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ITEM 1.01.
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ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
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On June 12 and 13, 2019, RGC Midstream, LLC ("Midstream"), a wholly-owned subsidiary of RGC Resources, Inc. ("Resources") entered into unsecured Promissory Notes ("Notes") and Loan Agreements ("Agreements") with Atlantic Union Bank ("Atlantic Union") and Branch Banking and Trust ("BB&T"), respectively. The Atlantic Union Note, in the aggregate principal amount of $14,000,000, bears an interest rate of one month LIBOR plus 1.15% per annum with interest payable monthly. The principal balance of the Atlantic Union Note is due on June 12, 2026. The BB&T Note, in the principal amount of $10,000,000 has an interest rate of one month LIBOR plus 1.20% per annum with interest payable monthly. The principal balance of the BB&T Note has a monthly repayment schedule that begins in July 2022 at an annual rate of 10% of the original loan amount with the remaining unpaid balance due on June 1, 2024.
The proceeds from these Notes are being used to refinance a portion of Midstream's existing debt under its current Promissory Notes ("Current Notes") and non-revolving Credit Agreement with Atlantic Union Bank and Branch Banking and Trust, originally dated December 29, 2015 as amended. As a result of this refinancing, the corresponding available balances on the Current Notes declined by the $24,000,000 thereby reducing the previously available $50,000,000 down to $26,000,000 and the outstanding balance to nearly $11,300,000.
Also on June 12, 2019, Midstream executed an interest rate swap agreement for $14,000,000 corresponding to the term of the Atlantic Union Note, which effectively converts the variable rate note to a fixed rate instrument with an effective annual interest rate of 3.24%. In addition, Midstream executed a similar interest rate swap on June 13, 2019 in the amount of $10,000,000 to effectively convert the BB&T variable rate note into a fixed rate instrument with a 3.14% annual interest rate.
In addition and in connection with the above Notes and Agreements, Resources executed Unconditional Guaranties in favor of Atlantic Union and BB&T unconditionally guaranteeing timely payment and performance of the obligations of Midstream to each of the financial institutions.
The Agreements referenced above contain the same financial covenants included in other debt agreements including the limitation of Consolidated Long Term Indebtedness to not more than 65% of Consolidated Total Capitalization and Priority Indebtedness to not more than 15% of Consolidated Total Assets.