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Note 5 - Debt Financing
Credit Facility
On April 16, 2020,
the Company terminated its facility with Avidbank and entered into a new facility with BBVA USA.
On April 16, 2020,
Optex Systems Holdings, Inc. and its subsidiary, Optex Systems, Inc. (“Optex”, and with the Company, the “Borrower”)
entered into a line of credit facility (the “Facility”) with BBVA, USA (“BBVA”) The substantive terms are
as follows:
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The principal amount of the Facility is $2.25 million. The Facility matures on April 15, 2022. The interest rate is variable based on BBVA’s Prime Rate plus a margin of -0.250%, initially set at 3% at loan origination, and all accrued and unpaid interest is payable monthly in arrears starting on May 15, 2020; and the principal amount is due in full with all accrued and unpaid interest and any other fees on April 15, 2022. |
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There are commercially standard covenants including, but not limited to, covenants regarding maintenance of corporate existence, not incurring other indebtedness except trade debt, not changing more than 25% stock ownership of Borrower, and a Fixed Charge Coverage Ratio of 1.25:1, with the Fixed Charge Coverage Ratio defined as (earnings before taxes, amortization, depreciation, amortization and rent expense less cash taxes, distribution, dividends and fair value of warrants) divided by (current maturities on long term debt plus interest expense plus rent expense). As of December 27, 2020, the Company was in compliance with the covenants. |
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The Facility contains commercially standard events of default including, but not limited to, not making payments when due; incurring a judgment of $10,000 or more not covered by insurance; not maintaining collateral and the like. |
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The Facility is secured by a first lien on all of the assets of Borrower. |
The outstanding balance
on the facility was $377 thousand as of December 27, 2020 and September 27, 2020.
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