Note 6 - Secured Credit Facility

3 Months Ended

Mar. 31, 2025

Notes to Financial Statements

Debt Disclosure [Text Block]

Note 6 – Secured Credit Facility

On June 21, 2024, Nuvera and CoBank entered into (i) an Agreement Regarding Amendments to Loan Documents and (ii) an Amended and Restated Revolving Loan Promissory Note. The agreements amended our existing credit facility with CoBank and secured a credit facility in the aggregate principal amount of $180.0 million.

Under the Agreements, among other things, (i) the Company received a $125.0 million term loan to replace existing debt, (ii) a $25.0 million delayed draw term loan, (iii) the Company’s revolving loan was decreased from $40.0 million to $30.0 million, (iv) the maturity dates of the term loans and revolving loan were set at June 21, 2029, and (v) the Company’s operating subsidiaries agreed to extend their previous guarantees, security interests and mortgages to cover the increased amount of the credit facility. The financing was secured to facilitate the Company’s advanced fiber-build plans announced on December 15, 2021. Refer to the Company’s 8-K filing with the SEC on June 25, 2024, for further details regarding the 2024 credit agreements with CoBank.

Under the credit agreement, the Company and its respective subsidiaries have entered into security agreements under which substantially all the assets of Nuvera and its respective subsidiaries have been pledged to CoBank as collateral. In addition, Nuvera and its respective subsidiaries have guaranteed all the obligations under the credit facility. The credit agreement contains certain customary events of default, which include failure to make payments when due, the material inaccuracy of representations or warranties, failure to observe or perform certain covenants, cross-defaults, bankruptcy and insolvency-related events, certain judgments, certain ERISA-related events, or a change in control (as defined in the credit agreement).

New 2024 Credit Agreement:

● TERM A-1 LOAN - $125,000,000 term note with interest payable quarterly. The final maturity date of this note is June 21, 2029. Eight quarterly principal payments of $781,250 are due commencing June 30, 2026, through March 31, 2028, and four quarterly principal payments of $1,562,500 commencing on June 30, 2028, through maturity date. A final balloon payment of $112,500,000 is due at maturity of this note on July 15, 2029.

● DELAYED DRAW TERM LOAN - $25,000,000 Delayed Draw Term Loan with interest on any outstanding amounts payable quarterly. The final maturity date of this loan is June 21, 2029. Eight quarterly principal payments of 0.625% of the outstanding loan balance are due commencing June 30, 2026, through March 31, 2028, and four quarterly principal payments of 1.250% of the outstanding loan balance commencing on June 30, 2028, through maturity date. A final balloon payment of the balance of the Delayed Draw Term Loan is due at maturity of this note on June 21, 2029. We currently have drawn $0 on this Delayed Draw Term Loan as of March 31, 2025.

● REVOLVING LOAN - $30,000,000 revolving loan with interest payable quarterly. The final maturity date of this note is June 21, 2029. We currently have drawn $19,059,098 on this revolving note as of March 31, 2025.

The term loan borrowings initially bear interest at a “Margin for Secured Overnight Financing Rate (SOFR) Loans” of 3.75% above the applicable SOFR. The margin for SOFR loans for term loans increases as our “Leverage Ratio” increases and decreases as our “Leverage Ratio” decreases. The revolving loan borrowings initially bear interest at a “Margin for SOFR Loans” of 3.75% above the applicable base SOFR. The margin for SOFR loans for revolving loans increases as our “Leverage Ratio” increases and decreases as our “Leverage Ratio” decreases.

We generally use variable-rate debt to finance our operations, capital expenditures and acquisitions. These variable-rate debt obligations expose us to variability in interest payments due to changes in interest rates. The terms of our credit facility with CoBank require that we enter into interest rate agreements designed to protect us against fluctuations in interest rates, in an aggregate principal amount and for a duration determined under the credit facility.

Under the new 2024 credit facility, Nuvera can enter into IRSAs in connection with amounts borrowed from CoBank. In connection with the closing of the credit facility, the Company “rolled over” its two exiting IRSAs.

As described in Note 7 – “Interest Rate Swaps,” on August 1, 2018, we entered into an IRSA with CoBank covering $16,137,500 of our aggregate indebtedness to CoBank. As of March 31, 2025, our IRSA covered $8,357,450, with a weighted average interest rate of 6.71%.

As described in Note 7 – “Interest Rate Swaps,” on August 29, 2019, we entered into a second IRSA with CoBank covering an additional $42,000,000 of our then aggregate indebtedness to CoBank. As of March 31, 2025, our IRSA covered $23,424,441, with a weighted average interest rate of 5.04%.

As described in Note 7 – “Interest Rate Swaps,” on September 17, 2024, we entered into a third IRSA with CoBank covering an additional $21,813,892 of our then aggregate indebtedness. As of March 31, 2025, our IRSA covered $20,718,109, with a weighted average interest rate of 7.77%.

Our loan agreements with CoBank require us to have a minimum of 35% of our existing debt under IRSAs. As of March 31, 2025, we were in compliance with the above stated covenant in our loan agreements.

Our remaining outstanding debt of $91.6 million remains subject to variable interest rates at an effective weighted average interest rate of 8.21%, as of March 31, 2025.

As of March 31, 2025, our additional delayed draw term loan of $25.0 million and unused revolving credit facility of $10.9 million are subject to an unused commitment fee of 0.50% annually, until drawn. Once drawn, this debt would be subject to an effective weighted average interest rate based on current rate of interest in effect at the time.

Our loan agreements include restrictions on our ability to pay cash dividends to our stockholders. However, we are allowed to pay dividends in an amount up to $3,000,000 in any year as long as no default or event of default has occurred, and our current Total Leverage Ratio is equal to 4.25:1.00 or less. In addition, we are allowed to pay dividends in an unlimited amount in any year as long as no default or event of default has occurred, and our current Total Leverage Ratio is equal to 3.50:1.00 or less. Our current Total Leverage Ratio as of March 31, 2025, was 5.01. Our maximum Total Leverage Ratio under the new loan facility is 6.00:1.00.

Our credit facility requires us to comply with specified financial ratios and tests. These financial ratios include Total Leverage Ratio and debt service coverage ratio. On March 31, 2025, we were in compliance with all the stipulated financial ratios in our loan agreements.

There are security and loan agreements underlying our current CoBank credit facility that contain restrictions on our distributions to stockholders and investment in, or loans, to others. Also, our credit facility contains restrictions that, among other things, limit or restrict our ability to enter into guarantees and contingent liabilities, incur additional debt, issue stock, transact asset sales, transfers, or dispositions, and engage in mergers and acquisitions, without CoBank approval.