Note 6. Credit Facilities and Capital Leases

12 Months Ended

Dec. 31, 2011

Debt Disclosure [Text Block]

Note 6: Credit Facilities and Capital Leases

Credit Facilities

On April 16, 2008, our existing revolving credit agreement was amended and restated in connection with our acquisition of the companies owning 70.3% of the joint venture operating the Greens Creek mine.  The amended and restated agreement involved a $380 million facility, consisting of a $140 million three-year term facility originally maturing on March 31, 2011, which was fully drawn upon closing of the Greens Creek transaction, and a $240 million bridge facility, which originally was scheduled to mature in October 2008.  We utilized $220 million from the bridge facility at the time of closing the Greens Creek transaction, and used the remaining $20 million balance for general corporate purposes in September 2008.

The first term facility principal payment of $18.3 million was paid on September 30, 2008.  We applied $162.9 million in proceeds from the public offering of 34.4 million shares of our common stock against the bridge loan principal balance during the third quarter of 2008. On October 16, 2008, we repaid an additional $37.1 million of the bridge facility balance and reached an agreement with our bank syndicate to extend the remaining $40 million outstanding bridge facility balance until February 16, 2009. In December 2008, we reached an agreement with the bank syndicate to move the $18.3 million term facility principal payment originally scheduled for December 31, 2008 to February 13, 2009, and repayment of the $40 million bridge facility balance was due on February 13, 2009 as a result of the amendment.  On February 3, 2009, we again amended the terms of the credit agreement to defer all scheduled term facility principal payments due in 2009, totaling $66.7 million, to 2010 and 2011.

On February 4, 2009, we entered into an agreement to sell 32 million units comprised of one share of common stock and one-half Series 3 Warrant to purchase one share of common stock in an underwritten public offering for proceeds of approximately $65.6 million. On February 6, 2009, the underwriters exercised their over-allotment option in connection with the original offering, resulting in the issuance and sale of 4.8 million additional units for additional proceeds of approximately $9.8 million.  We applied $40 million of the total proceeds to the retirement of our outstanding bridge loan facility balance on February 10, 2009.  In accordance with the credit facilities, we also reduced our term loan by approximately $8 million in February 2009.  

On June 4, 2009, we completed the sale in a private placement of 17.4 million shares of our common stock and Series 4 Warrants to purchase 12.2 million shares of our common stock for gross proceeds of $60 million (see Note 9 for more information).  $57.2 million of the proceeds were applied against the outstanding term facility balance in June 2009.

On June 29, 2009, we made an $18.2 million prepayment of our term facility principal balance under an additional amendment.  We repaid the remaining $38.3 million term facility balance on October 14, 2009.

Prior to its repayment in October 2009, our then-outstanding term facility balance was subject to an interest rate swap and had an interest rate of 9.38%.  The interest rate applicable margins did not change as a result of the February 3 and June 29, 2009 amendments to the agreement. During 2009 we incurred interest expense totaling $11.3 million, including amortization of loan origination fees and net expense incurred for the interest rate swap, for the term facility prior to our repayment of the outstanding balance in October 2009.  The bridge facility had an interest rate of either LIBOR plus 6.00% or an alternative base rate plus 5.00%.  During the first quarter of 2009, we incurred interest expense totaling $2.3 million, including amortization of loan origination fees, for the bridge facility prior to our repayment of the outstanding balance in February 2009.  Total interest expense incurred for our credit facilities for 2009 included $4.0 million for the amortization of loan origination fees and net expense of $2.7 million related to interest rate swap adjustments.

The February 3, 2009 amendment to the credit agreement also required us to pay an additional fee to our lenders upon effectiveness of the amendment, and on each subsequent July 1 and January 1, by issuing to the lenders an aggregate amount of a new Series of 12% Convertible Preferred Stock (discussed further in Note 9) equal to 3.75% of the aggregate principal amount of the term facility outstanding on February 10, 2009 and on each July 1 and January 1 thereafter until the term facility was paid off in full.  Pursuant to this requirement, 42,621 shares of 12% Convertible Preferred Stock valued at $4.3 million were issued to the lenders in February 2009.  However, the June 2009 amendment to our credit agreement waived, through September 15, 2009, the 3.75% semiannual fee paid in 12% Convertible Preferred Stock.  The fee waiver was extended for an additional month in September 2009, until October 15, 2009, and we repaid the remaining outstanding balance on the term facility on October 14, 2009.  In July 2009, 13,700 of the 12% Convertible Preferred Shares were converted to common stock, with the remaining 28,921 shares converted in October 2009.

We have a $100 million senior secured revolving credit facility, which is collateralized by the shares of common stock held in our material subsidiaries, and by our joint venture interests in the Greens Creek mine, all of our rights and interests in the joint venture agreement, and all of our rights and interests in the assets of the joint venture.  This credit facility originated from a $60 million senior secured revolving credit agreement entered into in October 2009.  The agreement was amended in December 2010 to extend the term of the agreement, reduce the commitment fee rate and interest rate spreads, allow the issuance of secured and unsecured debt and investments to governmental authorities as payment of obligations owed to such authorities, and to allow the release of certain liens and security interests granted to the lenders to secure the credit facility. The agreement was again amended on October 10, 2011 to increase the secured revolving credit facility to $100 million. Amounts borrowed under the credit agreement are available for general corporate purposes.  The interest rate on outstanding loans under the agreement is between 2.75% and 3.5% above the LIBOR or an alternative base rate plus an applicable margin of between 1.75% and 2.5%.  We are required to pay a standby fee of between 0.825% and 1.05% per annum on undrawn amounts under the revolving credit agreement.  The credit facility is effective until September 30, 2014. We incurred $0.6 million in interest expense in  2011 for the amortization of loan origination fees and $0.6 million in interest expense for commitment fees relating to the credit agreement.  

The credit agreement includes various covenants and other limitations related to our various financial ratios and indebtedness and investments, as well as other information and reporting requirements, including the following limitations:

•   Leverage ratio (calculated as total debt divided by EBITDA) of not more than 3.0:1.

•   Interest coverage ratio (calculated as EBITDA divided by interest expense) of not less than 3.0:1.

•   Current ratio (calculated as current assets divided by current liabilities) of not less than 1.10:1.

•   Tangible net worth of greater than $500 million.

We were in compliance with all covenants under the amended credit agreement as of December 31, 2011.  We have not drawn funds on the current revolving credit facility as of the filing date of this Form 10-K.

Capital Leases

We entered into five 48-month lease agreements in 2010 and 2009 for equipment at our Greens Creek and Lucky Friday units, which we have determined to be capital leases. At December 31, 2011, the total liability balance associated with capital leases, including purchase option amounts, was $10.3 million, with $4.0 million of the liability classified as current and $6.3 million classified as non-current.  At December 31, 2010, the total liability balance associated with capital leases was $6.3 million, with $2.5 million of the liability classified as current and $3.8 million classified as non-current. The annual maturities of capital lease commitments, including interest, as of December 31, 2011 are:

Year ending December 31,
2012	$	4,190
2013		2,734
2014		2,506
2015		1,303
2016		21
Total		10,754
Less:  imputed interest		(692	)
Net capital lease obligation	$	10,062