Long-Term Debt

9 Months Ended

Jun. 30, 2012

Long-Term Debt and Line of Credit

Long-term debt consists of the following as of June 30, 2012:



Note payable to MLIC Asset Holdings, LLC (A) (MLIC)	$	23,788,364
Note payable to the Iowa Department of Economic Development (B)	—
Note payable to the Iowa Department of Transportation (C)	196,354
	$	23,984,718

(A) On October 26, 2006, the Company entered into a $34,715,000 construction-term loan agreement with MLIC Asset Holdings, LLC which was used to complete the biodiesel project. The loan consisted of two phases: a “construction phase” where the Company made periodic requests for fund advances to meet construction obligations and at the completion of construction, the loan converted to a “senior debt instrument.” Previously, the note bore interest at prime plus .25% and was due in monthly principal and interest payments of $373,000. The Company violated the debt covenants; however, MLIC has waived these violations and has entered into a new amendment on January 11, 2012 which extends the maturity date to January 5, 2013. This new amendment bears interest at 6% plus the one month LIBOR rate (currently 6.25%) and requires monthly principal and interest payments of $350,000 plus additional principal payments if monthly earnings before taxes, depreciation and amortization exceed $300,000. This new amendment includes revised covenants including, the requirement to maintain tangible net worth of at least $2,000,000 through June 30, 2012 and at least $2,250,000 from July 1, 2012 until the maturity date of the loans on January 5, 2013. The Company is also required to maintain a cash flow coverage ratio (monthly EBITDA divided by monthly principal and interest payments) of 1:1 starting in February 2012. The loan is secured by substantially all assets of the Company.

The Company's plans with respect to its term loan are discussed in greater detail below in Note 5.

(B) The Company has a $300,000 loan agreement with the Iowa Department of Economic Development. The loan is noninterest-bearing and due in monthly payments of $5,000 beginning December 2006 for a term of 60 months with a balance as of June 30, 2012 and September 30, 2011 of none and $55,000, respectively. Borrowings under this agreement are collateralized by substantially all of the Company's assets and will be subordinate to the $34,715,000 financial institution debt. On November 18, 2010, the Company requested from the IDED a deferral of payments for the period January 1, 2011 through June 30, 2011. On December 16, 2010 the IDED board approved the IRE deferral request with the requirement of a 6.0% interest accrual on the loan for that period. Additionally, in March 2011 the IDED board approved an extension of this agreement through May 2012. This loan was repaid in full in May 2012, however, the Company is obligated to meet certain job retention obligations through 2014.

(C) The Company has a $132,000 loan agreement and a $168,000 forgivable grant agreement with the Iowa Department of Transportation. The loan bears interest at 3.67% beginning June 2008 and is due in semi-annual payments of $14,569 beginning December 2008 for a term of 60 months. The balance at June 30, 2012 and September 30, 2011 was $28,354 and $55,696, respectively. Borrowings under this agreement are collateralized by substantially all of the Company's assets and are not subordinate to the $34,715,000 financial instrument debt. The grant is forgivable upon completion of the loan agreement.

Maturities of long-term debt are as follows:



Year ending June 30:
2013	$	23,816,718
2014	168,000
	$	23,984,718

On September 2, 2010 the Company entered into a short-term line of credit where MLIC Asset Holdings, LLC, Federation Bank, and Washington State Bank will provide up to a $6,000,000 revolving line of credit to be used for the purchase of raw materials. This line of credit matured on January 2, 2012 and therefore no amount is outstanding on this line of credit at June 30, 2012. The balance on this line of credit on September 30, 2011 was $5,974,473.

On January 11, 2012, the Company entered into a new short-term line of credit with Washington State Bank and Federation Bank to provide up to a $1,000,000 revolving line of credit to be used for operations. The line of credit will mature on January 5, 2013 at which time all principal and interest must be paid. Interest on this line of credit is at 6%. At June 30, 2012, no amount is outstanding on this line of credit. The full amount of the line of credit is currently available.

- 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+ Details

Iowa Renewable Energy, LLC 10-Q