Line of Credit and Mortgage Payable
|12 Months Ended|
Dec. 31, 2019
|Line of Credit and Mortgage Payable|
|Line of Credit and Mortgage Payable||
8. Line of Credit and Mortgage Payable
Line of Credit
Prior to May 11, 2018, the Company maintained a $20 million revolving credit facility with Bankwell Bank (“Bankwell”). The Bankwell credit facility was secured by substantially all the Company’s assets. Interest on the amounts outstanding accrued at a rate equal to the greater of (x) 5.5% and (y) the three-month LIBOR Rate plus 4.50%. At May 11, 2018 the outstanding balance under the Bankwell credit facility was $18,512,470 and was accruing interest at the rate of 6.79% per annum. In addition, each of John L. Villano, Jeffrey C. Villano, and an entity owned by them, jointly and severally, guaranteed the Company’s obligations under the Bankwell Credit Line up to a maximum of $1,000,000 each.
Effective May 11, 2018 (the “Closing Date”), the Company replaced the Bankwell credit facility with a new $35 million credit facility (the “Webster Credit Facility”) with Webster Business Credit Corporation (“WBCC”), Bankwell Bank and Berkshire Bank (collectively, the “Lenders”). The Webster Credit Facility was secured by a first priority lien on all the Company’s assets, including its mortgage loan portfolio. Interest on the outstanding balance accrued at a rate equal to the 30-day LIBOR rate plus 4.00% per annum. All amounts outstanding under the Webster Credit Facility, including principal, accrued interest and other fees and charges, were to be due and payable May 11, 2022. Pursuant to the terms of the Webster Credit Facility, the maximum amount the Company could borrow was 75% of the aggregate principal amount of its “Eligible Mortgage Loans,” as defined. In addition, the Webster Credit Facility contained various agreements and affirmative, negative and financial covenants that directly impacted the Company’s operations.
On June 25, 2019, the entire outstanding balance of the Webster Facility, including principal, accrued but unpaid interest and other fees, in the aggregate amount of $19.8 million was paid in full and the Webster Facility was terminated. In connection with the termination of the Webster Facility, the Company expensed non-recurring charges of $779,641, of which $439,446 constituted the write-off of non-cash deferred financing costs.
Amortization of all deferred financing costs for the years ended December 31, 2019 and 2018 were $722,580 (including costs of $439,446 incurred in the termination of the Bankwell Credit Line) and $137,241, respectively.
In February 2017, the Company obtained a mortgage loan from Bankwell Bank, secured by property owned by the Company located at 698 Main Street in Branford, Connecticut (the “Bankwell Mortgage Loan”). Since March 2019, this property has served as the Company’s principal place of business. The original principal amount of the Bankwell Mortgage Loan was $310,000 and interest accrued at the rate of 4.52% per annum. Interest and principal were payable in monthly installments of $1,975.
The entire outstanding principal balance of the Bankwell Mortgage Loan and all accrued and unpaid interest thereon was to be due and payable in January 2022. At December 31, 2018, the outstanding principal balance on the Bankwell Mortgage Loan was $290,984. On April 1, 2019, effective as of March 29, 2019, the Company refinanced the original Bankwell Mortgage Loan with a new 10-year mortgage loan from Bankwell Bank in the principal amount of $795,000. The interest rate on this new mortgage loan is 5.06% per annum and the loan is due and payable in full maturing on March 31, 2029. Beginning on May 1, 2019, principal and interest on the new Bankwell Mortgage Loan are payable, in arrears, in monthly installments of $4,710, calculated based on a 25-year amortization schedule. The new Bankwell Mortgage Loan is secured by a first mortgage lien on the Main Street property. In connection with the new Bankwell Mortgage Loan, John L. Villano and Jeffrey C. Villano, jointly and severally, agreed to indemnify Bankwell Bank from and against any and all claims, liabilities, losses, damages, costs and expenses arising out of or attributable to the new Bankwell Mortgage Loan.
Principal payments on the new Bankwell Mortgage Loan are due as follows:
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.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef