DEBT

12 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

DEBT

DEBT

Debt is comprised of the following (in thousands): 

	6/30/2023		6/30/2022
Short-term and current maturities
Loan and Security Agreement (Term Loan)	$	1,495	$	1,495
Brazil Loans	3,466		5,052
	4,961		6,547
Long-term debt (net of current portion)
Loan and Security Agreement (Term Loan)	1,957		10,252
Loan and Security Agreement (Line of Credit)	2,897		11,397
Brazil Loans	827		3,771
Debt Reacquisition Cost	(408)		(515)
	5,273		24,905
Total Debt	$	10,234	$	31,452

Future maturities of debt are as follows (in thousands):

Fiscal Year
2024	$	4,961
2025	2,248
2026	538
2027	2,897
Thereafter	—
Total	$	10,642

On April 29, 2022, the Company and certain of the Company’s domestic subsidiaries entered into a new Loan and Security agreement with HSBC Bank USA. The Company incurred $0.5 million as a result of debt re-acquisition cost and as of June 30, 2023 that balance is $0.4 million.

Prior to the new agreement with HSBC, the Company’s Amended and Restated Loan and Security Agreement of June 25, 2020, the “First Amendment” to this loan agreement was executed on September 17, 2020, which include, among other things, (i) pause testing of the Fixed Charge Coverage Ratio until September 30, 2021 and (ii) establishment of a new minimum cumulative EBITDA and minimum liquidity covenants in lieu thereof.

These credit facilities are comprised of a $30 million revolving line of credit with a $10 million uncommitted accordion provision, a $12.1 million term loan and a $7 million Capital Expenditure draw down credit facility. The Facilities are secured by a valid first-priority security interest on substantially all existing and future assets of the Company and its domestic subsidiaries.

The interest rate on the new facilities is based on a grid which uses the percentage of the remaining availability of the revolving credit line to determine the floating margin to be added to the one month or three-month Secured Overnight Financing Rate, herein "SOFR". The initial rate for the first three months of the agreement is the one-month SOFR plus 1.60%. The new credit facilities mature on April 29, 2027.

Availability under the revolving line of credit is secured by and subject to a borrowing base comprised of eligible inventory and accounts receivable. The percentage of receivables included in the borrowing base is 90% for domestic investment grade and foreign insured accounts, 85% for domestic accounts that are neither investment grade nor insured, and 75% of foreign uninsured accounts. The percentage of inventory included in the borrowing base is the lower of 65% of the value of eligible inventory at cost or 85% of the net orderly liquidation value of eligible inventory at cost. The initial borrowing base is estimated at about $19 million. Receivables and inventory are reported monthly to HSBC and subject to an annual field exam and inventory appraisal by an independent auditor commissioned by the Bank. The Company believes that the agreement provides an initial borrowing base sufficient for current domestic working capital needs and flexibility to accommodate potential growth-related working capital needs.

Availability under the Term Loan facility was comprised of 70% of the fair market value of the Borrowers’ eligible real estate, which included facilities located in Westlake, Ohio, and Waite Park, Minnesota and totaled $4.6 million; and 85% of the net orderly liquidation value of the Borrowers’ machinery and equipment, capped at $7.5 million. The real estate portion of the Term facility is subject to a 12.5 year straight line amortization paid quarterly, and the machinery and equipment portion of the facility is subject to a 6.67 year straight line amortization, also paid quarterly. The term loan is subject to equal quarterly installments of $373,650, payable on the last day of each fiscal quarter.

The capital expenditure loan facility is available for the purchase of new machinery and equipment at 80% of the net invoice value of new machinery and equipment purchases, with a draw period of eighteen months past the closing date, with any amount outstanding under the facility subject to a 3.75% amortization rate per quarter.

The new credit facilities contain financial covenants with respect to a minimum fixed charge coverage ratio of 1.00, measured on a trailing twelve-month basis, for both the U.S. borrowing companies tested quarterly and the Consolidated L.S. Starrett Company tested semi-annually. The Loan and Security agreement also contains the customary affirmative and negative covenants, including limitations on indebtedness, liens, acquisitions, asset dispositions, fundamental corporate changes, excess pension contributions, and certain customary events of default. Upon the occurrence or continuation of an event of default, the Lender may terminate all commitments and facilities, and require the immediate payment of the entire unpaid principal balances, accrued interest, and all other obligations.

The Company’s Brazilian subsidiary loans are backed by the entity’s U.S. dollar denominated export receivables were made with Brazilian Banks. As of June 30, 2023 the following table represents Brazil's outstanding debt (in thousands):

Lending Institution	Interest Rate		Beginning Date	Ending Date	Outstanding Balance
Itau	4.52	%	October 2021	September 2024	2,857
Itau	4.98	%	February 2022	February 2024	914
Brazil	4.18	%	September 2022	September 2023	53
Brazil	3.80	%	September 2022	August 2024	96
Brazil	4.95	%	August 2022	July 2025	373
					$	4,293