Financing Arrangements

6 Months Ended

Sep. 30, 2019

Borrowings of the Company and its subsidiaries are summarized below (in thousands) at September 30, 2019 and March 31, 2019, respectively. AirCo and Contrail Aviation (“Contrail”) are subsidiaries of the Company in the commercial jet engines and parts segment.


(In Thousands)	September 30, 2019		March 31, 2019		Maturity Date	Interest Rate	Unused commitments as of September 30, 2019
Revolver - MB&T	$	18,424	$	12,403	November 30, 2019	Prime - 1%	$	1,576
Term Note A - MB&T	8,250		8,750		January 1, 2028	1-month LIBOR + 2%
Term Note B - MB&T	4,125		4,375		January 1, 2028	4.5%
Term Note D - MB&T	1,574		1,607		January 1, 2028	1-month LIBOR + 2%
Debt - Trust Preferred Securities	9,632		—		June 7, 2049	8%
Air T Debt	42,005		27,135

Revolver - MB&T	—		3,820		May 21, 2019	7.5%
Revolver - MB&T	6,921		—		November 30, 2019	greater of 6.50% or Prime + 2%	3,078
Term Loan - MB&T	—		450		December 17, 2019	7.50%
Term Loan - MB&T	—		400		June 17, 2020	7.25%
Term Loan - Park State	—		2,100		June 17, 2020	8.50%
AirCo Debt	6,921		6,770

Revolver	—		—		September 5, 2021	1-month LIBOR + 3%	20,000
Term Loan A	7,466		8,617		January 26, 2021	1-month LIBOR + 3.75%
Term Loan B	6,500		15,500		September 14, 2021	1-month LIBOR + 3.75%
Term Loan C	12,805		—		August 1, 2024	1-month LIBOR + 3.75%
Contrail Debt - Old National	26,771		24,117

Total Debt	75,697		58,022

Less: Unamortized Debt Issuance Costs	(317)		(369)
Total Debt, net	$	75,380	$	57,653

At September 30, 2019, our contractual financing obligations, including payments due by period, are as follows (in thousands):


Due by	Amount
September 30, 2020	$	29,836
September 30, 2021	17,535
September 30, 2022	4,172
September 30, 2023	4,271
September 30, 2024	4,138
Thereafter	15,745
	75,697
Less: Unamortized Debt Issuance Costs	(317)
	$	75,380

On June 10, 2019, the Company completed a transaction with all holders of the Company’s Common Stock to receive a special, pro-rata distribution of three securities as enumerated below:

•A dividend of one additional share for every two shares already held (a 50% stock dividend, or the equivalent of a 3-for-2 stock split). See Footnote 6 for discussion.

•The Company issued and distributed to existing common shareholders an aggregate of 1.6 million trust preferred capital security ("TruPs") shares (aggregate $4.0 million stated value) and an aggregate of 8.4 million warrants ("Warrants") (representing warrants to purchase $21.0 million in stated value of TruPs). The Warrants are exercisable for one year from issuance.

The issuance of the TruPs and Warrants on June 10, 2019 is disclosed on our consolidated statements of equity as well as within the supplemental non-cash disclosure of the Company's consolidated statements of cash flows. As of September 30, 2019, 2,252,797 Warrants have been exercised. As a result, the amount outstanding on the Company's Debt - Trust Preferred Securities is $9,632,243 as of September 30, 2019.

At September 30, 2019, the Company had Warrants outstanding and exercisable to purchase 6,147,203 shares of its TruPs at an exercise price of $2.40 per share, which represents a discount to the $2.50 face value of each Trust Preferred Security. The Warrants will expire on June 7, 2020 or earlier upon redemption or liquidation.


	Fair Value Measurement as of September 30, 2019
Warrant liability (Level 2)	$	614,720

As of September 30, 2019, the Warrants are recorded within "Other non-current liabilities" on our consolidated balance sheets. Fair value measurement was based on market activity and trading volume as observed on the NASDAQ Global Market. The liability is classified as Level 2 in the hierarchy (Level 2 is defined as quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability).

On August 16, 2019, Contrail entered into a term loan agreement with to borrow $13 million at the interest rate of LIBOR plus 3.75% per annum. The maturity date of the term loan is August 1, 2024.

On September 24, 2019, Air T amended the MBT revolver ("Air T Revolver") to temporarily increase the borrowing commitment from $17 million to $20 million. All other terms of the credit agreement remain unchanged. As noted in Footnote 17 - Subsequent Events, on November 8, 2019, Air T extended the maturity date of the Air T Revolver to February 28, 2020. The principal amount reverted back to $17 million. Concurrently, the Company also extended the maturity date of the AirCo MBT revolver ("AirCo Revolver") to February 28, 2020. Principal amount and terms of the AirCo Revolver remained unchanged.

The Company assumes various financial obligations and commitments in the normal course of its operations and financing activities. Financial obligations are considered to represent known future cash payments that the Company is required to make under existing contractual arrangements such as debt and lease agreements.

As part of the Company’s interest rate risk management strategy, the Company, from time to time, uses derivative instruments to minimize significant unanticipated earnings fluctuations that may arise from rising variable interest rate costs associated with existing borrowings (Air T Term Note A and Term Note D). To meet these objectives, the Company entered into interest rate swaps with notional amounts consistent with the outstanding debt to provide a fixed rate of 4.56% and 5.09%, respectively, on Term Notes A and D. The swaps mature in January 2028.

As of August 1, 2018, these swap contracts were designated as cash flow hedging instruments and qualified as effective hedges in accordance with ASC 815-30. The effective portion of changes in the fair value on these instruments is recorded in other comprehensive income and is reclassified into the consolidated statement of income as interest expense in the same period in which the underlying hedge transaction affects earnings. As of September 30, 2019 and March 31, 2019, the fair value of the interest-rate swap contracts was a liability of $570,069 and $227,000, respectively, which is included within other non-current liabilities in the consolidated balance sheets. During the three months ended September 30, 2019, the Company recorded a loss of approximately $88,000, net of tax, in the consolidated statement of comprehensive income (loss) for changes in the fair value of the instruments.