LONG-TERM DEBT

12 Months Ended

Sep. 30, 2012

LONG-TERM DEBT

LONG-TERM DEBT

9.LONG-TERM DEBT

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

	September 30,
	2012			2011
Canadian revolving credit facility	$	12,000,000		$	12,000,000
Real estate loan	5,164,000			11,714,000
	17,164,000			23,714,000
Less current portion	(5,764,000		)	(12,314,000		)
Total long-term debt	$	11,400,000		$	11,400,000

Canadian revolving credit facility

Barnwell has a credit facility at Royal Bank of Canada, a Canadian bank, for $20,000,000 Canadian dollars, or US$20,332,000 at the September 30, 2012 exchange rate.  Unused credit available under this facility was US$8,332,000 and the interest rate on the facility was 2.73% at September 30, 2012.

The facility is available in U.S. dollars at LIBOR plus 2.50%, at the Royal Bank U.S. base rate plus 1.50%, or in Canadian dollars at the Royal Bank prime rate plus 1.50%.  A standby fee of 0.6250% per annum is charged on the unused facility balance.  Under the financing agreement with Royal Bank of Canada, the facility is reviewed annually, with the next review planned for April 2013.  Subject to that review, the 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 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).  Based on the terms of this agreement, if Royal Bank of Canada were to convert the facility to a two-year term loan upon its next review in April 2013, Barnwell would be obligated to make quarterly principal repayments beginning in July 2013.  As such, one quarterly repayment of 5% would be due within one year of September 30, 2012 and accordingly, we have included $600,000 in the current portion of long-term debt.

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 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.  As a result of the sale of one of its homes in June 2012, Kaupulehu 2007 repaid $5,277,000 of the real estate loan in addition to the scheduled monthly payments.  In September 2012, the loan was modified to reduce the monthly payments of principal and interest to $58,000.  The monthly payment will change as a result of an annual change in the interest rate, the sale of a house or the sale of a residential parcel.  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, 2012 was 3.57%.  Any unpaid principal balance and accrued interest will be due and payable on April 1, 2018.

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 a house or a 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.

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.  As of September 30, 2012, we were in compliance with the loan covenants.

The home collateralizing the loan is currently available for sale; therefore, the entire balance outstanding at September 30, 2012 under the term loan has been classified as a current liability.

Combined Maturities

Combined maturities of borrowings are as follows based on the assumption that Kaupulehu 2007’s home is sold during fiscal 2013 and that Royal Bank of Canada does not renew our facility upon the next review in April 2013 and the facility is therefore converted to a term loan:

Fiscal year ending
2013	$	5,764,000
2014	2,400,000
2015	9,000,000
2016	-
2017	-
Thereafter	-
Total	$	17,164,000