NOTES PAYABLE AND CREDIT FACILITY

9 Months Ended

Dec. 31, 2019

NOTES PAYABLE AND CREDIT FACILITY [Abstract]

9.	NOTES PAYABLE AND CREDIT FACILITY

Non-recourse and recourse obligations consist of the following (in thousands):

	December 31, 2019		March 31, 2019
Recourse notes payable with interest rates at 2.55% as of December 31, 2019 and 4.00% as of March 31, 2019
Current	$	2,239	$	28

Non-recourse notes payable secured by certain financing receivables and investments in operating leases with interest rates ranging from 2.90% to 8.45% as of December 31, 2019 and 3.23% to 8.45% as of March 31, 2019.
Current	$	59,015	$	38,117
Long-term		7,120		10,502
Total non-recourse notes payable	$	66,135	$	48,619

Principal and interest payments on non-recourse notes payable are generally due monthly in amounts that are approximately equal to the total payments due from the customer under the leases or notes receivable that collateralize the notes payable. The weighted average interest rate for our non-recourse notes payable was 3.69% and 4.68%, as of December 31, 2019 and March 31, 2019, respectively. The weighted average interest rate for our recourse notes payable was 2.55% and 4.00% as of December 31, 2019 and March 31, 2019. Under recourse financing, if a customer defaults, the lender has recourse to the customer, the assets serving as collateral, and us. Under non-recourse financing, if a customer defaults, the lender generally only has recourse against the customer and the assets serving as collateral, but not us.

Our technology segment, primarily through our subsidiary ePlus Technology, inc., finances its operations with funds generated from operations, and with a credit facility with Wells Fargo Commercial Distribution Finance, LLC or (“WFCDF”). This facility provides short-term capital for our technology segment. There are two components of the WFCDF credit facility: (1) a floor plan component, and (2) an accounts receivable component. Under the floor plan component, we had outstanding balances of $144.5 million and $116.1 million as of December 31, 2019 and March 31, 2019, respectively. Under the accounts receivable component, we had no outstanding balances as of December 31, 2019 and March 31, 2019.

As of December 31, 2019, the facility had an aggregate limit of $250 million for the two components, and the accounts receivable component had a sub-limit of $50 million, which bears interest assessed at a rate of the One Month LIBOR plus two and one-half percent. We have an election beginning July 1 in each year to temporarily increase the aggregate limit of the two components from $250 million to $325 million ending the earlier of 90 days following the election or October 31 of that same year. On July 31, 2019, we elected to temporarily increase the aggregate limit to $325 million.

The credit facility has full recourse to ePlus Technology, inc. and certain subsidiaries and is secured by a blanket lien against all its assets, such as receivables and inventory. Availability under the facility may be limited by the asset value of equipment we purchase or accounts receivable and may be further limited by certain covenants and terms and conditions of the facility. These covenants include but are not limited to, a minimum excess availability of the facility and minimum earnings before interest, taxes, depreciation and amortization (“EBITDA”) of ePlus Technology, inc. and certain subsidiaries. We were in compliance with these covenants as of December 31, 2019. In addition, the facility restricts the ability of ePlus Technology, inc. and certain subsidiaries to transfer funds to its affiliates in the form of dividends, loans or advances with certain exceptions for dividends to ePlus inc. The facility also requires that financial statements of ePlus Technology, inc. and certain subsidiaries be provided within 45 days at the end of each quarter and 90 days of each fiscal year end, and that other operational reports be provided on a regular basis. Either party may terminate the credit facility with 90 days’ advance written notice. We are not, and do not believe that we are reasonably likely to be, in breach of the WFCDF credit facility. In addition, we do not believe that the covenants of the WFCDF credit facility materially limit our ability to undertake financing. In this regard, the covenants apply only to our subsidiary, ePlus Technology, inc. and certain subsidiaries. This credit facility is secured by the assets of only ePlus Technology, inc., and certain subsidiaries, and the guaranty as described below.

The WFCDF facility requires a guaranty of $10.5 million by ePlus inc. The guaranty requires ePlus inc. to deliver its annual audited financial statements by certain dates. We have delivered the annual audited financial statements for the year ended March 31, 2019, as required. The loss of the WFCDF credit facility could have a material adverse effect on our future results as we currently rely on this facility and its components for daily working capital and liquidity for our technology segment, and as an operational function of our accounts payable process.

Fair Value

As of December 31, 2019, and March 31, 2019, the fair value of our long-term recourse and non-recourse notes payable approximated their carrying value.