LONG-TERM DEBT

A summary of Barnwell’s long-term debt is as follows:



	September 30,
	2015			2014
Canadian revolving credit facility	$	—		$	7,000,000
Real estate loan	3,440,000			4,099,000
	3,440,000			11,099,000
Less current portion	(3,440,000		)	(4,449,000		)
Total long-term debt	$	—		$	6,650,000

Canadian revolving credit facility

On April 10, 2015, Barnwell’s revolving credit facility at Royal Bank of Canada was amended and renewed. The amendment, among other things, provided for a decrease in the aggregate principal amount of the credit facility to $6,500,000 Canadian dollars from $11,800,000 Canadian dollars. This reduction in the borrowing capacity was largely due to a tightening credit market for oil and natural gas companies due to the uncertainty of future oil and natural gas prices and significant declines in Royal Bank of Canada’s forecast of oil and natural gas prices. On September 30, 2015, the credit facility was further reduced by the bank to $1,000,000 Canadian dollars, or U.S. $747,000 at the September 30, 2015 exchange rate, as a result of the sale of the Company's principal oil and natural gas property, Dunvegan, in September 2015. Barnwell repaid the credit facility in full from the proceeds of the disposition. The other material terms of the credit facility remain unchanged.

Borrowings under this facility were $0 at September 30, 2015 and unused credit available was $713,000 after consideration of issued letters of credit totaling $34,000.

Barnwell repaid $7,000,000 of the Canadian revolving credit facility during the year ended September 30, 2015 and realized foreign currency transaction losses of $752,000 as a result of the repayment of U.S. dollar denominated debt using Canadian dollars, which is included in "General and administrative" expenses on the Consolidated Statements of Operations. During the year ended September 30, 2014, Barnwell repaid $5,000,000 of the credit facility and realized foreign currency transaction gains of $271,000 as a result of the repayment of U.S. dollar denominated debt using Canadian dollars, which is included in "Gas processing and other" revenues on the Consolidated Statements of Operations.

The Canadian revolving facility is available in U.S. dollars at LIBOR plus 2.50%, at Royal Bank of Canada’s U.S. base rate plus 1.50%, or in Canadian dollars at Royal Bank of Canada’s prime rate plus 1.50%. A standby fee of 0.625% per annum is charged on the unused facility balance. Under the financing agreement with Royal Bank of Canada, the credit facility is reviewed annually, with the next review planned for April 2016. Subject to that review, the credit facility may be renewed for one year with no required debt repayments or converted to a two-year term loan by the bank. If the credit facility is converted to a two year term loan, Barnwell has agreed to the following repayment schedule of the then outstanding loan balance: first year of the term period – 20% (5% per quarter), and in the second year of the term period – 80% (5% per quarter for the first three quarters and 65% in the final quarter).

The obligations under the Canadian revolving credit facility are secured by substantially all of the assets of Barnwell of Canada, Limited. The credit facility subjects Barnwell to certain customary affirmative covenants, including the delivery of financial statements and annual appraisals of certain oil and natural gas properties. In addition, the credit facility contains customary negative covenants, including, but not limited to, restrictions on the ability of Barnwell to, among other things, merge with or acquire other entities, incur new liens, incur additional indebtedness, or sell certain oil and natural gas properties or petroleum and natural gas reserves (other than the sale of production from such oil and natural gas properties in the ordinary course of business). The credit facility also contains provisions concerning customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, and certain events of bankruptcy and insolvency. If an event of default occurs and is continuing, any amounts due under the credit facility may be accelerated, and the rights and remedies of Royal Bank of Canada under the credit facility may be exercised, including rights with respect to the collateral securing Barnwell’s obligations thereunder.

Barnwell has the option to change the currency denomination and interest rate applicable to the loan at periodic intervals during the term of the loan. The facility is guaranteed by Barnwell and is collateralized by a general security agreement on all of the assets of Barnwell’s oil and natural gas segment. No compensating bank balances are required for this credit facility.

Real estate loan

Barnwell, together with its real estate joint venture, Kaupulehu 2007, has a non-revolving real estate loan with a Hawaii bank. In January 2015, the loan was amended from monthly principal and interest payments to monthly interest-only payments effective February 1, 2015. All other terms of the loan remained unchanged. The principal balance and any accrued interest will be due and payable on April 1, 2018. The interest rate adjusts each April for the remaining term of the loan to the lender’s then prevailing interest rate for similarly priced commercial mortgage loans or a floating rate equal to the lender’s base rate. The interest rate at September 30, 2015 was 3.59%.

The loan is collateralized by, among other things, a first mortgage on Kaupulehu 2007’s lots together with all improvements thereon. Kaupulehu 2007 will be required to make a principal payment upon the sale of the house or the residential parcel in the amount of the net sales proceeds of the house or residential parcel; the loan agreement defines net sales proceeds as the gross sales proceeds for the house or residential parcel, less reasonable commissions and normal closing costs. In October 2014, Kaupulehu 2007 sold one of its residential parcels for net proceeds of $1,145,000 and, with approval from the bank, $473,000 was used to pay down the principal balance of the loan, $200,000 was deposited into a cost reserve account and is included in "Restricted cash" on the accompanying Consolidated Balance Sheets at September 30, 2015, and the remaining proceeds were released to Barnwell.

The loan agreement contains provisions requiring us to maintain compliance with certain covenants including a consolidated debt service coverage ratio and a consolidated total liabilities to tangible net worth ratio. However, in June 2015, the bank suspended these financial covenants in exchange for an interest reserve account which had a balance of $242,000 at September 30, 2015 and is included in "Restricted cash" on the accompanying Consolidated Balance Sheets. These financial covenants will remain suspended as long as there are sufficient funds in the interest reserve account.

The home and residential lot collateralizing the loan are currently available for sale; therefore, the entire balance outstanding at September 30, 2015 under the term loan has been classified as a current liability.

Combined Maturities

Based on the assumption that Kaupulehu 2007’s home is sold during fiscal 2016, the Company's real estate loan is assumed to become due and payable in full in fiscal 2016.