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ThirdParty LongTerm Debt

3 Months Ended

Mar. 31, 2023

(10) Third-Party Long-Term Debt

Loan Agreements

Loan Description	Parties	Principal (in millions)	Origination / Maturity	Monthly Principal and Interest Payment	Interest Rate	Loan Purpose
Veritex Loans
LE Term Loan Due 2034 (in default)⁽¹⁾	LE Veritex	$25.0	Jun 2015 / Jun 2034	$0.2 million	WSJ Prime + 2.75%	Refinance loan; capital improvements
LRM Term Loan Due 2034 (in default)⁽¹⁾	LRM Veritex	$10.0	Dec 2015 / Dec 2034	$0.1 million	WSJ Prime + 2.75%	Refinance bridge loan; capital improvements
Kissick Debt (in default)⁽^2)(3)(4)	LE Kissick	$11.7	Jun 2006 / Jan 2018	$0.5 million	6.25%	Working capital
GNCU Loan
NPS Term Loan Due 2031(in default)⁽⁵⁾	NPS GNCU	$10.0	Oct 2021 / Oct 2031	$0.1 million	5.75%	Working capital
SBA EIDLs
Blue Dolphin Term Loan Due 2051 (as modified)⁽⁶⁾	Blue Dolphin SBA	$2.0	May 2021 / Jun 2051	$0.01 million	3.75%	Working capital
LE Term Loan Due 2050⁽⁷⁾	LE SBA	$0.15	Aug 2020 / Aug 2050	$0.0007 million	3.75%	Working capital
NPS Term Loan Due 2050⁽⁷⁾	NPS SBA	$0.15	Aug 2020 / Aug 2050	$0.0007 million	3.75%	Working capital
Equipment Loan Due 2025⁽⁸⁾	LE Texas First	$0.07	Oct 2020 / Oct 2025	$0.0013 million	4.50%	Equipment Lease Conversion

⁽¹⁾	At both March 31, 2023 and December 31, 2022, restricted cash, noncurrent, representing amounts held by Veritex in a payment reserve account, was $1.0 million.
⁽²⁾	Original principal amount was $8.0 million; pursuant to a 2017 sixth amendment, principal under the Kissick Debt increased by $3.7 million.
⁽³⁾	Pursuant to the Kissick Forbearance Agreement, LE began making monthly payments of $0.5 million to Kissick Noteholder in April 2023; as modified, interest on outstanding principal and accrued and unpaid interest decreased from 16.00% to 6.25% per year. See “Note (16)” for additional information.
⁽⁴⁾	Subject to the Kissick Subordination Agreement.
⁽⁵⁾	Loan requires monthly interest-only payments for the first thirty-six (36) months. Afterwards, principal and interest payments due monthly through loan maturity. First payment due in November 2024.
⁽⁶⁾	Original principal amount was $0.5 million; the Blue Dolphin Term Loan Due 2051 was modified to increase the principal amount by $1.5 million. Payments deferred for thirty (30) months; first payment due November 2023; interest accrues during deferral period; loan not forgivable.
⁽⁷⁾	Payments deferred for thirty (30) months; first payment due February 2023; interest accrued during deferral period; loan not forgivable.
⁽⁸⁾	In May 2019, LE entered into 12-month equipment rental agreement with option to purchase a backhoe at maturity; equipment rental agreement matured in May 2020; in October 2020, LE entered into the Equipment Loan Due 2025 to finance the backhoe purchase; backhoe used at the Nixon facility.

Outstanding Principal, Debt Issue Costs, and Accrued Interest

Third-party long-term debt, including outstanding principal and accrued interest, as of the dates indicated was as follows:

	March 31,			December 31,
	2023			2022
	(in thousands)
Veritex Loans
LE Term Loan Due 2034 (in default)	$	20,359		$	20,801
LRM Term Loan Due 2034 (in default)		8,557			8,671
Kissick Debt (in default)		11,206			11,006
GNCU Loan
NPS Term Loan Due 2031 (in default)		9,976			9,975
SBA EIDLs
BDEC Term Loan Due 2051		2,095			2,082
LE Term Loan Due 2050		162			162
NPS Term Loan Due 2050		162			162
Equipment Loan Due 2025		34			38
		52,551			52,897

Less: Current portion of long-term debt, net		(36,674	)		(42,155	)
Less: Unamortized debt issue costs		(2,098	)		(2,149	)
Less: Accrued interest payable		(6,483	)		(6,271	)
	$	7,296		$	2,322

Unamortized debt issue costs associated with the Veritex and GNCU loans as of the dates indicated consisted of the following:

	March 31,			December 31,
	2023			2022
	(in thousands)
Veritex Loans
LE Term Loan Due 2034 (in default)	$	1,674		$	1,674
LRM Term Loan Due 2034 (in default)		768			768
GNCU Loan
NPS Term Loan Due 2031 (in default)		730			730

Less: Accumulated amortization		(1,074	)		(1,023	)
	$	2,098		$	2,149

Amortization expense was $0.05 million for both three-month periods ended March 31, 2023 and 2022.

Accrued interest related to third-party long-term debt, reflected as accrued interest payable in our consolidated balance sheets, as of the dates indicated consisted of the following:

	March 31,			December 31,
	2023			2022
	(in thousands)
Kissick Debt (in default)	$	6,228		$	6,028
Veritex Loans
LE Term Loan Due 2034 (in default)		54			53
LRM Term Loan Due 2034 (in default)		64			66
GNCU Loan
NPS Term Loan Due 2031 (in default)		18			17
SBA EIDLs
BDEC Term Loan Due 2051		95			82
LE Term Loan Due 2050		12			12
NPS Term Loan Due 2053		12			12
Equipment Loan Due 2025		-			1
		6,483			6,271
Less: Accrued interest payable (in default)		(5,710	)		(6,271	)
Long-term Interest Payable, Net of Current Portion	$	773		$	-

The debt associated with the LE Term Loan Due 2034, LRM Term Loan Due 2034, and NPS Term Loan Due 2031 was classified within the current portion of long-term debt on our consolidated balance sheets at March 31, 2023 and December 31, 2022. Although the debt associated with the Kissick Debt was classified within the current portion of long-term debt on our consolidated balance sheet at December 31, 2022, the Kissick Debt was reclassified to long-term debt, net of current portion at March 31, 2023 as a result of the Kissick Forbearance Agreement.

Forbearance and Defaults

Veritex Forbearance Agreement. Pursuant to the Veritex Forbearance Agreement, Veritex agreed to forbear from exercising any of its rights and remedies related to existing defaults pertaining to covenant violations under the LE Term Loan Due 2034 and LRM Term Loan Due 2034 for a period beginning on November 18, 2022 through September 30, 2023. During the forbearance period, Veritex agreed to forbear from testing borrowers’ compliance with financial covenants as specified in the LE Term Loan Due 2034 and LRM Term Loan Due 2034 and forbear from exercising its rights or remedies with respect to non-compliance with past financial covenants. As part of the Veritex Forbearance Agreement, LE and LRM paid Veritex: (i) $4.3 million in past due principal and interest at the non-default rate (excluding late fees), (ii) $1.0 million into a payment reserve account, and (iii) $0.04 million in Veritex attorney fees. In the event that LE and LRM pay off all amounts due under the LE Term Loan Due 2034 and LRM Term Loan Due 2034 on or before September 30, 2023, Veritex also agreed to waive late fees totaling approximately $0.4 million in the aggregate. The Veritex Forbearance Agreement shall terminate on the first to occur of September 30, 2023, borrowers failing to make a payment when due, breach, or any new event of default. As of March 31, 2023, LE and LRM were in compliance with the Veritex Forbearance Agreement. However, as of the filing date of this report LE was not in compliance with the Veritex Forbearance Agreement for failing to obtain consent under the Kissick Subordination Agreement. Although LE was seeking Veritex’s consent, the Veritex Forbearance Agreement was in default as of the filing date of this report.

Kissick Forbearance Agreement. Pursuant to the Kissick Forbearance Agreement, Kissick Noteholder agreed to forbear from exercising any of its rights and remedies related to existing defaults pertaining to payment violations under the Kissick Debt. Under the terms of the Kissick Forbearance Agreement, LE agreed to make monthly payments of $0.5 million beginning in April 2023, continuing on the first of each month through February 2025. On March 1, 2025, LE shall make a final payment of $0.4 million to Kissick Noteholder. As part of the Kissick Forbearance Agreement, LE paid Kissick Noteholder $0.5 million in each of April and May 2023. As of the filing date of this report, the Kissick Debt was in forbearance related to past defaults. As noted above, LE was seeking Veritex’s consent under the Kissick Subordination Agreement. See “Note (16)” for additional disclosures related to the Kissick Forbearance Agreement.

Other Defaults. As of March 31, 2023 and the filing date of this report, we were also in default under the NPS Term Loan Due 2031 due to covenant violations. Defaults permit lenders to declare the amounts owed under the related loan agreements immediately due and payable, exercise their rights with respect to collateral securing obligors’ obligations, and/or exercise any other rights and remedies available. Any exercise by third parties of their rights and remedies under secured loan agreements that are in default could have a material adverse effect on our business operations, including crude oil and condensate procurement and our customer relationships; financial condition; and results of operations. In such a case, the trading price of our Common Stock and the value of an investment in our Common Stock could significantly decrease, which could lead to holders of our Common Stock losing their investment in our Common Stock in its entirety.

We can provide no assurance that: (i) our assets or cash flow will be sufficient to fully repay borrowings under secured loan agreements that are in default, either upon maturity or if accelerated, (ii) LE, LRM, NPS, or BDPL will be able to refinance or restructure the debt, and/or (iii) third parties will provide future default waivers, particularly if the banks with whom we have relationships fail. If one or more banks fail, we could be exposed to additional events of default (if not cured or waived) under existing secured loan agreements. Defaults under our secured loan agreements and any exercise by third parties of their rights and remedies related to such defaults may have a material adverse effect on our business, the trading price of our Common Stock, and on the value of an investment in our Common Stock, and holders of our Common Stock could lose their investment in our Common Stock in its entirety. See “Notes (1) and (3)” to our consolidated financial statements for additional information regarding defaults under our secured loan agreements and their potential effects on our business, financial condition, and results of operations.

Guarantees and Security

Loan Description	Guarantees	Security
Veritex Loans
LE Term Loan Due 2034 (in default)	· USDA · Jonathan Carroll⁽¹⁾ · Affiliate cross-guarantees	· First priority lien on Nixon facility’s business assets (excluding accounts receivable and inventory) · Assignment of all Nixon facility contracts, permits, and licenses · Absolute assignment of Nixon facility rents and leases, including tank rental income · $5.0 million life insurance policy on Jonathan Carroll
LRM Term Loan Due 2034 (in default)	· USDA · Jonathan Carroll⁽¹⁾ · Affiliate cross-guarantees	· Second priority lien on rights of LE in crude distillation tower and other collateral of LE · First priority lien on real property interests of LRM · First priority lien on all LRM fixtures, furniture, machinery, and equipment · First priority lien on all LRM contractual rights, general intangibles, and instruments, except with respect to LRM rights in its leases of certain specified tanks for which Veritex has second priority lien · Substantially all assets
Kissick Debt (in default)⁽²⁾	---	· Subordinated deed of trust that encumbers the crude distillation tower and general assets of LE
GNCU Loan
NPS Term Loan Due 2031 (in default)	· USDA · Jonathan Carroll⁽¹⁾ · Affiliate cross-guarantees	· Deed of trust lien on approximately 56 acres of land and improvements owned by LE · Leasehold deed of trust lien on certain property leased by NPS from LE · Assignment of leases and rents and certain personal property
SBA EIDLs
Blue Dolphin Term Loan Due 2051	---	· Business assets (e.g., machinery and equipment, furniture, fixtures, etc.)
LE Term Loan Due 2050	---	· Business assets (e.g., machinery and equipment, furniture, fixtures, etc.)
NPS Term Loan Due 2050	---	· Business assets (e.g., machinery and equipment, furniture, fixtures, etc.)
Equipment Loan Due 2025	---	· First priority security interest in the equipment (backhoe).

⁽¹⁾	Jonathan Carroll was required to personally guarantee repayment of borrowed funds and accrued interest.
⁽²⁾	Subject to the Kissick Subordination Agreement.