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Note 10 - Third-party Long-term Debt

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Long-Term Debt [Text Block]

(10) Third-Party Long-Term Debt

Loan Agreements

Monthly Principal

Principal

and Interest Payment

Loan Description

Parties

(in millions)

Maturity

(in millions)

Interest Rate

Loan Purpose

Veritex Loans

LE Term Loan Due 2034 (in default) (1)

25.0

June 2034

$0.3

WSJ Prime + 2.75%

Refinance loan; capital improvements

Veritex

LRM Term Loan Due 2034 (in default) (1)

LRM

10.0

December 2034

$0.1

WSJ Prime + 2.75%

Refinance bridge loan; capital improvements

Veritex

Kissick Debt (in forbearance)(2)

11.7

January 2018

$0.5

6.25

Working capital

Kissick

GNCU Loan

NPS Term Loan Due 2031(in default) (3)

NPS

10.0

October 2031

$0.1

5.75

Working capital

GNCU

SBA EIDLs

Blue Dolphin Term Loan Due 2051 (as modified) (4)

Blue Dolphin

2.0

June 2051

$0.01

3.75

Working capital

SBA

LE Term Loan Due 2050 (5)

0.15

August 2050

$0.0007

3.75

Working capital

SBA

NPS Term Loan Due 2050 (5)

NPS

0.15

August 2050

$0.0007

3.75

Working capital

SBA

Equipment Loan Due 2025 (6)

0.07

October 2025

$0.0013

4.50

Equipment Lease Conversion

Texas First

⁽¹⁾	Restricted cash, noncurrent totaled $1.0 million and $0.0 at March 31, 2024 and December 31, 2023, respectively. Restricted cash, noncurrent reflects amounts held by Veritex in a payment reserve account, which is required to have a balance of $1.0 million. Although the amount at December 31, 2023 was $0, the payment reserve account was fully replenished on January 2, 2024.
⁽²⁾	Original principal amount was $8.0 million; pursuant to a 2017 sixth amendment, principal under the Kissick Debt increased by $3.7 million.
⁽³⁾	Loan requires monthly interest-only payments for the first thirty-six (36) months. Afterwards, principal and interest payments are due monthly through loan maturity. First payment due in November 2024.
⁽⁴⁾	Original principal amount was $0.5 million; the Blue Dolphin Term Loan Due 2051 was modified to increase the principal amount by $1.5 million. Payments deferred for thirty (30) months; first payment due and paid in November 2023; interest accrues during deferral period; loan not forgivable.
⁽⁵⁾	Payments deferred for thirty (30) months; first payment made in February 2023; interest accrued during deferral period; loan not forgivable.
⁽⁶⁾	In May 2019, LE entered into 12-month equipment rental agreement with an option to purchase backhoe at maturity; equipment rental agreement matured in May 2020; in October 2020, LE entered into the Equipment Loan Due 2025 to finance the backhoe purchase; backhoe used at the Nixon facility.

Outstanding Principal, Debt Issue Costs, and Accrued Interest

Third-party long-term debt, including outstanding principal and accrued interest, as of the dates indicated was as follows:

	March 31,			December 31,
	2024			2023
	(in thousands)
Veritex Loans
LE Term Loan Due 2034 (in default)	$	19,607		$	19,858
LRM Term Loan Due 2034 (in default)		8,163			8,260
Kissick Debt (in forbearance)		5,751			7,147
GNCU Loan
NPS Term Loan Due 2031 (in default)		9,975			9,975
SBA EIDLs
BDEC Term Loan Due 2051		2,125			2,135
LE Term Loan Due 2050		161			162
NPS Term Loan Due 2050		161			162
Equipment Loan Due 2025		25			29
		45,968			47,728

Less: Current portion of long-term debt, net		(40,581	)		(39,440	)
Less: Unamortized debt issue costs		(1,896	)		(1,947	)
Less: Accrued interest payable		(1,182	)		(2,596	)
	$	2,309		$	3,745

Unamortized debt issue costs associated with the Veritex and GNCU loans as of the dates indicated consisted of the following:

	March 31,			December 31,
	2024			2023
	(in thousands)
Veritex Loans
LE Term Loan Due 2034 (in default)	$	1,674		$	1,674
LRM Term Loan Due 2034 (in default)		768			768
GNCU Loan
NPS Term Loan Due 2031 (in default)		730			730

Less: Accumulated amortization		(1,276	)		(1,225	)
	$	1,896		$	1,947

Amortization expense was $0.05 million for both three-month periods ended March 31, 2024 and 2023.

Accrued interest related to third-party long-term debt, reflected as accrued interest payable in our consolidated balance sheets, as of the dates indicated consisted of the following:

	March 31,			December 31,
	2024			2023
	(in thousands)
Kissick Debt (in forbearance)	$	773		$	2,169
Veritex Loans
LE Term Loan Due 2034 (in default)		176			181
LRM Term Loan Due 2034 (in default)		69			70
GNCU Loan
NPS Term Loan Due 2031 (in default)		17			17
SBA EIDLs
BDEC Term Loan Due 2051		125			135
LE Term Loan Due 2050		11			12
NPS Term Loan Due 2053		11			12
		1,182			2,596
Less: Accrued interest payable		(1,182	)		(2,596	)
Long-term Interest Payable, Net of Current Portion	$	-		$	-

The debt associated with the LE Term Loan Due 2034, LRM Term Loan Due 2034, and NPS Term Loan Due 2031 was classified within long-term debt, current portion on our consolidated balance sheets at March 31, 2024 and December 31, 2023 due to being in default. The Kissick Debt fell within long-term debt, current portion on our consolidated balance sheet at March 31, 2024 compared to long-term debt, net of current portion at December 31, 2023 due to principal payments being due within the next twelve months.

Forbearance and Defaults

Veritex First Amended Forbearance Agreement. Under the Veritex Forbearance Agreement, LE and LRM paid Veritex: (i) $4.3 million in past due principal and interest at the non-default rate (excluding late fees), (ii) $1.0 million into a payment reserve account, and (iii) $0.04 million in Veritex attorney fees. The Veritex Forbearance Agreement expired on September 30, 2023, and was superseded by the Veritex First Amended Forbearance Agreement. The First Amended Forbearance Agreement expired on December 29, 2023, and was superseded by the Veritex Second Amended Forbearance Agreement. The Veritex Second Amended Forbearance Agreement expired on March 29, 2024. During each of these forbearance periods, Veritex agreed to forbear from testing borrowers’ compliance with financial covenants as specified in the LE Term Loan Due 2034 and LRM Term Loan Due 2034 and forbear from exercising its rights or remedies with respect to non-compliance with the financial covenants.

Kissick Forbearance Agreement. Pursuant to the Kissick Forbearance Agreement, Kissick Noteholder agreed to forbear from exercising any of its rights and remedies related to existing defaults pertaining to payment violations under the Kissick Debt. Under the terms of the Kissick Forbearance Agreement, LE agreed to make monthly principal and interest payments totaling $0.5 million beginning in April 2023, continuing on the first of each month through February 2025, with a final payment of $0.4 million to Kissick Noteholder on March 1, 2025. LE paid Kissick Noteholder $1.5 million and $0 for the three months ended March 31, 2024 and 2023. As of the filing date of this report, the Kissick Debt was in forbearance related to past defaults.

Defaults. As of March 31, 2024 and through the filing date of this report, we were in default under the NPS Term Loan Due 2031 due to covenant violations. We were also in default under the LE Term Loan Due 2034 and LRM Term Loan Due 2034; the Veritex Second Amended Forbearance Agreement expired on March 29, 2024. Defaults may permit lenders to declare the amounts owed under the related loan agreements immediately due and payable, exercise their rights with respect to collateral securing obligors’ obligations, and/or exercise any other rights and remedies available. Any exercise by third parties of their rights and remedies under secured loan agreements that are in default could have a material adverse effect on our business operations, including crude oil and condensate procurement and our customer relationships; financial condition; and results of operations. In such a case, the trading price of our Common Stock and the value of an investment in our Common Stock could significantly decrease, which could lead to holders of our Common Stock losing their investment in our Common Stock in its entirety.

We can provide no assurance that: (i) our assets or cash flow will be sufficient to fully repay borrowings under secured loan agreements that are in default, either upon maturity or if accelerated, (ii) LE, LRM, NPS, or BDPL will be able to refinance or restructure the debt, and/or (iii) third parties will provide future forbearances or default waivers, particularly if the banks with whom we have relationships fail. If one or more banks fail, we could be exposed to additional events of default (if not cured or waived) under existing secured loan agreements. Defaults under our secured loan agreements and any exercise by third parties of their rights and remedies related to such defaults may have a material adverse effect on our business, the trading price of our Common Stock, and on the value of an investment in our Common Stock, and holders of our Common Stock could lose their investment in our Common Stock in its entirety. If the debt associated with secured loan agreements is accelerated and we are unable to refinance or restructure the debt or obtain default waivers, we may have to consider other options, including selling assets, raising additional debt or equity capital, cutting costs, reducing cash requirements, filing bankruptcy, or ceasing operating. See “Notes (1) and (3)” to our consolidated financial statements for additional information regarding defaults under our secured loan agreements and their potential effects on our business, financial condition, and results of operations.

Guarantees and Security

Loan Description	Guarantees	Security
Veritex Loans
LE Term Loan Due 2034 (in default)	• USDA	• First priority lien on Nixon facility’s business assets (excluding accounts receivable and inventory)
	• Jonathan Carroll⁽¹⁾	• Assignment of all Nixon facility contracts, permits, and licenses
	• Affiliate cross-guarantees	• Absolute assignment of Nixon facility rents and leases, including tank rental income
		• $5.0 million life insurance policy on Jonathan Carroll
LRM Term Loan Due 2034 (in default)	• USDA	• Second priority lien on rights of LE in crude distillation tower and other collateral of LE
	• Jonathan Carroll⁽¹⁾	• First priority lien on real property interests of LRM
	• Affiliate cross-guarantees	• First priority lien on all LRM fixtures, furniture, machinery, and equipment
		• First priority lien on all LRM contractual rights, general intangibles, and instruments, except with respect to LRM rights in its leases of certain specified tanks for which Veritex has second priority lien
		• Substantially all assets
Kissick Debt (in forbearance)⁽²⁾	-	• Subordinated deed of trust that encumbers the crude distillation tower and general assets of LE
GNCU Loan
NPS Term Loan Due 2031 (in default)	• USDA	• Deed of trust lien on approximately 56 acres of land and improvements owned by LE
	• Jonathan Carroll⁽¹⁾	• Leasehold deed of trust lien on certain property leased by NPS from LE
	• Affiliate cross-guarantees	• Assignment of leases and rents and certain personal property
SBA EIDLs
Blue Dolphin Term Loan Due 2051	-	• Business assets (e.g., machinery and equipment, furniture, fixtures, etc.)
LE Term Loan Due 2050	-	• Business assets (e.g., machinery and equipment, furniture, fixtures, etc.)
NPS Term Loan Due 2050	-	• Business assets (e.g., machinery and equipment, furniture, fixtures, etc.)
Equipment Loan Due 2025	-	• First priority security interest in the equipment (backhoe).

	⁽¹⁾	Jonathan Carroll was required to personally guarantee repayment of borrowed funds and accrued interest.
	⁽²⁾	Subject to the Kissick Subordination Agreement.

Representations, Warranties, and Covenants

The First Term Loan Due 2034, Second Term Loan Due 2034, NPS Term Loan Due 2031, BDEC Term Loan Due 2051, LE Term Loan Due 2050, and NPS Term Loan Due 2050 contain representations and warranties, affirmative and negative covenants, and events of default that we consider usual and customary for bank facilities of these types. Specifically, the First Term Loan Due 2034 contains quarterly debt service coverage and total combined current assets ratios and annual current and debt to net worth ratios; in addition, LE must maintain quarterly total combined debt and total combined tangible net worth ratios. The First Term Loan Due 2034 also requires that a $1.0 million payment reserve account be maintained. The Second Term Loan Due 2034 contains quarterly total combined current assets, total combined current liabilities, and total combined debt ratios and annual current and debt to net worth ratios. The NPS Term Loan Due 2031 requires annual maintenance of debt service coverage and current ratios. There are no covenants associated with the Kissick Debt, BDEC Term Loan Due 2051, LE Term Loan Due 2050, NPS Term Loan Due 2050, and the Equipment Loan Due 2025.