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Note
8 — Debt Financing
Credit
Facility — PNC Bank (formerly BBVA, USA)
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. (the “Borrower”) entered into a line
of credit facility (the “Facility”) with BBVA, USA. In June 2021, PNC Bank completed its acquisition of BBVA, USA and the
bank name changed to PNC Bank (“PNC”). 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
PNC’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 October 3, 2021, 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 credit facility was zero and $377 thousand as of October 3, 2021 and September 27, 2020, respectively. For
the years ended October 3, 2021 and September 27, 2020, the total interest expense against the outstanding line of credit balance was
$11 thousand and $19 thousand, respectively.
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