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Long-Term Debt
12 Months Ended
Jun. 30, 2019
Debt Disclosure [Abstract]  
Long-Term Debt

9. LONG-TERM DEBT

Long-term debt consisted of the following:

 

 

 

June 30,

 

 

 

2019

 

 

2018

 

Trace RDA Loan

 

$

2,999

 

 

$

3,277

 

Capital lease obligations

 

 

159

 

 

 

0

 

Total

 

 

3,158

 

 

 

3,277

 

Less unamortized debt costs

 

 

(195

)

 

 

(219

)

Less current maturities

 

 

(2,836

)

 

 

(255

)

 

 

$

127

 

 

$

2,803

 

 

Trace RDA Loan— Southern Health Corporation of Houston, Inc. (“Trace”) a wholly owned subsidiary of the Company, closed on a $9,975 Mortgage Loan Agreement (“Trace RDA Loan”) with a bank, dated as of July 5, 2012. The Trace RDA Loan has a term of 15 years with level monthly payments of principal and interest until repaid. On December 26, 2017, the Fifth Amendment to Loan Agreement, Modification of Note and Waiver (“Modification”) was entered into by Trace and the bank. Under the Modification, Trace made a $3,548 prepayment on the Trace RDA Loan. The monthly principal and interest payments on the Trace RDA Loan were reduced, the interest rate was reduced to the prime rate (as published in the Wall Street Journal) plus 1% with a floor of 5.5%, (6.5% at June 30, 2019) and certain loan covenants were modified. The Trace RDA Loan is collateralized by real estate and equipment of Trace in Houston, MS, and is partially guaranteed under the U.S. Department of Agriculture, Rural Development Business and Industry Program.

The Trace RDA Loan contains various terms and conditions, including financial restrictions and limitations, and affirmative and negative covenants. The loan is guaranteed by SunLink. At June 30, 2019, Trace was not in compliance with the debt service coverage, fixed charge coverage and funded debt to EBITDA ratios. The Company is discussing with the lender a waiver of this non-compliance but a waiver of non-compliance has not been received as of the date of the filing of this report. Since Trace was in non-compliance with these covenants at a measurement date, if the lender were to declare an event of default and accelerate the maturity of the indebtedness, either Trace or SunLink under its guarantee could be required to repay the loan in advance of its maturity which would require a substantial amount of our cash and any such repayment could restrict our current and future operations, which could negatively affect our ability to manage our operations and liquidity. No event of default has been declared by the lender as of the date of the filing of this report nor is such a declaration currently anticipated .

The Company continues to discuss a waiver to this non-compliance but a waiver of the non-compliance has not been received as of September 27, 2019. Indebtedness of $2,535, net of unamortized debt costs, as of June 30, 2019, is presented in current liabilities in the consolidated balance sheet as a result of the financial covenant non-compliance at that date. The ability of Trace to continue to make the required debt service payments under the Trace RDA Loan depends on, among other things, its ability to generate sufficient cash, including from operating activities and asset sales. If Trace is unable to generate sufficient cash to meet debt service payments on the Trace RDA Loan, including in the event the lender were to declare an event of default and accelerate the maturity of the indebtedness, such failure could have material adverse effects on the Company. The Trace RDA Loan is guaranteed by the Company and one subsidiary.

Debt Commitments —Annual required payments of debt and contractual commitments for interest on long-term debt are shown in the following table. The interest rate on variable interest debt is calculated at the interest rate at June 30, 2019.

 

 

 

Debt

 

 

Interest

 

2020

 

$

3,031

 

 

$

186

 

2021

 

 

34

 

 

 

8

 

2022

 

 

36

 

 

 

5

 

2023

 

 

39

 

 

 

3

 

2024

 

 

18

 

 

 

0

 

Total

 

$

3,158

 

 

$

202