LONG-TERM DEBT

12 Months Ended

Oct. 31, 2011

LONG-TERM DEBT

LONG-TERM DEBT

9.  LONG-TERM DEBT

Long-term debt consists of the following:

	October 31		October 31
	2011		2010
Term note payable to lending institution, see terms below.	$	39,747,497	$	48,967,611
Revolving term note payable to lending institution, see terms below.	6,864,561		1,155,872
Balance forward	$	46,612,058	$	50,123,483

	October 31		October 31
	2011		2010
Balance from previous page	$	46,612,058	$	50,123,483
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. The Company is required to make deposits over 24 months, which began in January 2007, for one years’ worth of debt service payments that are held on deposit to be applied with the final payments of the assessment.	2,653,090		2,837,720
Assessment payable as part of water treatment agreement, due in semi-annual installments of $25,692 with interest at 0.50%, enforceable by statutory lien, with the final payment due in 2016.	253,118		302,988
Assessment payable as part of water supply agreement, due in monthly installments of $4,126 with interest at 8.73%, enforceable by statutory lien, with the final payment due in 2019.	264,309		290,462
Note payable for equipment, with monthly payments of $2,371 including effective interest of 6.345%, due in April 2012, secured by equipment.	13,860		40,505
Note payable to electrical provider, with monthly payments of $29,775 including implicit interest of 1.50%, due in December 2013, secured by equipment and restricted cash.	439,590		785,379
Note payable to electrical company with monthly payments beginning in October 2009 of $6,250 with a 1% maintenance fee due each October, due September 2017. The electrical company is a member of the Company.	443,750		518,750
Note payable to financial institutions initially for the construction of the pipeline assets due initially in December 2011, extended until February 2012. The note is convertible into a term loan upon meeting certain conditions in February 2012 with a three year repayment period. Interest is at 5.75% and the note is secured by substantially all assets of Agrinatural, LLC and a debt guarantee by as described in Note 10.	737,750		—
Totals	51,417,525		54,899,287
Less amounts due within one year	4,572,613		50,830,571
Net long-term debt	$	46,844,912	$	4,068,716

At October 31, 2010 and during 2011, the Company was not in compliance with certain provisions of the AgStar loan agreements and therefore had classified the loans with them as current.  Following changes made to the loan agreements with AgStar in September 2011, the Company reclassified the debt to long-term.

Term Note Payable

In September 2011 AgStar  replaced and superseded the Company’s existing loan agreements, related loan documents and the amended forbearance agreements.  The Company has a five-year term loan initially amounting to $40,000,000, comprised of two tranches of $20,000,000 each, with the first tranche bearing interest at a variable rate equal to the greater of LIBOR plus 3.50% or 5.0%, and the second tranche bearing interest at 5.75%.  The Company must make equal monthly payments of principal and interest on the term loan based on a ten-year amortization, provided the entire principal balance and accrued and unpaid interest on the term loan is due and payable in full on the maturity date of September 1, 2016.  In addition, the Company is required to make additional payments annually on debt for up to 25% of the excess cash flow, as defined by the agreement, up to $2 million per year.  As part of the agreement, the premium above LIBOR on the loans may be reduced based on a financial ratio.  The loan agreements are secured by substantially all business assets and are subject to various financial and non-financial covenants that limit distributions and debt and require minimum debt service coverage, net worth, and working capital requirements.

Prior to the changes in 2011, the Company was charged interest on the term note payable at LIBOR plus 3.25%.  The Company had locked in an interest rate of 6.58% on $45 million of the note for three years ending in April 2011.  The term note scheduled to mature in October 2012.

Revolving Term Note

The Company also obtained a five-year term revolving loan commitment in the amount of $8,008,689, under which AgStar agreed to make periodic advances to the Company up to this original amount until September 1, 2016.  Amounts borrowed by the Company under the term revolving loan and repaid or prepaid may be re-borrowed at any time prior to maturity date of the term revolving loan, provided that outstanding advances may not exceed the amount of the term revolving loan commitment.  Amounts outstanding on the term revolving loan bear interest at a variable rate equal to the greater of a LIBOR rate plus 3.50% or 5.0%, payable monthly.  The Company also pays an unused commitment fee on the unused portion of the term revolving loan commitment at the rate of 0.35% per annum, payable in arrears in quarterly installments during the term of the term revolving loan.  Under the terms of the new agreement, the term revolving loan commitment is scheduled to decline by $500,000 annually, beginning on September 1, 2012 and each anniversary date thereafter.  The maturity date of the term revolving loan is September 1, 2016.  The Company does have a $600,000 outstanding standby letter of credit at October 31, 2011.

Prior to the changes in September 2011, the revolving term note had an interest rate of LIBOR plus 3.25%.  The Company had accrued default interest of 2.0% from February 2010 to July 2010 because of covenant defaults.  AgStar agreed in 2011 to waive 50% of the default interest during 2011.  The revolving term note was scheduled to mature in October 2012.

Estimated maturities of long-term debt at October 31, 2011 are as follows:

2012	$	4,572,613
2013	3,745,574
2014	4,210,387
2015	4,563,146
2016	32,627,401
After 2016	1,698,404
Total long-term debt	$	51,417,525