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Long-Term Debt
 12 Months Ended
May 31, 2019
Debt Disclosure [Abstract]  
Long-Term Debt

Note 4. LONG-TERM DEBT

 

Long-term debt consists of the following as of May 31:

 

   2019   2018 
Term loan A payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.0%, maturing April 30, 2023  $3,234,947   $3,945,443 
           
Term loan C payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.0%, maturing August 4, 2020   1,399,490    1,613,445 
           
Term loan D payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.75%, maturing January 10, 2022   1,744,235    2,314,935 
           
Term loan E payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 4.75%, maturing January 10, 2022   927,199    843,200 
           
Term loan F payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 5.25%, maturing February 8, 2021   3,398,247    - 
           
Term loan G payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 5.25%, maturing April 30, 2024   876,934    - 
           
Revolving loan payable to International Bank of Commerce, prime rate of interest plus 0.5% but not less than 5.50%, due January 31, 2021   3,205,000    1,879,000 
           
Term loan payable by GRE to International Bank of Commerce, interest rate of 5.5%, monthly principal and interest payments of $27,688, due April 30, 2023   2,461,116    2,652,428 
           
Note payable to Robert Rosene, 7.5% interest, due January 15, 2021   4,426,631    4,469,355 
           
Note payable to First Bank, prime rate of interest plus 1.45% but not less than 4.95%, monthly principal and interest payment of $30,628, due August 21, 2021   800,488    1,099,447 
           
Note payable to Yorktown Management & Financial Services, LLC, 5.0% interest, due February 28, 2019, monthly principal and interest payments of $20,629   -    181,850 
           
Other   223,177    252,493 
Face value of long-term debt   22,697,464    19,251,596 
Less: Debt issuance costs, net of amortization   (37,686)   (91,370)
    22,659,778    19,160,226 
Less: Current portion of long-term debt   (3,030,630)   (2,324,046)
Long-term debt  $19,629,148   $16,836,180 

 

The prime rate of interest as of May 31, 2019 was 5.50%. Effective August 1, 2019, the prime rate of interest decreased to 5.25%.

 

Debt Issuance Costs consists of the amounts paid to third parties in connection with the issuance and modification of debt instruments. These costs are shown on the consolidated balance sheet as a direct reduction to the related debt instrument. Amortization of these costs is included in interest expense. Greystone recorded amortization of debt issuance costs of $95,166 and $137,056 for the years ended May 31, 2019 and 2018, respectively.

 

Loan Agreement between Greystone and International Bank of Commerce (“IBC”)

 

On January 31, 2014, Greystone and GSM (the “Borrowers”) and International Bank of Commerce (“IBC”) entered into a Loan Agreement (the “IBC Loan Agreement”). The IBC Loan Agreement, as amended, provides for certain term loans and a revolver loan.

 

During the years ended May 31, 2019 and 2018, Greystone and IBC entered into certain amendments to the IBC Loan Agreement providing for the following new loans:

 

Date  Term Loan  Amount   Maturity  Purpose
August 4, 2017  C  $1,795,000   August 4, 2020  Acquisition of Equipment
January 10, 2018  D  $2,500,000   January 10, 2022  Convert Revolver to Term
January 10, 2018  E  $1,000,000   January 10, 2022  Acquisition of Equipment
August 8, 2018  F  $3,600,000   February 8, 2021  Acquisition of Equipment
April 30, 2019  G  $880,000   April 30, 2024  Acquisition of Real Estate

 

The IBC term loans make equal monthly payments of principal and interest in such amounts sufficient to amortize the principal balance of (i) Term Loan A over a seven-year period beginning February 29, 2016 (currently $77,548 per month), (ii) Term Loan C over a seven-year period beginning August 31, 2017 (currently $25,205 per month), (iii) Term Loan D over a four-year period beginning February 10, 2019 (currently $57,469 per month), (iv) Term Loan E over a four-year period beginning February 10, 2019 (currently $23,060 per month), (v) Term Loan F over a five-year period beginning February 28, 2019 (currently $68,808 per month) and (vi) Term Loan G over a fifteen-year period beginning April 30, 2019 (currently $7,466 per month). The monthly payments of principal and interest on the IBC term loans may vary as a result of changes in the prime rate of interest.

 

The IBC Loan Agreement, as amended, provides a revolving loan in an aggregate principal amount of up to $4,000,000 (the “Revolving Loan”). The exact amount which can be borrowed under the Revolving Loan from time to time is dependent upon the amount of the borrowing base but in no event can exceed $4,000,000. The Revolving Loan bears interest at greater of the prime rate of interest plus 0.5%, or 5.50% and matures January 31, 2021. The Borrowers are required to pay all interest accrued on the outstanding principal balance of the Revolving Loan on a monthly basis. Any principal on the Revolving Loan that is prepaid by the Borrowers does not reduce the original amount available to the Borrowers.

 

The IBC Loan Agreement includes customary representations and warranties and affirmative and negative covenants which include (i) requiring the Borrowers to maintain a debt service coverage ratio of 1:25 to 1:00 and a funded debt to EBIDA ratio not exceeding 3:00 to 1:00, (ii) subject to certain exceptions, limiting the Borrowers’ combined capital expenditures on fixed assets to $1,500,000 per year, (iii) prohibiting Greystone, without IBC’s prior written consent, from declaring or paying any dividends, redemptions of stock or membership interests, distributions and withdrawals (as applicable) in respect of its capital stock or any other equity interest, other than additional payments to holders of its preferred stock in an amount not to exceed $500,000 in any fiscal year, (iv) subject to certain exceptions, prohibiting the incurrence of additional indebtedness by the Borrowers, and (v) requiring the Borrowers to prevent (A) any change in capital ownership such that there is a material change in the direct or indirect ownership of (1) Greystone’s outstanding preferred stock, and (2) any equity interest in GSM, or (B) Warren Kruger from ceasing to be actively involved in the management of Greystone as President and/or Chief Executive Officer. The foregoing list of covenants is not exhaustive and there are several other covenants contained in the IBC Loan Agreement.

 

As of May 31, 2019, Greystone was not in compliance to maintain the debt service coverage ratio required by the IBC Loan Agreement. IBC issued a waiver, dated August 26, 2019, to Greystone for failure to maintain the debt service coverage ratio at May 31, 2019.

 

The IBC Loan Agreement includes customary events of default, including events of default relating to non-payment of principal and other amounts owing under the IBC Loan Agreement from time to time, inaccuracy of representations, violation of covenants, defaults under other agreements, bankruptcy and similar events, the death of a guarantor, certain material adverse changes relating to a Borrower or guarantor, certain judgments or awards against a Borrower, or government action affecting a Borrower’s or guarantor’s ability to perform under the IBC Loan Agreement or the related loan documents. Among other things, a default under the IBC Loan Agreement would permit IBC to cease lending funds under the IBC Loan Agreement, and require immediate repayment of any outstanding loans with interest and any unpaid accrued fees.

 

The IBC Loan Agreement is secured by a lien on substantially all of the assets of the Borrowers. In addition, the IBC Loan Agreement is secured by a mortgage granted by GRE on the real property owned by GRE in Bettendorf, Iowa (the “Mortgage”). GRE is owned by Warren F. Kruger, Greystone’s President and CEO, and Robert B. Rosene, Jr., a director of Greystone. Messrs. Kruger and Rosene have provided a combined limited guaranty of the Borrowers’ obligations under the IBC Loan Agreement, with such guaranty being limited to a combined amount of $6,500,000 (the “Guaranty”). The Mortgage and the Guaranty also secure or guaranty, as applicable, the obligations of GRE under the Loan Agreement between GRE and IBC dated January 31, 2014 as discussed in the following paragraph.

 

Loan Agreement between GRE and IBC

 

On January 31, 2014, GRE and IBC entered into a Loan Agreement, as amended, providing for a mortgage loan to GRE of $3,412,500. The loan provides for a 5.5% interest rate and a maturity of April 30, 2023 and is secured by a mortgage on the two buildings in Bettendorf, Iowa which are leased to Greystone.

 

Note Payable between Greystone and Robert B. Rosene, Jr.

 

Effective December 15, 2005, Greystone entered into an agreement with Robert B. Rosene, Jr., a member of Greystone’s Board of Directors, to convert $2,066,000 of advances into a note payable at 7.5% interest.

 

Effective June 1, 2016, the note payable with Mr. Rosene was restated (the “Restated Note”) whereby accrued interest of $2,475,690 was combined with the outstanding principal of $2,066,000 resulting in a note payable in the principal amount of $4,541,690 with an interest rate of 7.5% and a maturity of January 15, 2018, subsequently amended to January 15, 2021. The Restated Note requires the payment of accrued interest to Mr. Rosene. In addition, the Restated Note allows Greystone to make additional payments, at Greystone’s discretion, up to an amount allowed by the IBC Loan Agreement.

 

Note Payable between Greystone and First Bank

 

In connection with the acquisition of certain equipment from Yorktown Management & Financial Services, LLC (“Yorktown”) effective February 1, 2017, Greystone assumed a note payable in the amount of $1,469,713 between Yorktown and First Bank. The note bears interest at the prime rate of interest plus 1.45% but not less than 4.95% (6.95% at May 31, 2019). The First Bank note is secured by certain production equipment.

 

Maturities

 

Maturities of Greystone’s long-term debt for the five years after May 31, 2019 are $3,030,630, $13,868,421, $2,370,964, $2,713,978 and $713,471.