Item 1.01. Entry into a Material Definitive Agreement.
On December 23, 2019, TechPrecision Corporation (the "Company"), through its
wholly owned subsidiary Ranor, Inc. ("Ranor"), entered into a Third Modification
to Loan Agreement (the "Modification") and an Amended and Restated Promissory
Note (the "Amended and Restated Note") with Berkshire Bank, successor by merger
to Commerce Bank & Trust Company ("Berkshire"). The Modification amends and
modifies the Loan Agreement between Ranor and Berkshire dated December 20, 2016,
as amended by the previously disclosed First Modification to Loan Agreement
dated June 6, 2018 and the previously disclosed Second Modification to Loan
Agreement and First Modification and Allonge to Promissory Note (the "Second
Modification") dated December 19, 2018 (the "Loan Agreement"), and the Amended
and Restated Note amends and restates in its entirety that certain Promissory
Note dated December 20, 2016 made by Ranor in favor of Berkshire in the stated
principal amount of $1,000,000, as amended by the Second Modification (the "Line
of Credit Note"). Under the terms of the Loan Agreement and the Line of Credit
Note, Ranor borrowed $2.85 million under the term facility (the "Term Loan") and
was entitled to borrow up to $1,000,000 on a revolving basis (the "Revolver
Loan"). As of the date of the Modification, there was approximately $2,588,183
in remaining principal outstanding under the Term Loan and were no amounts
outstanding under the Revolver Loan.
Under the Modification, Ranor and Berkshire agreed to increase the maximum
principal amount available under the Revolver Loan from $1,000,000 to
$3,000,000, which is available for refinancing existing indebtedness and for
working capital and general corporate purposes. Additionally, the parties agreed
to lower the interest rate on advances made under the Revolver Loan based on
LIBOR. Prior to the Modification, interest accrued on advances made under the
Revolver Loan at a variable rate equal to the one-month LIBOR plus 275 basis
points. Under the Modification, interest accrues on such advances at a variable
rate equal to the one-month LIBOR plus 225 basis points. The Modification
contains customary LIBOR replacement provisions. In the event LIBOR becomes
unavailable or a rate other than LIBOR has become a widely recognized
replacement benchmark rate during the term of the Revolver Loan, Berkshire will
select an alternate rate of interest to replace LIBOR giving consideration to
prevailing market conventions. Until such replacement rate is determined,
borrowings under the Revolver Loan will bear interest at the "Base Rate," which
is the higher of (i) the Federal Funds Rate plus fifty basis points and (ii)
Berkshire's "Prime Rate." Under the Amended and Restated Note, the Company can
elect to have the interest rate converted to the "Adjusted LIBOR Rate" (as
defined in the Modification) or the "Adjusted Prime Rate," which the Prime Rate
minus seventy basis points. Interest-only payments on advances made under the
Revolver Loan will continue to be payable monthly in arrears.
Prior to the Modification, advances under the Revolver Loan were subject to a
borrowing base equal to the lesser of (A) $1,000,000 and (B) the sum of (i) 80%
of eligible accounts receivable, and (ii) the lesser of (a) 25% of eligible raw
material inventory and (b) $250,000. Under the Modification, advances under the
Revolver Loan are subject to a borrowing base equal to the lesser of (A)
$3,000,000 and (B) the sum of (i) 80% of eligible accounts receivable, (ii) the
lesser of (a) 25% of eligible raw material inventory and (b) $250,000 and (iii)
50% of the appraised value of the Company's eligible equipment.
The Modification also excludes the balance of the Revolver Loan from the
Loan-to-Value Ratio covenant calculations and excludes the Company's anticipated
repayment of its obligations to People's Capital and Leasing Corp ("People's")
from the calculation of the financial covenants. If the Company repays People's
in full in January 2020, the debt service requirements related to the People's
obligations will be eliminated for purposes of the Debt Service Coverage Ratio
covenant calculations and the debt service related to the People's financing
will be eliminated from covenant testing starting with the December 31, 2019
The maturity date of the Revolver Loan remains December 20, 2020, and all other
material terms of the Loan Agreement and Line of Credit Note were unchanged.
Other than in respect of the Loan Agreement, the promissory notes made
thereunder and the related security documents, there is no material relationship
between Ranor or the Company, on the one hand, and Berkshire on the other hand.
The description of the Modification is qualified in its entirety by reference to
the full text of the Modification, a copy of which is attached hereto as Exhibit
10.1 and is incorporated by reference herein.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.01 hereof is incorporated by reference into
this Item 2.03.
Item 9.01. Financial Statements and Exhibits.
10.1* Third Modification to Loan Agreement, dated December 23, 2019,
between Ranor, Inc. and Berkshire Bank
* Pursuant to Item 601(a)(5) of Regulation S-K, certain schedules have been
omitted. A copy of any omitted schedule will be furnished supplementally to the
Securities and Exchange Commission upon request.
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