Annual report pursuant to Section 13 and 15(d)

Short and Long-term Borrowings

v3.19.3.a.u2
Short and Long-term Borrowings
12 Months Ended
Dec. 31, 2019
Debt Disclosure [Abstract]  
Short and Long Term Borrowings

 

(7)

SHORT AND LONG-TERM BORROWINGS

Long-term borrowings at December 31, 2019 and 2018 are as follows (in thousands):

 

 

 

2019

 

 

2018

 

Note payable to banks, due in monthly installments of $348

   (includes principal and interest), variable-rate interest at

   5.24% per annum, secured by property, balloon payment of

   $62,843 due August 2020

 

$

63,692

 

 

$

65,148

 

Note payable to Luen Thai Enterprise, Ltd., balloon payment

   of $393 due January 2021

 

 

393

 

 

 

5,800

 

Note payable to TCF Equipment Finance, Inc., due in monthly

   installments of $30 (includes principal and interest), fixed-

   rate interest at 5.24% per annum, paid in July 2019

 

 

 

 

 

210

 

Loan payable to a bank, variable-rate interest at 4.275% per

   annum, due September 2023

 

 

48,791

 

 

 

18,626

 

Loan payable to a bank, variable-rate interest at 3.915% per

   annum, due October 2020

 

 

2,541

 

 

 

 

Subtotal

 

 

115,417

 

 

 

89,785

 

Less: current installments

 

 

66,234

 

 

 

1,666

 

Total long-term borrowings

 

$

49,183

 

 

$

88,119

 

 

The aggregate maturities of long-term borrowings at December 31, 2019 are as follows (in thousands):

 

2020

 

$

63,692

 

2021

 

 

3,290

 

2022

 

 

36,848

 

2023

 

 

11,587

 

2024

 

 

 

 

 

$

115,417

 

 

On September 29, 2018, through the Taicang subsidiary, the Company entered into a 700 million yuan loan agreement with China Construction Bank Corporation (the “China DC Loan Agreement”). The proceeds from the China DC Loan Agreement is being used to finance the construction of the Company’s distribution center in China. Interest will be paid quarterly.  The interest rate will float and be calculated at a reference rate provided by the People’s Bank of China. The interest rate at December 31, 2019 was 4.275% and may increase or decrease over the life of the loan, and will be evaluated every 12 months.  The principal of the loan will be repaid in semi-annual installments, beginning in 2021, of variable amounts as specified in the China DC Loan Agreement. The China DC Loan Agreement contains customary affirmative and negative covenants for secured credit facilities of this type, including covenants that limit the ability of the Subsidiary to, among other things, allow external investment to be added, pledge assets, issue debt with priority over the China DC Loan Agreement, and adjust the capital stock structure of the TC Subsidiary. The China DC Loan Agreement matures on September 28, 2023.  The obligations of the TC Subsidiary under the China DC Loan Agreement are jointly and severally guaranteed by the Company’s Chinese joint venture. As of December 31, 2019, there was $48.8 million outstanding under this credit facility, which is classified as long-term borrowings in the Company’s consolidated balance sheets.   

On April 30, 2010, HF Logistics-SKX, LLC (the “JV”), through a wholly-owned subsidiary of the JV (“HF-T1”), entered into a construction loan agreement with Bank of America, N.A. as administrative agent and as a lender, and Raymond James Bank, FSB, as a lender (collectively, the “Construction Loan Agreement”), pursuant to which the JV obtained a loan of up to $55.0 million used for construction of the project on certain property (the “Original Loan”). On November 16, 2012, HF-T1 executed a modification to the Construction Loan Agreement (the “Modification”), which added OneWest Bank, FSB as a lender, increased the borrowings under the Original Loan to $80.0 million and extended the maturity date of the Original Loan to October 30, 2015. On August 11, 2015, the JV, through HF-T1, entered into an amended and restated loan agreement with Bank of America, N.A., as administrative agent and as a lender, and CIT Bank, N.A. (formerly known as OneWest Bank, FSB) and Raymond James Bank, N.A., as lenders (collectively, the “Amended Loan Agreement”), which amends and restates in its entirety the Construction Loan Agreement and the Modification.  

As of the date of the Amended Loan Agreement, the outstanding principal balance of the Original Loan was $77.3 million. In connection with this refinancing of the Original Loan, the JV, the Company and HF Logistics (“HF”) agreed that the Company would make an additional capital contribution of $38.7 million to the JV, through HF-T1, to make a payment on the Original Loan based on

the Company’s 50% equity interest in the JV. The payment equaled the Company’s 50% share of the outstanding principal balance of the Original Loan. Under the Amended Loan Agreement, the parties agreed that the lenders would loan $70.0 million to HF-T1 (the “New Loan”). The New Loan is being used by the JV, through HF-T1, to (i) refinance all amounts owed on the Original Loan after taking into account the payment described above, (ii) pay $0.9 million in accrued interest, loan fees and other closing costs associated with the New Loan and (iii) make a distribution of $31.3 million less the amounts described in clause (ii) to HF. Pursuant to the Amended Loan Agreement, the interest rate on the New Loan is the LIBOR Daily Floating Rate (as defined in the Amended Loan Agreement) plus a margin of 2%. The maturity date of the New Loan is August 12, 2020, which HF-T1 has one option to extend by an additional 24 months, or until August 12, 2022, upon payment of a fee and satisfaction of certain customary conditions. On August 11, 2015, HF-T1 and Bank of America, N.A. entered into an ISDA master agreement (together with the schedule related thereto, the “Swap Agreement”) to govern derivative and/or hedging transactions that HF-T1 concurrently entered into with Bank of America, N.A. Pursuant to the Swap Agreement, on August 14, 2015, HF-T1 entered into a confirmation of swap transactions (the “Interest Rate Swap”) with Bank of America, N.A. The Interest Rate Swap has an effective date of August 12, 2015 and a maturity date of August 12, 2022, subject to early termination at the option of HF-T1, commencing on August 1, 2020. The Interest Rate Swap fixes the effective interest rate on the New Loan at 4.08% per annum. Pursuant to the terms of the JV, HF Logistics is responsible for the related interest expense on the New Loan, and any amounts related to the Swap Agreement. The full amount of interest expense paid related to the New Loan has been included in non-controlling interests in the consolidated balance sheets. The Amended Loan Agreement and the Swap Agreement are subject to customary covenants and events of default. Bank of America, N.A. also acts as a lender and syndication agent under the 2015 Credit Agreement dated June 30, 2015. As of December 31, 2019, there was $63.7 million outstanding under the Amended Loan Agreement, which is included in current installments of long-term borrowings.

The Company’s short-term and long-term debt obligations contain both financial and non-financial covenants, including cross-default provisions. The Company is in compliance with its non-financial covenants, including any cross default provisions, and financial covenants of its short-term and long-term borrowings as of December 31, 2019.