Annual report pursuant to Section 13 and 15(d)

DEBT

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DEBT
 12 Months Ended
Dec. 31, 2023
Debt Disclosure [Abstract]  
DEBT
NOTE F - DEBT
The table below summarizes our notes payable and long-term debt at December 31, 2023 and at December 31, 2022:
(in thousands) December 31, 2023 December 31, 2022
 
Senior Credit Agreement $ 640,492  $ 436,126 
Fixed payment obligation 26,400  22,785 
Other notes 3,816  2,441 
Subtotal 670,708  461,352 
 
Less: current portion of long-term debt (199,192) (11,792)
Less: unamortized debt discount and issuance costs (49,615) (36,072)
Subtotal 421,901  413,488 
 
Convertible note payable to executive officer —  1,000 
 
Total $ 421,901  $ 414,488 
Notes payable including current portion of long-term debt 199,192  11,792 
Less: current portion of unamortized debt issuance costs (960) — 
Notes payable including current portion of long-term debt, net 198,232  11,792 
Senior Credit Agreement and Bridge Loan
On May 4, 2020, BKRF OCB 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 Facility. Through various amendments, the commitments under the Senior Credit Agreement have subsequently been increased to $559.6 million as of December 31, 2023 and subsequently increased to $584.6 million. As of December 31, 2023, we have borrowed $523.4 million under the Senior Credit Agreement, and have borrowed an additional $52.2 million through April 16, 2024. The Company deferred interest payments of $78.6 million during the twelve months ended December 31, 2023 for a total deferred amount of $117.1 million as of December 31, 2023. The Senior Credit Agreement is secured by all the assets of our Bakersfield Renewable Fuels Facility, including a pledge of the member’s interest.
Outstanding term loans under the Senior Credit Agreement bear interest at the rate of 15.0% per annum, as amended by Amendment No. 10 as further described below, payable quarterly. The principal of the Senior Credit Agreement, as amended, is set to mature December 2025 pursuant to Amendment No. 10, provided that BKRF OCB must offer to prepay the senior loans with any proceeds of such asset dispositions, borrowings other than permitted borrowings, proceeds from damage or losses at the Facility, and excess net cash flow. BKRF OCB may also prepay the senior loans in whole or in part with the payment of a prepayment premium. As additional consideration for a portion of the senior loans, the Senior Lenders were issued Class B Units in BKRF HCP, LLC, an indirect parent company of BKRF OCB. The fair value of the Class B Units were initially recognized at fair value and are subsequently remeasured at fair value each reporting period with changes recognized in earnings. The Class B Units are discussed further below.
On March 26, 2021, Amendment No. 3 to the Senior Credit Agreement was made effective to more accurately reflect the updated scope and cost estimates of the Facility and to establish a contingency reserve account to fund the costs of the additional capabilities and equipment and to fund possible cost overruns. Concurrently, Consent No. 2 and Amendment No. 2 to the Senior Credit Agreement were made effective, which, among other things, established a consent premium equal to 1.00% of the aggregate commitments (“Consent Premium”), to be paid in the form of equity or cash to the Lenders, subject to whether the Company raises capital of $35.0 million prior to July 31, 2021. The Consent Premium was paid in connection with the consummation of the Series C Financing on February 23, 2022, as described below.
On May 19, 2021, Amendment No. 4 to the Senior Credit Agreement was made effective to replace the Engineering, Procurement and Construction Agreement dated April 30, 2020 with ARB, Inc. (the “ARB EPC Agreement”), effective immediately with a Engineering, Procurement and Construction Agreement with CTCI Americas, Inc. (the “CTCI EPC Agreement”). The subcontracts for the Facility remain in effect and were subsumed in the CTCI EPC Agreement. Accordingly, the subcontractors continue to provide their services for the Facility through CTCI.
On July 29, 2021, Amendment No. 5 to the Senior Credit Agreement was made effective, among other things, increased the amount of funding available under the Senior Credit Agreement by $4.4 million, to $317.6 million.
On December 20, 2021, Amendment No. 6 to Senior Credit Agreement was made effective, which, among other things, increased the amount of funding available under the Senior Credit Agreement by $20.0 million to $337.6 million and to provide a new Bridge Loan facility in an aggregate principal amount of $20.0 million. The Bridge Loan bore interest at the rate of 12.5% per annum and had a stated maturity date of January 31, 2022. On January 7, 2022, the Company borrowed an incremental $8.0 million on the Bridge Loan, and the total outstanding at that time was $20.0 million. The Bridge Loan was paid in full on February 23, 2022 in connection with the Series C Financing. In connection with Amendment No. 6 to the Senior Credit Agreement, GCEH committed to the Senior Lenders to issue warrants covering 5,017,008 shares of common stock of GCEH at an exercise price to be determined based on a market pricing mechanism upon the completion of the Series C Financing for a term of five years from that date. These warrants were issued on February 23, 2022 in connection with the consummation of the Series C Financing, and were issued in consideration for (i) the Consent Premium payable from an earlier amendment to the Senior and Mezzanine Credit Facilities, (ii) the Bridge Loan, and (iii) as additional creditor fees for forbearance to the Senior Lenders and Mezzanine Lenders.
On February 2, 2022, Amendment No. 7 to Senior Credit Agreement was made effective, which, among other things, extended the forbearance period and each respective deadline to satisfy the conditions precedent for the conditional waivers to become permanent waivers were extended from January 31, 2022 to February 23, 2022.
On February 23, 2022, Amendment No. 8 to the Senior Credit Agreement modified a previous provision whereby the Facility needs to achieve Substantial Completion, as defined under the Senior Credit Agreement, no later than August 31, 2022, or an event of default occurs and the Senior Lenders have the right to accelerate the loan for immediate payment of all principal and interest accrued to that date. The Senior Credit Agreement was also further amended to permit the Company to defer up to 3.5% per annum of the interest until the earlier of September 30, 2022 or the final completion of the retooling of the Facility, with all deferred interest being added to principal. Additionally, the parties agreed to various amendments to the representations and warranties, affirmative and negative covenants and events of default, including the Company’s loan subsidiaries ability to enter into working capital facilities in an amount of up to $125.0 million without the Senior Lenders’ consent, and the Company agreed to use its commercially reasonable efforts to enter into a permitted working capital facility on or before June 30, 2022.
On August 5, 2022, certain subsidiaries of the Company entered into Amendment No. 9 to the Senior Credit Agreement to, among other things, increase the Tranche B Commitments thereunder by $60.0 million to $397.6 million, extend the commercial operation date of the Facility to March 31, 2023 and implement certain other commercial arrangements as described therein. Existing defaults and potential events of default under the Senior Credit Agreement, if any, were also waived by the lenders in connection with the effectiveness of Amendment No. 9. The Company’s loan subsidiaries ability to enter into working capital facilities in an amount of up to $125.0 million without the Senior Lenders’ consent. The Company has deferred 100% of its cash interest payment due on September 30, 2022 and through December 31, 2023, as such amounts were allowed under the paid in kind provisions, as amended, of the Senior Credit Agreement.
On January 30, 2023, we entered into Amendment No. 10 to our Senior Credit Agreement whereby the Senior Lenders agreed to a series of Tranche C Commitments under the Senior Credit Agreement in an amount of up to $40.0 million, which was made available to be drawn through June 30, 2023. In addition, the amendment provided for (i) an increase in the underlying interest rate on the loans following the effective date of the amendment from 12.5% to 15.0%, (ii) the ability to pay interest in kind (in lieu of a cash payment) for the periods ending March 31, 2023 and June 30, 2023, (iii) a change in the original maturity date from November 2026 to December 31, 2025, (iv) an agreement to raise at least $10.0 million in new capital by March 31, 2023, and $100.0 million by April 1, 2024 and (v) certain governance rights, including certain limited rights for the Administrative Agent to put forth nominees to the Board of Directors of the Company. Additionally, the Company agreed to grant to the Administrative Agent a security interest in all assets of SusOils pursuant to a pledge and security agreement, dated as of January 30, 2023, by and among the Company, SusOils, and Orion Energy Partners TP Agent, LLC, as the collateral agent. If prior to June 30, 2025, the principal amount of the loans under the Credit Agreement is below $300.0 million, or on and after June 30, 2025 the principal amount of loans under the Credit Agreement is below $200.0 million, then the security interest will automatically terminate. The right to foreclose on the collateral is limited to specific fundamental events of default under the Senior Credit Agreement, including payment defaults and defaults arising from bankruptcy related actions. The requirement to raise $10.0 million by March 31, 2023 has been extended to April 30, 2024, through Amendment No. 13 below.
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 $40.0 million to $47.0 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 $54.0 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 provided for, among other things, a new $110.0 million Tranche D term loan facility, which may be increased up to $140.0 million upon the
consent of the Required Lenders (as defined within Amendment No. 13). Upon the effectiveness of Amendment No. 13, $36.0 million was committed, including $7.0 million of new funding and $29.0 million converted from Tranche C.

Amendment No. 13 also amended (i) the Tranche A and Tranche B prepayment schedule to provide for a prepayment premium of 1.4 times 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 2.0 times 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 $10.0 million capital raise to July 31, 2023, which was subsequently extended to April 30, 2024, and also provides that the outside date for completing a second $170.0 million capital raise is July 5, 2024. The proceeds from the $170.0 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 $144.1 million 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 consolidated balance sheet as of December 31, 2023.

In addition, Amendment No. 13 extends the deadlines for implementing certain governance and management related matters until November 30, 2023, which was subsequently extended to April 30, 2024. 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.

As of April 9, 2024, the Company entered into Amendment No. 14 to the Senior Credit Agreement that provided for, an increase to the Tranche D loan facility up to $165.0 million, providing $25.0 million of new funding. As of April 16, 2024, we have borrowed a total of $575.6 million under the Senior Credit Agreement, including $156.0 million of Tranche D. Consequently, the Company is operating with $9.0 million of borrowing capacity under the Senior Credit Agreement. While our Senior Lenders continue approving and funding draw requests on an as-submitted basis and there are ongoing discussions with the Senior Lenders concerning increasing borrowing capacity under the Senior Credit Agreement, there can be no assurance that such future draw requests will be successful. The availability period for which the Tranche D facility can be drawn may be extended from time to time by the Administrative Agent is currently extended until April 30, 2024.

During the year ended December 31, 2023, the Company recognized the following debt discount related to warrants issued (See Note I - Stock Options and Warrants).

(in thousands, except share amounts) Warrants issued Debt discount
Tranche C 8,250,000  $ 8,607 
Tranche D 24,422,941  $ 23,958 

During the year ended December 31, 2022, the Company recognized the following debt discount related to warrants issued (See Note I - Stock Options and Warrants).
(in thousands, except share amounts) Warrants issued Debt discount
Tranche B 12,485,937  $ 13,775 
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. SusOils executed and delivered to BKRF a secured intercompany promissory note, dated September 22, 2023, in the initial principal amount of $15.0 million (the “SusOils Note”), which provides for repayment of the amounts borrowed from BKRF under the SusOils Note plus interest accruing at 15.0% per annum on or before August 22, 2024. As of December 31, 2023, $10.9 million has been funded under the SusOils Note. The SusOils Note also requires that SusOils enter into a non-exclusive intercompany license agreement with BKRF pursuant to which BKRF would be licensed certain rights to use certain of SusOils’ intellectual property. As of October 12, 2023, in lieu of entering into the Proposed License Agreement, SusOils and BKRF agreed to enter into a revenue sharing agreement. During the Term of this Agreement, SusOils shall pay to BKRF the Revenue Sharing Percentage of the Gross Revenue accounted for by SusOils each calendar quarter with the first of such payments being due on January 31, 2024. 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 “SusOils 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 “SusOils Guaranty”), pursuant to which SusOils has agreed to guaranty up to $15.0 million that may be owned under the Credit Agreement (which such amount is subject to reduction for amounts paid under the SusOils Note). The SusOils Guaranty will remain in place until such time as the SusOils 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 Facility was not commercially operational to make payments from Facility 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 subsequently amended the fixed payment obligation in January 2024 to extend the repayment period beginning after the Facility commences commercial operations, but no later than December 31, 2024, and increased the total amount owed to $30.8 million. The Company had $26.4 million and $22.8 million outstanding on the fixed payment obligation as of December 31, 2023 and 2022, respectively.
Payment of the fixed payment obligation, as subsequently amended in January 2024, is set to begin one month after the Facility commences its commercial operations and produces on-spec renewable diesel with the final payment due no later than December 31, 2024. See Note M - Subsequent Events for further information.
Other Notes Payable
Included in “Other notes” are loans and notes payable facilities for miscellaneous financings, such as working capital loans in our Spanish subsidiary CCE 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, 2023, the Company had two insurance policies financed at a rate of 8.8% to 9.0% with a down payment ranging from 33.3% to 44.9%. As of December 31, 2023, $0.1 million remained outstanding on the insurance policies being financed. The Company expects that it will continue to finance certain policy premiums. Other outstanding notes payable consisted of annual interest rates ranging from 0.0% to 6.0% and mature between December 2024 through December 2050.
Convertible Note Payable to Executive Officer
On October 16, 2018, Richard Palmer, the Company’s former 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”). Under the Convertible Note, Mr. Palmer has
the right, exercisable at any time until the Convertible Note is fully paid, to convert all or any portion of the outstanding principal balance and accrued and unpaid interest into shares of the Company’s common stock at an exercise price of $0.154 per share. On February 23, 2022, the Company amended Mr. Palmer's note to extend the term to the later of February 23, 2024 or upon the redemption of the Series C Preferred shares. Interest on the convertible note was 5.0% per annum and the total number of shares that could be converted was a maximum of 7,616,305. Repayment of the note was restricted under the existing Senior Credit Agreement.
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 Company recognized interest expense of approximately $0.0 million and $0.2 million for the years ended December 31, 2023 and December 31, 2022, respectively.
The following table summarizes the minimum required payments of notes payable and long-term debt as of December 31, 2023:
(in thousands)
Year Required Minimum Payments
2024 $ 199,192 
2025 $ 471,347 
2026 $ 25 
2027 $ 8 
2028 $ 4 
Thereafter $ 132 
Total $ 670,708 
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 December 31, 2023. To the extent that there is distributable cash, the Company is obligated to make certain distribution payments to holders of Class B Units that end on the later of five years after the Facility commences commercial operations or the date on which the Class B Units equal 2.0x MOIC, after which 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 $792.0 million. The Tranche A and B loans under the Senior Credit Agreement represent $396.0 million of the $523.4 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 totaled approximately $16.5 million which were recorded as debt discount. The aggregate fair value of the earned units as of December 31, 2023 and December 31, 2022 were approximately $3.6 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 along with delays in the Facility reaching commercial operations resulting in additional debt and less distributable cash within the available distribution period.
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.