CREDIT FACILITIES AND DEBT |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| CREDIT FACILITIES AND DEBT |
3. CREDIT FACILITIES AND DEBT LC Facility On May 3, 2024, we amended our LC Facility to extend its maturity date to June 30, 2026. The LC Facility provides for up to $10.0 million of letters of credit, subject to our cash securitization of the letters of credit, and at September 30, 2024, we had $1.5 million of outstanding letters of credit under the LC Facility. Commitment fees on the unused portion of the LC Facility are 0.4% per annum and interest on outstanding letters of credit is 1.5% per annum. See Note 4 for further discussion of our letters of credit and associated security requirements. Surety Bonds We issue surety bonds in the ordinary course of business to support our projects and certain of our insurance coverages. At September 30, 2024, we had $17.5 million of outstanding surety bonds, of which $12.6 million relates to our second forty-vehicle ferry project for our Shipyard Division (which will terminate in the first quarter 2025 upon expiration of the warranty period for the vessel) and $4.9 million relates to our Fabrication Division contracts and certain of our insurance coverages. See Note 2 for further discussion of the warranty period for our second forty-vehicle ferry project and Note 4 for further discussion of our surety bonds and related indemnification obligations. Note Agreement In connection with the resolution of our MPSV Litigation and the Settlement Agreement, on November 6, 2023, we entered into a promissory note (“Note Agreement”) with one of our Sureties (Fidelity & Deposit Company of Maryland and Zurich American Insurance Company (collectively, “Zurich”)), pursuant to which we will pay Zurich $20.0 million. The Note Agreement bears interest at a fixed rate of 3.0% per annum commencing on January 1, 2024, with principal and interest payable in 15 equal annual installments of approximately $1.7 million, beginning on December 31, 2024 and ending on December 31, 2038. Future annual principal maturities under the Note Agreement are as follows (in thousands):
(1)
At September 30, 2024, the estimated present value of the Note Agreement amount was $13.7 million based on an estimated market rate of interest.
(2)
Due to the forbearance of interest until January 1, 2024, the effective rate on the Note Agreement is 2.9% per annum.
See Note 4 for further discussion of the resolution of our MPSV Litigation and the Settlement Agreement. Mortgage Agreement We have a multiple indebtedness mortgage arrangement (“Mortgage Agreement”) with Zurich to secure our obligations and liabilities under the Note Agreement and our general indemnity agreement with Zurich associated with an outstanding surety bond for our forty-vehicle ferry projects. The Mortgage Agreement, as amended, encumbers all real estate associated with the Houma Facilities, includes certain covenants and events of default, and requires that 50 percent of the net proceeds (as defined by the Mortgage Agreement) received by us in excess of $8.0 million from the sale of any real estate of our Houma Facilities be used to make early payments on the principal balance under the Note Agreement. The Mortgage Agreement will terminate when the obligations and liabilities of Zurich associated with the outstanding surety bond for the forty-vehicle ferry projects are discharged and the Note Agreement is repaid. See “Note Agreement” above for further discussion of the Note Agreement and Note 2 for further discussion of our forty-vehicle ferry projects. Insurance Finance Arrangements In connection with the renewal of our property and equipment insurance coverages during 2022, and general liability insurance coverages during the first quarter 2023, we entered into short-term premium finance arrangements (“Insurance Finance Arrangements”). The property and equipment arrangement totaled $2.4 million, payable in ten equal monthly installments through March 2023, with interest at a fixed rate of 4.3% per annum. The general liability arrangement totaled $0.5 million, payable in eight equal monthly installments through August 2023, with interest at a fixed rate of 6.6% per annum. We considered the transactions to be non-cash financing activities, with the initial financed amount reflected within accrued expenses and other liabilities, and a corresponding asset reflected within prepaid expenses and other assets, on our Balance Sheet. During the nine months ended September 30, 2023, we made principal payments of $1.3 million, which have been reflected as a financing activity on our Statement of Cash Flows. |
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