CREDIT FACILITIES

12 Months Ended

Sep. 30, 2020

NOTE 6—CREDIT FACILITIES

A summary of borrowings at period end follows:


	Fixed/		September 30, 2020				September 30, 2019
	Variable	Maturity			Interest				Interest
Debt	Rate	Date	Balance		Rate		Balance		Rate
(in thousands)
M&T credit facilities:
Revolving Credit Facility	v	6/4/2023	$	19,960	2.75	%	$	26,646	4.31	%
Master Lease	v	6/4/2023	1,782		3.00		—		—
Term Loan B	v	5/5/2022	—		—		2,779		4.59

Equipment Line Term Note	v	Various	—		—		1,125		4.56
Total debt, gross			21,742				30,550
Unamortized debt issuance costs			(266)				(269)
Total debt, net			21,476				30,281
Less: current portion			—				(1,371)
Long-term debt			$	21,476			$	28,910

M&T Bank Credit Facilities

Effective as of June 4, 2020, the Company and M&T Bank entered into the Sixth Amended and Restated Credit Facility Agreement (the “Credit Facility”) which replaced the Fifth Amended and Restated Credit Facility Agreement dated as of December 14, 2015, as amended by various amendments (collectively, the “Prior Credit Facility, as amended”).

Pursuant to the Credit Facility, the Company increased its revolving credit facility to an aggregate principal amount of $45.0 million and added provisions that allow the Company, subject to certain requirements, to request further increases, in minimum amounts of $5.0 million, up to $55.0 million. Some of the proceeds from the Credit Facility were used to repay the existing outstanding Term Loan B and Equipment Line Term Note. The Credit Facility also amended the financial covenant, Fixed Charge Coverage Ratio, and set a Minimum Fixed Charge Coverage Ratio. In addition, the Credit Facility modified the definition of Applicable Margin used to determine interest charges on outstanding and unused borrowings under the revolving credit facility and modified the definition of Permitted Acquisitions. The Credit Facility also established a LIBOR floor of 1% and included an alternate benchmark rate when LIBOR is discontinued. During the fiscal year ended September 30, 2020, the Company paid fees of approximately $84 thousand related to this Credit Facility.

Also as of June 4, 2020, the Company and M&T Bank entered into a master equipment lease (the “Master Lease”) for a lease line of up to $10.0 million in lease value of equipment to the Company. The Master Lease contains terms and provisions customary for transactions of this type, including obligations relating to the use, operation and maintenance of the equipment. The Master Lease also contains customary events of default, including nonpayment of amounts due under the lease and assignments for the benefit of creditors, bankruptcy or insolvency. In the event that an event of default occurs, M&T Bank may exercise one or more remedies specified in the Master Lease. At the conclusion of the lease term, the Company will have the right to purchase the equipment under the Master Lease. The Master Lease will renew automatically for additional 12-month terms until the Company provides M&T Bank with notice of non-renewal.

The Credit Facility is secured by a general security agreement covering the assets of the Company and its subsidiaries, a pledge of the Company’s equity interest in its subsidiaries, a negative pledge on the Company’s real property, and a guarantee by the Company’s subsidiaries, all of which restrict use of these assets to support other financial instruments.

Individual debt facilities provided under the Credit Facility as of September 30, 2020, and Prior Credit Facility, as amended, as of September 30, 2019, are described below:

a)Revolving Credit Facility (“Revolver”): At September 30, 2020, up to $45.0 million was available pursuant to the Credit Facility through June 4, 2023. At September 30, 2019, up to $35.0 million was available through May 5, 2022 under the Prior Credit Facility, as amended. The maximum amount the Company may borrow is determined based on a borrowing base calculation described below.

b)Master Lease: At September 30, 2020, we had drawn down $1.8 million pursuant to the $10.0 million Master Lease that was entered into as of June 4, 2020.

c)Term Loan B: As of September 30, 2019, $14.0 million was borrowed on January 18, 2013. Principal was being repaid in 120 equal monthly installments of $117 thousand. As part of an amendment to the Prior Credit Facility, as amended, the principal was modified from $8.0 million to $6.0 million and principal was being repaid in equal monthly installments of $71 thousand plus a balloon payment of $0.6 million. The maturity date of the loan was May 5, 2022. Some of the proceeds from the Credit Facility were used to repay the existing outstanding Term Loan B and no amounts remained outstanding as of September 30, 2020.

d)Equipment Line Term Note: On March 18, 2019, $0.3 million was converted from an Equipment Line Advance, principal was being repaid in 36 equal monthly installments of $9 thousand and was set to mature on March 18, 2022. On May 6, 2019, $0.4 million was converted from an Equipment Line Advance, principal was being repaid in 36 equal monthly installments of $11 thousand and was set to mature on May 6, 2022. Some of the proceeds from the Credit Facility were used to repay the existing outstanding Equipment Line Term Note and no amounts remained outstanding as of September 30, 2020.

Borrowing Base

At September 30, 2020, under the Credit Facility, the maximum amount the Company can borrow under the Revolver was the lesser of (i) 85% of eligible receivables plus (ii) up to 90% of eligible investment grade accounts plus (iii) a percentage of eligible inventories (up to a cap of $30.0 million). At September 30, 2019, under the Prior Credit Facility, as amended, the maximum amount the Company could borrow under the Revolver was the lesser of (i) 85% of eligible receivables plus a percentage of eligible inventories (up to a cap of $30.0 million) or (ii) $35.0 million.

At September 30, 2020, the upper limit on Revolver borrowings was $39.4 million, and $19.4 million was available. At September 30, 2019, the upper limit on Revolver borrowings was $35.0 million with $8.4 million available. Average Revolver balances amounted to $24.4 million and $21.4 million during the fiscal years ended September 30, 2020 and September 30, 2019, respectively.

Interest Rates

Under the Credit Facility, variable rate debt accrues interest at LIBOR plus the applicable marginal interest rate that fluctuates based on the Company’s Fixed Charge Coverage Ratio, as defined below. At September 30, 2020, the applicable marginal interest rate was 1.75% for the Revolver. At September 30, 2019, the applicable marginal interest rate was 2.25% for the Revolver and 2.50% for Term Loan B and Equipment Line Advances. Changes to applicable margins and unused fees resulting from the Fixed Charge Coverage Ratio, as defined below, generally become effective mid-way through the subsequent quarter.

The Company incurs quarterly unused commitment fees ranging from 0.250% to 0.375% of the excess of $45.0 million over average borrowings under the Revolver. Fees incurred amounted to $32 thousand and $20 thousand during the fiscal years ended September 30, 2020 and September 30, 2019, respectively. The fee percentage varies based on the Company’s Fixed Charge Coverage Ratio, as defined below.

Financial Covenants

The Credit Facility contains various affirmative and negative covenants including financial covenants. As of September 30, 2020, the Company had to maintain a minimum fixed charge coverage ratio (“Fixed Charge Coverage Ratio”). The Fixed Charge Coverage Ratio compares (i) EBITDAS minus unfinanced capital expenditures minus income tax expense, to (ii) the sum of interest expense, principal payments, payments on all capital lease obligations and dividends, if any (fixed charges). “EBITDAS” is defined as earnings before interest, income taxes, depreciation, amortization and non-cash stock compensation expense. The Fixed Charge Coverage Ratio was measured for a trailing twelve months ended September 30, 2020 as a minimum of 1.10 times. The Fixed Charge Coverage Ratio was the only covenant in effect at September 30, 2020. The Credit Facility also provides for customary events of default, subject in certain cases to customary cure periods, in which the outstanding balance and any unpaid interest would become due and payable.

The Company was in compliance with the financial debt covenant at September 30, 2020.

Contractual Principal Payments

A summary of contractual principal payments under IEC’s borrowings at September 30, 2020 for the next three years taking into consideration the Credit Facility is as follows:


Debt Repayment Schedule	Contractual Principal Payments
(in thousands)
Twelve months ending September 30,
2021	$	—
2022	—
2023	21,742


	$	21,742