Borrowings

3 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Borrowings

10. Borrowings

Related party borrowings of the Company's subsidiaries are summarized in the following table:

(in thousands)	Borrower	September 30, 2022			June 30, 2022
Seller Note	GECM	$	5,661		$	6,270
GP Corp. Note	GEC GP	*			*
Total principal		$	5,661		$	6,270
Unamortized debt issuance cost			-			-
Total long-term related party notes payable			5,661			6,270
Less current portion of related party notes payable			(5,661	)		-
Related party notes payable, net of current portion		$	-		$	6,270

*Balance eliminates in consolidation.

The Company’s and subsidiaries’ other outstanding borrowings are summarized in the following table:

(in thousands)	Borrower	September 30, 2022			June 30, 2022
GEGGL Notes	GEG	$	26,945		$	26,945
DME Revolver	HC LLC and subsidiaries		-			-
Equipment Financing	HC LLC and subsidiaries		3,909			2,993
Total principal		$	30,854		$	29,938
Unamortized debt discounts and issuance costs			(1,348	)		(1,413	)
Total other outstanding borrowings			29,506			28,525
Less current portion of other outstanding borrowings			(3,909	)		(2,993	)
Other outstanding borrowings, net of current portion		$	25,597		$	25,532

The Company incurred interest expense of $0.7 million and $0.01 million for the three months ended September 30, 2022 and 2021, respectively, on related-party and other borrowings. See Note 11 – Convertible Notes for interest expense on Convertible Notes and Note 12 – Non-Controlling Interests and Preferred Stock of Subsidiaries for interest expense on the preferred stock of subsidiaries.

The Company’s aggregate future required principal debt repayments are summarized in the following table:

(in thousands)	Principal Due
For the nine months ending June 30, 2023	$	3,909
For the year ending June 30, 2024		5,661
For the year ending June 30, 2025		-
For the year ending June 30, 2026		-
For the year ending June 30, 2027		26,945
Thereafter		-
Total	$	36,515

Additional details of each borrowing by operating segment are discussed below.

Durable Medical Equipment

The Company has a revolving line of credit with Banc of California (formerly Pacific Mercantile Bank) (DME Revolver). The DME Revolver allows for borrowings up to $10 million, subject to a fixed percentage of qualifying accounts receivable and inventories related to the durable medical equipment business operations. Borrowings under the line of credit are due on November 29, 2022 and accrue interest at a variable rate of the prime rate plus 0.4% per annum. At September 30, 2022 the interest rate was 6.7%. Interest is payable monthly in arrears. The Company has the option to prepay the borrowings without any penalty. As of September 30, 2022, there were no borrowings outstanding under the DME Revolver.

The borrowings under the DME Revolver are collateralized by the assets of the durable medical equipment business and the Company is required to meet certain financial covenants.

The DME Revolver includes covenants that restrict HC LLC’s and its subsidiaries’ business operations to the current business, limit additional indebtedness, liens, asset dispositions and investments, require compliance and maintenance of licenses and government approvals and other customary conditions. Events of default include the failure to pay amounts when due, bankruptcy, or violation of covenants, including a change in control of HC LLC. HC LLC must also comply with a fixed-charge coverage and leverage ratio financial covenants, which are based in part on the levels of HC LLC's earnings before interest, taxes, depreciation and amortization. The Company was in compliance with all material covenants and restrictions at September 30, 2022.

HC LLC’s operating subsidiaries also utilize equipment financing debt to fund certain inventory and equipment purchases from suppliers. These equipment financing debt agreements are entered into with third party banks and are generally payable in equal installments over terms of one to three years, depending on the nature of the underlying purchases being financed. The debt is secured by the inventory and equipment, as applicable, of the operating subsidiaries entering into the agreements, and the long-term agreements have implicit interest rates between 7 – 8%. During the three months ended September 30, 2022 and 2021, the Company financed $2.7 million and $2.1 million, respectively, in inventory and equipment through such financing agreements.

Investment Management

On May 4, 2022 as part of the consideration paid to acquire the Monomoy UpREIT investment management agreement, GECM issued ICAM a $6.3 million promissory note (the Seller Note). The Seller Note is due on August 4, 2023 and is payable at GECM’s option with either cash or newly issued GEG shares (subject to shareholder approval). There are no prepayment penalties. The Seller Note bears interest at 6.5%, which is paid quarterly. The balance of the Seller Note as of September 30, 2022 was $5.7 million.

During the three months ended September 30, 2022, the Company settled the principal amount of $0.6 million by transferring 50,000 shares of GECC stock.

General Corporate

On June 9, 2022, we issued $26.9 million in aggregate principal amount of 7.25% Notes due 2027 (the GEGGL Notes), which included $1.9 million of GEGGL Notes issued in connection with the partial exercise of the underwriters’ over-allotment option. The aggregate principal balance of the GEGGL Notes outstanding as of September 30, 2022 is $26.9 million. The GEGGL Notes are unsecured obligations and rank equal with all of our outstanding and future unsecured unsubordinated indebtedness. The unsecured notes are effectively subordinated, or junior in right of payment, to indebtedness under our Convertible Notes and any other future secured indebtedness that we may incur and structurally subordinated to all future indebtedness and other obligations of our subsidiaries. We pay interest on the GEGGL Notes on March 31, June 30, September 30 and December 31 of each year. The GEGGL Notes will mature on June 30, 2027. The GEGGL Notes can be called on, or after, June 30, 2024. Holders of the Notes do not have the option to have the GEGGL Notes repaid prior to the stated maturity date. The GEGGL Notes were issued in minimum denominations of $25 and integral multiples of $25 in excess thereof.

The GEGGL Notes include covenants that limit additional indebtedness or the payment of dividends subject to compliance with a net consolidated debt to equity ratio of 2:1. As of September 30, 2022 our consolidated debt to equity ratio is 1.59:1.00.