively, are presented in the Condensed Consolidated Balance Sheets as “Restricted cash.” The 2016 Term Loan Agreement, 2019 Term Loan Agreement and the Commercial Mortgage Agreement were terminated in conjunction with the New Term Loan Agreement. The $23.0 million outstanding under the New Term Loan Agreement is payable in 119 equal monthly installments of principal and interest , based on a fifteen ( 15 ) year maturity schedule which commenced January 20, 2020 followed by one final balloon payment of all remaining principal, interest and fees due on the maturity date of December 20, 2029. Borrowings under the New Term Loan Agreement bear interest at a fixed rate of 5.00% until the fifth anniversary date of the closing at which time the interest rate will be reset to a fixed rate equal to the greater of (a) 5.00% per annum or (b) the sum of the five year treasury rate on the date two ( 2 ) business days prior to the reset date plus 3.60%, provided that the applicable rate shall in no event exceed 7.35% per annum. Avalon has the right to prepay the amount outstanding under the New Term Loan Agreement, in whole or in part, at any time upon payment of the principal amount of the loan to be prepaid plus accrued unpaid interest thereon to the prepayment date, plus an applicable prepayment penalty. The prepayment penalty, expressed as a percentage of the principal of the loan being prepaid, is five percent ( 5% ) on any prepayment in the first five years; four percent ( 4% ) on any prepayment in the sixth and seventh year; three percent ( 3% ) on any prepayment in the eighth and ninth year; and two percent ( 2% ) on any prepayment in the tenth year. Borrowings under the New Term Loan Agreement are secured by certain real property and related business assets as defined in the agreement. The New Term Loan Agreement also contains certain financial and other covenants, customary representations, warranties and events of default. Avalon was in compliance with the New Term Loan Agreement covenants at March 31, 2020 and December 31, 2019. The Company capitalized approximately $0.4 million of debt issuance costs in connection with the New Term Loan Agreement. The Company will amortize these costs over the life of the New Term Loan Agreement. In accordance with ASU 2015 - 03, Simplifying the Presentation of Debt Issuance Costs , these costs are presented in the Condensed Consolidated Balance Sheets as a direct reduction from the carrying amount of the term loan liability. Line of Credit Agreement On May 31, 2018, Avalon entered into a new business loan agreement with Home Savings Bank, (the “Line of Credit Agreement”) which provides for a line of credit of up to $5.0 million with an original maturity date of May 31, 2020. On June 17, 2019, the Company amended the Line of Credit Agreement to extend the maturity date to May 31, 2021. Under the Line of Credit Agreement, borrowings in excess of $1.0 million are subject to a borrowing base which is calculated based off a specific level of eligible accounts receivable of the waste management business as defined in the agreement. The existing line of credit agreement with Home Savings Bank, dated December 20, 2016, as amended, which was entered into concurrently with the 2016 Term Loan Agreement, was terminated in conjunction with the new Line of Credit Agreement. No amounts were outstanding under the existing line of credit agreement at termination. The Company anticipates amending the Line of Credit Agreement to extend the maturity date in the second quarter of 2020. At December 20, 2019, the outstanding balance of $1.7 million under the Line of Credit Agreement was paid down with a portion of the proceeds from the New Term Loan Agreement. No amounts were drawn under the Line of Credit Agreement at March 31, 2020 and December 31, 2019. Outstanding borrowings under the Line of Credit Agreement bear interest at Prime Rate plus .25%. At March 31, 2020, the interest rate on the Line of Credit Agreement was 3.50%. Borrowings under the Line of Credit Agreement are secured by certain business assets of the Company including accounts receivable, inventory and equipment. The Line of Credit Agreement also contains certain financial and other covenants, customary representations, warranties and events of default. Avalon was in compliance with the line of credit agreements covenants at March 31, 2020 and December 31, 2019. During the three months ended March 31, 2020 and 2019, the weighted average interest rate on outstanding borrowings was 5.00% and 5.36%, respectively. Obligations under the Company’s debt agreements at March 31, 2020 and December 31, 2019 consist of the following (in thousands):
|  | March 31, 2020 |
|  | Gross Amount |  |  | Debt Issuance Costs |  |  | Net Amount |
Term Loan Agreement |  | $ | 22,741 |  |  | $ | (405 | ) |  | $ | 22,336 |
Less current portion |  |  | 1,070 |  |  |  | (42 | ) |  |  | 1,028 |
Long-term debt |  | $ | 21,671 |  |  | $ | (363 | ) |  | $ | 21,308 |
|  | December 31, 2019 |
|  | Gross Amount |  |  | Debt Issuance Costs |  |  | Net Amount |
Term Loan Agreement |  | $ | 23,000 |  |  | $ | (415 | ) |  | $ | 22,585 |
Less current portion |  |  | 1,057 |  |  |  | (42 | ) |  |  | 1,015 |
Long-term debt |  | $ | 21,943 |  |  | $ | (373 | ) |  | $ | 21,570 |
At March 31, 2020, future maturities of long-term debt are as follows (in thousands):
2021 |  | $ | 1,070 |
2022 |  |  | 1,125 |
2023 |  |  | 1,182 |
2024 |  |  | 1,243 |
2025 |  |  | 1,306 |
Thereafter |  |  | 16,815 |
Total |  | $ | 22,741 |

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- Definition The entire disclosure for 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. + References Reference 1: 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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