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Note
5 - Debt Financing
Credit
Facility — PNC Bank (formerly BBVA, USA)
On
April 16, 2020, Optex Systems Holdings, Inc. and its subsidiary, Optex Systems, Inc. (collectively, 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 of the facility were as follows:
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The
principal amount of the Facility was $2.25 million. The Facility matured on April 15, 2022.
The interest rate was 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 was payable
monthly in arrears starting on May 15, 2020; and the principal amount was due in full with
all accrued and unpaid interest and any other fees on April 15, 2022. |
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There
were 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 April 3, 2022, the Company was in compliance with the covenants. |
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The
Facility contained 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 was secured by a first lien on all of the assets of Borrower. |
The
outstanding balance on the Facility was zero as of April 3, 2022 and October 3, 2021. For the three and six months ended April 3, 2022,
the total interest expense against the outstanding line of credit balance was zero. For the three and six months ended March 28, 2021,
the total interest expense against the outstanding line of credit balance was $2 thousand and $5 thousand, respectively.
As
further disclosed in Note 9. Subsequent Events, the Facility was replaced on April 12, 2022 with a new facility.
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