Debt

6 Months Ended

Jun. 30, 2011

Debt Disclosure [Abstract]

Debt

Note 2.   Debt

Long-term Debt – Financial Institutions

Following is a summary of our long-term debt to financial institutions:

	(Unaudited) June 30, 2011		December 31, 2010
(In thousands)
Fixed Rate term note payable to a U.S. bank, with an interest rate of 6.65% at June 30, 2011, due January 1, 2016, secured by real estate, leasehold improvements, property, plant and equipment, inventory and accounts receivable of our US operation.
	$	1,856	$	2,000
Term note payable to a U.S. equipment financing company, with an interest rate of 5.24% at June 30, 2011, due April 1, 2013, secured by a Caterpillar front-end loader.
		48		60
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 7.8% at June 30, 2011, due July 1, 2029, secured by TPT's land and office building purchased July 2004. (€352)
		512		485
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.6% at June 30, 2011, due January 31, 2030, secured by TPT's land and building purchased January 2005. (€351)
		510		482
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.05% at June 30, 2011, due July 31, 2015, secured by TPT's assets. (€208)
		302		312
U.S. Dollar term note payable to a Malaysian bank which matured May 30, 2011.
		-		41
Total		3,228		3,380
Less current maturities		506		533
Total long-term debt and notes payable - financial institutions	$	2,722	$	2,847

On July 5, 2011, TOR Processing and Trade, B.V. (“TPT”), entered into a three year term loan in the amount of €700,000 ($1,016,000) with a fixed interest rate of 4.25%.  The loan proceeds will be used to fund the plant expansion and is secured by TPT’s assets.  Monthly principal and interest payments will begin on August 5, 2011 and continue through July 5, 2014.  As this transaction was a subsequent event, it is excluded from the above table.

Six-percent Convertible Subordinated Debentures

As reported in the Company’s Forms 8-K filed with the SEC on May 6, 2009 and August 10, 2009, the Company’s Board of Directors authorized the issuance of its six-percent (6%) convertible subordinated debentures with detachable warrants (the “Debentures”) for the purpose of refinancing, in whole or in part, its debt to the Bank and for general corporate purposes.  Under the current authorization, the Company received, $1,500,000 from the sale of Debentures, due May 4, 2016, from nine accredited investors, four of which are directors of the Company and another of which is a greater than 5% shareholder.  At June 30, 2011, a balance of $1,450,000 remained outstanding on the Debentures.

Short-term Debt

US Operations

On December 31, 2010, the Company entered into a new U.S. credit agreement (the “Agreement”) with American Bank, N.A. (the “Lender”) which established a $1 million line of credit (the “Line”) which matures July 1, 2012.  The amount which the Company is entitled to borrow from time to time under the line of credit is subject to a borrowing base based on the loan value of the collateral pledged to the Lender to secure the indebtedness owing to the Lender by the Company.  Amounts advanced under the line of credit bear interest at a variable rate equal to one percent per annum point above the Wall Street Journal Prime Rate as such prime rate changes from time to time, with a minimum floor rate of 5.50%.  At June 30, 2011, the Company had no outstanding funds borrowed on the Line.

Under the terms of the Agreement, the Company must maintain a ratio of cash flow to debt service of at least 1.25 to 1.0 measured on a rolling four quarter basis.  At June 30, 2011, the ratio of cash flow to debt service was 2.97 to 1.0.

Netherlands Operations

On March 20, 2007, our subsidiary, TPT, entered into a short-term credit facility (the “Credit Facility”) with Rabobank which increased TPT’s line of credit from €650,000 to €1,100,000.  The Credit Facility was renewed on January 1, 2010 and has no stated maturity date.  The Credit Facility, which has a variable interest rate of Bank prime plus 2.8% (currently at 4.328%), is secured by TPT’s accounts receivable and inventory.  At June 30, 2011, TPT had utilized €866,000 ($1,257,000) of its short-term credit facility.

TPT’s loan agreements covering both the credit facility and the term loans include subjective acceleration clauses that allow Rabobank to accelerate payment if, in the judgment of the bank, there are adverse changes in our business.  We believe that such subjective acceleration clauses are customary in the Netherlands for such borrowings.  However, if demand is made by Rabobank, we may be unable to refinance the demanded indebtedness, in which case the lenders could foreclose on the assets of TPT.

Malaysian Operations

On June 27, 2011, the Company’s subsidiary, TOR Minerals Malaysia, Sdn. Bhd. (“TMM”), amended its banking facility with HSBC Bank Malaysia Berhad (“HSBC”) to extend the maturity date from April 30, 2011 to April 30, 2012.  The HSBC facility includes the following in Malaysian Ringgits (“RM”):  (1) overdraft of RM 500,000; (2) an import/export line (“ECR”) of RM 6,460,000; and (3) a foreign exchange contract limit of RM 5,000,000 ($165,000, $2,137,000 and $1,654,000, respectively).

On June 1, 2011, TMM amended its banking facility with RHB Bank Berhad (“RHB”) to extend the maturity date to April 4, 2012.  The RHB facility includes the following:  (1) an overdraft line of credit up to RM 1,000,000; (2) an ECR of RM 9,300,000; (3) a bank guarantee of RM 1,200,000; and (4) a foreign exchange contract limit of RM 25,000,000 ($330,000, $3,077,000, $397,000 and $8,272,000, respectively).

The banking facilities with both HSBC and RHB bear an interest rate on the overdraft facilities at 1.25% over bank prime and the ECR facilities bear interest at 1.0% above the funding rate stipulated by the Export-Import Bank of Malaysia Berhad.  The ECR, a government supported financing arrangement specifically for exporters, is used by TMM for short-term financing of up to 180 days against customers’ and inter-company shipments.  At June 30, 2011, the outstanding balance on the ECR facilities was RM 1,642,000 ($543,000) at a current interest rate of 4.0%.

The borrowings under both the HSBC and the RHB short term credit facilities are subject to certain subjective acceleration covenants based on the judgment of the banks and a demand provision that provide that the banks may demand repayment at any time.  We believe such a demand provision is customary in Malaysia for such facilities.  The loan agreements are secured by TMM’s property, plant and equipment.  However, if demand is made by HSBC or RHB, we may be unable to refinance the demanded indebtedness, in which case, the lenders could foreclose on the assets of TMM.  The credit facilities prohibit TMM from paying dividends and the HSBC facility further prohibits loans to related parties without the prior consent of HSBC.