12.	FINANCING ARRANGEMENTS

March 29, 2019,

Air T entered into an Amended and Restated Credit Agreement with Minnesota Bank & Trust (“MBT”), dated as of

March 28, 2019 (

the “Amended Agreement”), principally to refinance the Worthington credit facility. The principal changes of the Amended Agreement are as follows: (

) the revolving credit facility increased to

$17,000,000;

(

) the rate was revised to the greater of (a)

4.00%

or (b) the sum of (i) the prime rate minus (ii)

1.00%;

(

)

three

parties were added: (a) Worthington Acquisition, LLC, a wholly-owned subsidiary of Stratus Aero Partners LLC, a wholly-owned subsidiary of the Company; (b) Worthington Aviation, LLC, a wholly-owned subsidiary of Worthington Acquisition, LLC; and (c) Worthington MRO, LLC, a wholly-owned subsidiary of Worthington Acquisition, LLC (collectively, the “Worthington Entities”). The additional funds were applied to repay indebtedness owed by the Worthington Entities under that certain Loan Agreement dated as of

May 11, 2018

to MBT. Additionally, the related Amended and Restated Guaranty in favor of MBT, dated as of

March 28, 2019,

amended that certain Guaranty dated as of

December 21, 2017,

which also added the Worthington Entities as loan parties.

Borrowings of the Company and its subsidiaries are summarized below at

March 31, 2019

and

March 31, 2018,

respectively. AirCo and Contrail Aviation (“Contrail”) are subsidiaries of the Company in the commercial aircraft, engines and parts segment.

	March 31, 2019			March 31, 2018			Maturity Date	Interest Rate		Priority	Unused commitments

Revolver	$	12,403,213		$	-		November 30, 2019		Prime - 1%	Secured	$	4,596,787
Term Note A		8,750,000			9,750,000		January 1, 2028		1-month LIBOR + 2%	Secured
Term Note B		4,375,000			4,875,000		January 1, 2028		4.50%	Secured
Term Note D		1,607,200			1,674,400		January 1, 2028		1-month LIBOR + 2%	Secured
Air T Debt - MBT		27,135,413			16,299,400

Revolver		3,820,000			5,000,000		May 21, 2019		7.50%	Secured		1,180,000
Term Loan		-			2,404,775		March 26, 2019		7.25%	Secured
Term Loan		450,000			-		December 17, 2019		7.50%	Secured
Term Loan		400,000			-		June 17, 2020		7.25%	Secured
Term Loan		2,100,000			-		June 17, 2020		8.50%
AirCo Debt - MBT		6,770,000			7,404,775

Revolver		-			14,826,062		May 5, 2019		1-month LIBOR + 3%	Secured		20,000,000
Term Loan		8,616,336			9,920,000		January 26, 2021		1-month LIBOR + 3.75%	Secured
Term Loan		15,500,000			-		September 14, 2021		1-month LIBOR + 3.75%	Secured
Contrail Debt - Old National		24,116,336			24,746,062

Total Debt		58,021,749			48,450,238

Less: Unamortized Debt Issuance Costs		(368,760	)		(365,288	)
Total Debt, net	$	57,652,989		$	48,084,950

The Air T revolving credit facility, as well as Term Note A, Term Note B and Term Note D are guaranteed by certain subsidiaries of the Company, secured by a

first

lien on all personal property of the Company and the guaranteeing subsidiaries.

The Contrail revolving credit facility contains affirmative and negative covenants, including covenants that restricted the ability of Contrail Aviation and its subsidiaries to, among other things, incur or guarantee indebtedness, incur liens, dispose of assets, engage in mergers and consolidations, make acquisitions or other investments, make changes in the nature of its business, and engage in transactions with affiliates.

The weighted average interest rate on short term borrowings outstanding as of

March 31, 2019

and

March 31, 2018

5.27%

and

7.25%,

respectively.

March 31, 2019,

our contractual financing obligations, including payments due by period, are as follows:

Fiscal year ended	Amount
2020	$	24,735,224
2021		18,188,725
2022		5,067,200
2023		1,567,200
2024		1,567,200
Thereafter		6,896,200
		58,021,749
Less: Unamortized Debt Issuance Costs		(368,760	)
	$	57,652,989

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.

Fair Value of Debt

—As of

March 31, 2019

and

2018,

the carrying amounts reported in the consolidated balance sheets for the Company’s debt instruments approximate the fair values. Estimated fair values are determined by comparing current borrowing rates and risk spreads offered in the market (Level

fair value measures) or quoted market prices (Level

fair value measures), when available, to the stated interest rates and spreads on the Company’s debts.

Interest Expense, net

- The components of net interest expense during the years ended

March 31, 2019

and

March 31, 2018

are as follows:

	March 31, 2019			March 31, 2018

Contractual interest		3,290,788			1,695,898
Amortization of deferred financing costs		193,942			90,028
Interest income		(57,628	)		(61,154	)
Total		3,427,102			1,724,771

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 have been 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 forecasted transactions (interest payments) affects earnings. As of

March 31, 2019

and

March 31, 2018,

the fair value of the interest-rate swap contracts was a liability of

$227,000

and

$8,500,

respectively, which is included within other non-current liabilities in the consolidated balance sheets. During the year ended

March 31, 2019,

the Company recorded a gain of approximately

$145,000

in the consolidated statement of income (loss) due to the changes in the fair value of the instruments prior to the designation and qualification of these instruments as effective hedges. After the interest rate swaps were deemed effective hedges, the Company recorded a loss of approximately

$236,000,

net of tax, in the consolidated statement of comprehensive income for changes in the fair value of the instruments.