8. DEBT FACILITIES

Granite Falls Energy

GFE has a credit facility with a lender. This credit facility was originally a revolving term loan facility with an aggregate principal commitment amount of $18,000,000 that reduced by $2,000,000 semi-annually beginning September 1, 2014, until final payment at maturity on March 1, 2018. On September 8, 2017, the revolving term loan was converted to a seasonal revolving loan in the amount of $6,000,000. GFE had no outstanding balance on the revolving term loan at the time of conversion. There was no outstanding balance on the seasonal revolving loan at October 31, 2017. Therefore, the aggregate principal amount available for borrowing by GFE under this seaonal revolving loan at October 31, 2017 was $6,000,000.

The interest rate on the seasonal revolving loan is based on the bank’s One Month London Interbank Offered Rate (“LIBOR”) Index Rate, plus 2.75%, which was 3.99% at October 31, 2017.

The credit facility requires GFE to comply with certain financial covenants at various times calculated monthly, quarterly or annually, including restriction of the payment of dividends and maintenance of certain financial ratios including minimum working capital, minimum net worth and a debt service coverage ratio as defined by the credit facility. Failure to comply with the protective loan covenants or maintain the required financial ratios may cause acceleration of the outstanding principal balances on the revolving term loan and/or the imposition of fees, charges or penalties.

The credit facility is secured by substantially all assets of GFE. There are no savings account balance collateral requirements as part of this credit facility.

On August 2, 2017, GFE entered into a replacement credit facility with Project Hawkeye. The terms of the replacement credit facility allow GFE to borrow up to $7.5 million of variable-rate, amortizing non-recourse debt from Project Hawkeye using the Ringneck investment as collateral. The Project Hawkeye loan bears interest from date funds are first advanced on the loan through maturity, at a rate per annum equal to the sum of the One Month LIBOR Index Rate plus 3.05% per annum, with an interest rate floor of 3.55% which equated to 4.29% at October 31, 2017.

The Project Hawkeye loan requires annual interest payments only for the first two years of the loan and monthly principal and interest payments for years three through nine based on a seven-year amortization period. The monthly amortized payments will be re-amortized following any change in interest rate. The entire outstanding principal balance of the loan, plus any accrued and unpaid interest thereon, is due and payable in full on August 2, 2026. GFE is permitted to voluntarily prepay all or any portion of the outstanding balance of this loan at any time without premium or penalty.

Pursuant to a pledge agreement entered into in connection with the Project Hawkeye loan, GFE’s obligations are secured by all of its right, title, and interest in its investment in Ringneck, including the 1,500 units subscribed for by GFE. The loan is non-recourse to all of GFE’s other assets, meaning that in the event of default, the only remedy available to Project Hawkeye will be to foreclose and seize all of GFE’s right, title and interest in its investment in Ringneck.

As of October 31, 2017, GFE has borrowed $7.5 million under the Project Hawkeye credit facility to finance the balance of its investment in Ringneck.

Heron Lake BioEnergy

HLBE has a revolving term loan with a lender under which it could borrow, repay, and re-borrow in an amount up to $28,000,000 at any time prior to the March 1, 2022 maturity. However, the available for borrowing under the revolving term note reduces by $3,500,000 annually, starting March 1, 2015 and continuing each anniversary thereafter until maturity. The aggregate principal commitment of this facility at October 31, 2017 was $17,500,000. HLBE had no outstanding balance on the revolving term loan at October 31, 2017 and 2016. Therefore, at October 31, 2017 and 2016, the aggregate principal amount available to the Company for borrowing was $17,500,000 and $21,000,000, respectively.

Interest on the revolving term loan accrues at a variable rate equal to 3.25% above the LIBOR Index rate. HLBE may elect to enter into a fixed interest rate on this loan at various times throughout the term of the loan as provided in the loan agreements. The interest rate on the revolving term loan was 4.49% and 3.45% at October 31, 2017, and October 31, 2016, respectively.

HLBE also agreed to pay an unused commitment fee on the unused portion of the revolving term loan commitment at the rate of 0.50% per annum. The loan is secured by substantially all of the Company assets including a subsidiary guarantee.

The credit facility contains customary covenants, including restrictions on the payment of dividends and loans and advances to Agrinatural, and maintenance of certain financial ratios including minimum working capital, minimum net worth and a debt service coverage ratio as defined by the credit facility. Failure to comply with the protective loan covenants or maintain the required financial ratios may cause acceleration of the outstanding principal balances on the revolving term loan and/or the imposition of fees, charges or penalties.

Long-term debt consists of the following:


	October 31, 2017		October 31, 2016
GRANITE FALLS ENERGY:
Revolving term loan, see terms above.	$	—	$	—
Seasonal loan, see terms above.		—		—
Term note payable to Project Hawkeye, see terms above.		7,500,000		—

HERON LAKE BIOENERGY:
Revolving term loan to lending institution, see terms above.		—		—
Assessment payable as part of water treatment agreement, due in semi-annual installments of $189,393 with interest at 6.55%, enforceable by statutory lien, with the final payment due in 2021. HLBE made deposits for one years' worth of debt service payments of approximately $364,000, which is included with other assets that are held on deposit to be applied with the final payments of the assessment.		1,241,171		1,517,046
Assessment payable as part of water supply agreement, due in monthly installments of $3,942 with interest at 8.73%, enforceable by statutory lien, with the final payment due in 2019.		56,514		97,930
Note payable to electrical company with monthly payments of $6,250 with interest at 0.00% and a 1.00% maintenance fee due each October. This note was paid in full in September 2017. The electrical company is a member of HLBE.		—		68,750
Note payable to non-controlling interest member of Agrinatural. Interest is at One Month LIBOR plus 4.0%, which was approximately 5.24% and 4.53% at October 31, 2017 and 2016, respectively. The note is considered due on demand with payments due at Agrinatural's Board of Managers' discretion.		100,000		200,000
Totals		8,897,685		1,883,726
Less: amounts due within one year		432,183		490,057
Net long-term debt	$	8,465,502	$	1,393,669

Based on the most recent debt agreements, estimated maturities of long-term debt at October 31, 2017 are as follows:


2018	$	432,183
2019		408,169
2020		1,398,227
2021		1,391,250
2022		1,071,429
Thereafter		4,196,427
Total debt	$	8,897,685