DEBT |
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| DEBT |
NOTE E - DEBT The table below summarizes our notes payable and long-term debt at September 30, 2023 and at December 31, 2022:
Amendments to Senior Credit Agreement On May 4, 2020, BKRF OCB, LLC, a wholly-owned subsidiary of GCEH, entered into the Senior Credit Agreement with a group of lenders (the “Senior Lenders”) pursuant to which the Senior Lenders agreed to initially provide a $300.0 million senior secured term loan facility to BKRF OCB to pay the costs of retooling the Bakersfield Renewable Fuels Refinery. Through various amendments, the commitments under the Senior Credit Agreement have subsequently been increased to $484.7 million. As of September 30, 2023, we have borrowed $484.7 million under the Senior Credit Agreement, and have borrowed an additional $19.5 million through November 13, 2023. The Company deferred interest payments of $55.3 million during the nine months ending September 30, 2023 for a total deferred amount of $93.8 million as of September 30, 2023. As Tranche C Commitments
were
funded, the Company
was
required to issue to the Tranche C lenders warrants to purchase up to 15,000,000 shares of the Company’s common stock, exercisable until December 23, 2028 at an exercise price of $0.075 per share (the “Tranche C Lender Warrants”). The Company issued 13,875,000 Lender Warrants in connection with funds drawn under Amendment No. 10 of Tranche C. The Tranche C loans are subject to a subordinated premium (the “Tranche C Subordinated Premium”) which requires the Company to pay an additional amount upon repayment equal to the interest, with respect to any Tranche C Loan, that would have been payable over the 79-month anniversary of the applicable Tranche C loan funding date. The Tranche C Lender Warrants result in a discount on the Tranche C loans that will be recognized over the contractual term of the Tranche C loans through interest expense.
On May 19, 2023, the Company entered into Amendment No. 11 to the Senior Credit Agreement, whereby
certain Senior Lenders agreed to increase the Tranche C Commitments from $40 million to $47 million. In exchange, the Company issued to
certain Senior Lenders , as payment of an amendment and upsize premium,
Tranche C Lender Warrants to purchase up to 3,750,000 shares of the Company’s common stock, exercisable until December 23, 2028 at an exercise price of $0.075 per share.
On June 21, 2023, the Company entered into Amendment No. 12 to the Senior Credit Agreement which provided for an incremental $7.0 million increase in availability to Tranche C, for a total commitment of $54 million and issued an additional 1,500,000 of
Tranche C Lender Warrants.
On July 5, 2023, the Company entered into Amendment No. 13 to the Senior Credit Agreement that provides for, among other things, a new $110 million Tranche D term loan facility, which may be increased up to $140 million upon the consent of the Required Lenders (as defined within Amendment No. 13). Upon the effectiveness of Amendment No. 13, $36 million was committed, including $7 million of new funding and $29 million converted from Tranche C. As of November 13, 2023, $84.6 million is outstanding under Tranche D of the Senior Agreement. The remaining, uncommitted availability under Tranche D will be made available to the Company at the sole discretion of the Required Lenders. The availability period for which the Tranche D facility can be drawn may be extended from time to time by the Administrative Agent until November 30, 2023.
Amendment No. 13 also amended (i) the Tranche A and Tranche B prepayment schedule to provide for a prepayment premium of 1.4x of the total amount of such loans being prepaid, (ii) the payment schedule for the Tranche A, Tranche B and Tranche C loans such that the applicable prepayment premium would be payable through the maturity date of those loans, and (iii) the Tranche C prepayment schedule to provide for an aggregate prepayment premium (comprised of the Tranche C priority premium and Subordinated Premium) of 2x of the total amount of loans being repaid. All principal, interest or other amounts paid in cash upon payment of the loans will count towards the prepayment premiums for each of the Tranche A, Tranche B, Tranche C and Tranche D loans. In addition,
Amendment No. 13 extends the outside date for which the Company is required to complete a $10 million capital raise to July 31, 2023, which was subsequently extended to November 30, 2023, and also provides that the outside date for completing a second $170 million capital raise is July 5, 2024.
The proceeds from the $170 million capital raise are to be used towards repayment of debt in accordance with the cash waterfall provisions of the Senior Credit Agreement . Accordingly, the Company has reclassified $153.7 from long-term maturities of Senior Credit Agreement to current maturities of long-term debt based on the amount of outstanding principal and accrued paid-in-kind interest, and after consideration to the prepayment provisions of the Senior Credit Agreement that is not included in the outstanding amount of debt in the condensed consolidated balance sheet as of September 30, 2023. Amendment No. 13 also extends the deadlines for implementing certain governance and management related matters until November 30, 2023. Pursuant to Waiver No. 8, the
Senior Lenders agreed to waive certain Defaults and Events of Default (each as defined under the Senior Credit Agreement), if any, arising prior to, or based on events or circumstances existing prior to, the effective date of Amendment No. 13. In connection with Amendment No. 13 and the conversion of Tranche C term loans to Tranche D term loans, 10,875,000 of certain outstanding warrants that were previously issued to
certain Senior Lenders were cancelled and reissued as new warrants to purchase up to 10,875,000 shares of the Company’s common stock, exercisable until December 23, 2028 at an exercise price of $0.075 per share (the “Lender Warrants”). These Lender Warrants also provide for other amendments necessary to reflect a reallocation amongst
certain Senior Lenders of outstanding warrants, as further set forth in that certain amendment agreement, dated as of July 5, 2023, by and among the Company and
certain Senior Lenders party thereto with the terms of the warrants remaining unchanged. The Company has agreed to register the resale of the shares of common stock underlying the Lender Warrants pursuant to an amendment to that certain registration rights agreement, dated July 5, 2023, by and among the Company and
certain Senior Lenders party thereto. Amendment No. 13 was determined to meet the requirements of modification accounting of the Company’s existing Senior Credit
Agreement . As a result of certain
Senior Lenders rescinding various warrants, the existing debt discount was decreased by $4.5 million.
During the nine months ended September 30, 2023, the Company recognized the following debt discount related to warrants issued (See Note G - Stock Options and Warrants).
On September 22, 2023, Sustainable Oils, Inc. (“SusOils”), a wholly-owned subsidiary of GCEH entered into a series of intercompany transactions providing for the incremental funding of certain of SusOils working capital requirements by BKRF OCB, LLC (“BKRF”), an indirect wholly-owned subsidiary of GCEH and primary borrower under the Company’s Senior Credit Agreement. SusOils executed and delivered to BKRF a secured intercompany promissory note, dated September 22, 2023, in the initial principal amount of $15 million (the “Intercompany Note”), which provides for repayment of the amounts borrowed from BKRF under the Intercompany Note plus interest accruing at 15% per annum on or before August 22, 2024. The Intercompany Note also requires that SusOils enter into a non-exclusive intercompany license agreement with BKRF, on or before October 7, 2023, pursuant to which BKRF would be licensed certain rights to use certain of SusOils’ intellectual property.
The impact of the intercompany transactions are eliminated in consolidation.
In addition, SusOils entered into a (i) pledge and security agreement, dated September 22, 2023 (the “Security Agreement”), pursuant to which it granted to BKRF a security interest in all of its assets, and (ii) guaranty agreement, dated September 22, 2023 (the “Guaranty”), pursuant to which SusOils has agreed to guaranty up to $15 million that may be owned under the Credit Agreement (which such amount is subject to reduction for amounts paid under the Intercompany Note). The Guaranty will remain in place until such time as the Intercompany Note has been repaid in full. Fixed Payment Obligation The Company amended a derivative forward contract with the counterparty which terminated the derivative forward contract and replaced it with a fixed payment obligation. Since the Bakersfield Renewable Fuels Refinery was not
commercially
operational to make payments from refinery operations,
the Company
amended the agreement in May 2022 and again in February 2023. Effective February 27, 2023,
the Company
amended
its
fixed payment obligation whereby we
were obligated to make payments
beginning in September 2023 with the first payment of $1.2 million and escalating monthly with the final payment of $6.0 million scheduled for March 2024. The Company did not make any payments beginning in September 2023, and the full amount remains outstanding as of November 1
3 , 2023. The total amount of the payments is now $26.4 million.Other Notes Payable Included in “Other notes” are loans and notes payable facilities for miscellaneous financings, such as working capital loans and financing of our insurance policies. At various times the Company enters into new insurance policies to replace certain policies that are expiring and to insure for additional identified risks. As of December 31, 2022, the Company had two insurance policies financed at a rate of 5.45% to 8.2% with a down payment ranging from 9% to 30% with monthly payments up to and including September 2023. There were no amounts outstanding on the insurance policies being financed at September 30, 2023. The Company expects that it will continue to finance certain policy premiums. Other outstanding notes payable consisted of annual interest rates ranging from 1.0% to 6.0% and mature between December 2023 through December 2028. Convertible Note Payable to Executive Officer On October 16, 2018, Richard Palmer, the Company’s Chief Executive Officer, entered into a new employment agreement with the Company and concurrently agreed to defer $1.0 million of his accrued unpaid salary and bonus by virtue of a $1.0 million convertible promissory note (the “Convertible Note”). On July 26, 2023, Mr. Palmer delivered a Notice of Conversion of his convertible note, including the accrued interest through February 23, 2022, into the Company’s common shares. The Company issued 7,582,318 common shares to Mr. Palmer in satisfaction of this monetary obligation by the Company with no proceeds being received by the Company for issuance of the common shares. The following table summarizes the minimum required payments of notes payable and long-term debt as of September 30, 2023:
Class B Units Pursuant to the Senior Credit Agreement, BKRF HCB, LLC, an indirect wholly-owned subsidiary of the Company, has issued 397.6 million Class B Units to certain Senior Lenders as of September 30, 2023. To the extent that there is distributable cash, the Company is obligated to make certain distribution payments to holders of Class B Units, and after the distributions reach a certain limit the units will no longer require further distributions and will be considered fully redeemed. The aggregate total payments (including distributions to the Class B Units, all interest and principal payments) to the certain
Senior Lenders cannot exceed two times the amount of the borrowings under the Senior Credit Agreement Tranche A and Tranche B, or approximately $795.2 million. The Tranche A and B loans under the Senior Credit Agreement, which represent $397.6 million of the $484.7 million outstanding, do earn Class B Units, while the Tranche C and Tranche D loans do not receive Class B Units. The aggregate fair value of such units on the date of their issuances totalled approximately $16.5 million which were recorded as debt discount. The aggregate fair value of the earned units as of September 30, 2023 and December 31, 2022 was approximately $5.4 million and $12.0 million, respectively. It is expected that the fair value will fluctuate depending on market inputs that impact the projected distributable cash.
The Class B Units meet the definition of a mandatorily redeemable financial instrument under ASC 480 because BKRF HCB, LLC has an unconditional obligation to redeem the Class B Units by transferring assets at a specified time. Pursuant to ASC 825-10, the Company has elected the fair value option for the Class B Units. Accordingly, at each borrowing the Company will initially recognize the Class B Unit liability based on the issuance date fair value with an offset to the discount on the Senior Credit Agreement. The Company measures their Class B Units at fair value at each reporting date with changes recognized in other income/expense. |
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