Long-Term Debt

6 Months Ended

Jun. 30, 2012

Long-Term Debt

Long-Term Debt

5.     Long-Term Debt

Long-term debt at June 30, 2012 and December 31, 2011 consisted of the following:

	June 30, 2012		December 31, 2011
	(in thousands)
Wells Fargo revolving loans, 4.05% and 4.12%	$	22,800	$	21,100
American AgCredit term loan, 5.25%	24,068		24,421
Total	46,868		45,521
Less current portion	46,868		—
Long-term debt	$	—	$	45,521

WELLS FARGO

The Company has a $34.5 million revolving line of credit with Wells Fargo that matures on May 1, 2013. Interest rates on borrowings are at LIBOR plus 3.8% and the line of credit is collateralized by approximately 880 acres of the Company’s real estate holdings at the Kapalua Resort. The line of credit agreement contains various representations, warranties, affirmative, negative and financial covenants and events of default customary for financings of this type. Financial covenants include a required minimum liquidity of $4 million (as defined, which includes the available line of credit) and maximum total liabilities of $175 million. The credit agreement includes predetermined release prices for the real property securing the credit facility and an option to extend the maturity date to May 1, 2014, upon satisfaction of certain conditions. The option to extend the maturity date may be exercised by the Company, provided that (i) the Company is not in default under the credit agreement, (ii) there has been no material adverse change, as determined by the lender, in the financial condition of the Company, (iii) the aggregate amount of the credit line does not exceed 40% of the value of the property securing the credit line, and (iv) the operating income attributable to the properties securing the credit line is at least 6% of the aggregate amount of the credit line.  If the loan-to-value or the operating income thresholds are not met, the credit agreement may still be extended, but the aggregate amount of the credit line will be reduced such that those percentages are satisfied.  The Company may not be able to extend the credit agreement if the conditions are not satisfied.  Even if the Company is able to extend the credit agreement, it may be required to repay a portion of its borrowings if the aggregate amount of the credit line is reduced.  Absent the sale of some of its real estate holdings or refinancing, the Company does not expect to be able to repay any significant amount of borrowings under the credit line.

In July 2011, the Company paid down the line of credit with $4.1 million of proceeds from the sale of real estate and in August 2011, the line of credit agreement was modified to reserve $4.1 million of credit availability for the payment of legacy costs (as defined) and to exclude $4.1 million from the credit line availability in the calculation of the minimum liquidity financial covenant. As of June 30, 2012, $4.1 million of legacy costs were paid and therefore no amounts are excluded from credit availability. There are no commitment fees on the unused portion of the revolving facility. As of June 30, 2012, the Company had $11.2 million available borrowing capacity and irrevocable letters of credit totaling $0.5 million that were secured by the Wells Fargo revolving line of credit.

AMERICAN AGCREDIT

At June 30, 2012, the Company had $24.1 million outstanding under a term loan with American AgCredit that matures on May 1, 2013. The interest rate on this credit facility is based on the greater of 1.00% or the 30-day LIBOR rate, plus an applicable spread of 4.25%. The loan agreement provides for tiered reductions in the applicable spread to 3.75%, subject to corresponding reductions in the principal balance of the loan. The loan requires mandatory principal prepayments of 100% of the net proceeds of the sale of any real property pledged as collateral for the loan. It also requires tiered mandatory principal prepayments based on predetermined percentages ranging from 10% to 75% of the net proceeds from the sale of non-collateralized real property. In accordance with this provision, the Company made $353,000 of principal payments in January 2012 due to the real property sale discussed in Note 4. The credit agreement is collateralized by approximately 3,100 acres of the Company’s real estate holdings in West Maui and Upcountry Maui. The term loan agreement contains various representations, warranties, affirmative, negative and financial covenants and events of default customary for financings of this type.  Financial covenants include a required minimum liquidity (as defined) of $4 million and maximum total liabilities of $175 million. Absent the sale of some of its real estate holdings or refinancing, the Company does not expect to be able to pay the outstanding balance under the term loan on the maturity date.

As of June 30, 2012, the Company believes it is in compliance with the covenants under the Wells Fargo and American AgCredit credit facilities. Management is actively working with its lenders to extend the maturity dates of its credit facilities.