Credit Facilities and Long-Term Debt

6 Months Ended

Jun. 30, 2013

Credit Facilities and Long-Term Debt [Abstract]

Credit Facilities and Long-Term Debt

Note 6 – Credit Facilities and Long-Term Debt

Lines of Credit

The Company has a revolving credit facility with the Bank of America with a maximum borrowing capacity of $30.0 million due April 1, 2017. This revolving credit facility includes an annual commitment fee ranging from 25 to 45 basis points of the unused portion of the facility and interest on the amounts outstanding at the LIBOR plus 175 to 225 basis points. The Company had outstanding borrowings under this facility of $16.0 million and $23.9 million at June 30, 2013 and December 31, 2012, respectively. For the three months ended June 30, 2013 and 2012, the weighted average interest rate on the revolving credit facility was 3.3% and 3.2%, respectively. For the six months ended June 30, 2013 and 2012, the weighted average interest rate on the existing and renewed revolving credit facility was 3.3%.

On February 13, 2013, the Company’s $500,000 revolving credit facility with Yadkin Valley Bank with an interest rate based on the prime rate, with a floor of 4.5% per annum and a maximum of 16% per annum expired. On April 12, 2013, Yadkin Valley Bank extended the $500,000 commercial line of credit beginning May 12, 2013. The debt is secured by a blanket lien on all assets owned or acquired by Independence. The Company had outstanding borrowings under this facility of $0.2 million and $0.4 million at June 30, 2013 and December 31, 2012, respectively. For the three and six months ended June 30, 2013 and 2012, the weighted average interest rate on the facility was 4.5%.

Notes Payable

The following table details the Company’s outstanding long-term debt balances at June 30, 2013 and December 31, 2012.

	June 30, 2013		December 31, 2012
LIBOR plus 1.75 to 2.25%, Bank of America amortizing term loan, due April 1, 2017	$	9,625,000	$	10,000,000
6.16%, Senior unsecured notes, due June 29, 2017		13,000,000		13,000,000
5.38%, Sun Life fixed rate note, due June 1, 2017		15,334,000		15,334,000
LIBOR plus 3.85%, Sun Life floating rate note, due May 3, 2014		3,000,000		3,000,000
4.15% Sun Life senior secured guaranteed note, due June 1, 2017		2,989,552		2,989,552
Vehicle loan		6,522		10,688
Total notes payable		43,955,074		44,334,240
Less: current portion		506,522		633,498
Notes payable, long-term portion	$	43,448,552	$	43,700,742

Debt Covenants

The Bank of America revolving credit agreement and term loan contain various covenants, which include, among others, limitations on total dividends and distributions made in the immediately preceding 60-month period to 80% of Energy West’s aggregate consolidated net income for such period, restrictions on certain indebtedness, limitations on asset sales, and maintenance of certain debt-to-capital and interest coverage ratios.

The senior unsecured notes contain various covenants, including a limitation on Energy West’s total dividends and distributions made in the immediately preceding 60-month period to 100% of aggregate consolidated net income for such period. The notes restrict Energy West from incurring additional senior indebtedness in excess of 60% of capitalization at any time and require Energy West to maintain an interest coverage ratio of not more than 150% of the pro forma annual interest charges on a consolidated basis in two of the three preceding fiscal years

The Sun Life fixed rate notes, floating rate notes, and senior secured guaranteed note contain various covenants, which include, among others, limitations on total dividends and distributions if in aggregate these limitations for the fiscal year do not exceed 70% of net income of NEO, Orwell, Brainard, Lightning Pipeline, GNR, and Great Plains (the “Obligors”) for the four fiscal quarters then ending. The agreements also contain restrictions on certain indebtedness, limitations on asset sales, maintenance of certain debt-to-capital and interest coverage ratios. Due to the covenants, the Obligors are unable to pay a dividend to the holding company, which may impact the Company’s ability to pay a dividend to shareholders.

Additionally, Sun Life restricted certain cash balances and required two main types of debt service reserve accounts to be created to cover approximately one year of interest payments. The balance in both debt service reserve accounts was $1,079,000 and $1,078,000 at June 30, 2013 and December 31, 2012, respectively, and is included in restricted cash. The debt service reserve accounts cannot be used for operating cash needs. In addition, the Company deposited $750,000 into a reserve account where Sun Life is the beneficiary. The terms allow the Company to withdraw that money if a letter of credit is received to replace the restricted cash.

The Yadkin Valley Bank revolving credit facility contains various restrictions, which include, among others, limitations on total dividends and distributions, restrictions on certain indebtedness, and limitations on asset sales.

The Company believes it is in compliance with the financial covenants under its debt agreements.