Note 11. Long-Term Debt

 

 

The Company has a revolving line of credit (“RLOC”) and term loan with Rabo AgriFinance, Inc. (“Rabo”) totaling $94,000,000. The revolving line of credit and term note are collateralized by 43,991 acres of farmland and 12,280 acres of additional property containing approximately 8,600 acres of producing citrus groves. The Rabo credit facility was amended effective July 1, 2014. Terms as amended are summarized below.

 

The term loan requires quarterly payments of interest at a floating rate of one month LIBOR plus 225 basis points. On July 15, 2016 and every two years thereafter, Rabo may adjust the interest rate to a maximum spread of LIBOR plus 5%. Rabo must provide a 30 day notice of the new spread. The Company has the right to prepay the outstanding balance without penalty. It also requires quarterly principal payments of $500,000 through October 1, 2020 when the remaining principal balance and accrued interest will be due and payable.

 

The Rabo credit facility includes a ten year $60,000,000 RLOC bearing interest at a floating rate on the outstanding balance payable quarterly beginning October 1, 2010. Thereafter, quarterly interest is payable on the first day of January, April, July and October until the revolving line of credit matures on October 1, 2020 and the remaining principal balance and accrued interest shall be due and payable. Proceeds from the revolving line of credit may be used for general corporate purposes including: (i) the normal operating needs of Alico and its operating divisions, (ii) the purchase of capital assets; and (iii) the payment of dividends.

 

The interest rate on the RLOC is based on the one month LIBOR plus a spread. The spread is determined based upon our debt service coverage ratio for the preceding fiscal year and can vary from 195 to 295 basis points. The rate is currently at LIBOR plus 195 basis points. On July 1, 2015 and every two years thereafter, Rabo may adjust the interest rate spread, and the spread adjustment on the RLOC is not limited. Rabo must provide a 30 day notice of the new spread. The Company has the right to prepay the outstanding balance without penalty.

 

The RLOC is subject to an unused commitment fee of 20 basis points on the annual average unused portion of the RLOC.

Loan origination fees incurred as a result of entry into the Rabo credit facility loan agreement, including appraisal fees, document stamps, legal fees and lender fees of approximately $1,202,000 were capitalized in fiscal year 2010 and are being amortized over the term of the loan agreement.

 

At September 30, 2014, and 2013, the Company was in compliance with the financial debt covenants and terms of the Rabo loan agreement. The Rabo credit facility contains the following significant covenants: (i) minimum current ratio of 1.50:1, (ii) debt to assets ratio no greater than 60%, (iii) tangible net worth of at least $80,000,000, and (iv) minimum debt coverage of 1.15:1.

 

The Company uses a cash management program with Rabobank designed to minimize the outstanding balance on the RLOC. Our various Rabobank accounts are swept daily into a concentration account. Funds in excess of a target balance are automatically applied to pay down the RLOC, if there is an outstanding balance.