Long Term Debt

6 Months Ended

Dec. 31, 2011

Note 3 — Long Term Debt:


	December 31, 2011				June 30, 2011
	Current		Long-Term		Current		Long-Term
	(in thousands)
Revolving Credit Agreement due July 2, 2012, interest rate one-month LIBOR rate 0.26% plus 7.50% (a)	$	13,700	$	—	$	—	$	13,700
Revolving Credit Agreement due July 2, 2012, interest rate one-month Euro LIBOR rate 1.13% plus 7.50% (a)		1,944		—		—		2,175
Term loan payable by foreign subsidiary due April 28, 2016, with annual payments, interest rate 1.53% (b)		260		910		248		993
Subordinated promissory note due June 30, 2015, interest one year LIBOR rate 1.2% plus 4.50% (c)		448		1,684		448		1,684
Term loan payable by foreign subsidiary due October 15, 2016, with annual payments, interest rate 1.50% (d)		130		1,170		—		—

	$	16,482	$	3,764	$	696	$	18,552

(a) The Company’s primary source of external financing is its revolving Credit Agreement, as amended with certain lenders (the “Lenders”) and Bank of America (“BofA”), as agent (the “Credit Agreement”), which has a term that ends on July 2, 2012. The borrowings under the Credit Agreement are secured in the U.S. by a pledge of substantially all of the Company’s domestic assets (approximately $17,000) and in Europe by a pledge of the Company’s European assets and the stock of the Company’s European subsidiaries and certain of the Company’s Asian subsidiaries.

Under the terms of waiver and amendment agreements entered into in September 2010 and May 2011 to the Credit Agreement, the Company issued to the Lenders two tranches of Warrants. The first tranche (“the 2010 Warrants”) have a term of 10 years to purchase 352,671 shares of the Company’s Class A Common Stock for $0.01 per share and contains a put provision that enables the holders after September 28, 2012 to request a cash settlement of the then fair market value of the 2010 Warrants in an amount not to exceed $1.50 per share for each share issuable upon exercise of the Warrants. During the quarter ended December 31, 2011 one of the Lenders exercised its Warrant and was issued 174,851 shares. The 2010 Warrants are presented as a liability ($159 at December 31, 2011) under other long-term liabilities. The value of the 2010 Warrants is marked to market at the end of each reporting period and the change in value is recorded in interest expense. During the quarter and six months ended December 31, 2011, the value of the 2010 Warrants decreased with a reduction of interest expense of $102 and increase in equity of $159.

The second tranche (“the May 2011 Warrants”) also have a term of ten years to purchase 372,374 shares of the Company’s Class A Common Stock for $0.01 per share and contains a put provision that enables the holders after May 16, 2013 to request a cash settlement of the then fair market value of the 2011 Warrants in an amount not to exceed $1.50 per share for each share issuable upon exercise of the Warrants. The 2011 Warrants are presented as a liability ($335 at December 31, 2011) under other long-term liabilities. The value of the 2011 Warrants is marked to market at the end of each reporting period and the change in value is recorded in interest expense. During the quarter and six months ended December 31, 2011, the value of the May 2011 Warrants decreased with a reduction in interest expense of $108.

On October 13, 2011, the Company entered into Amendment No. 11 to the Credit Agreement (“Amendment No. 11”) with certain lenders and BofA as agent. Among other things, Amendment No. 11 (i) extended the maturity date of the revolving Credit Agreement from November 21, 2011 to July 2, 2012, (ii) adjusted the interest payment provisions pursuant to which euro and U.S. dollar borrowings bear interest at LIBOR plus 7.50%, and (iii) increased the incremental interest rate for the deferred interest to be paid at maturity. At December 31, 2011 the amount of deferred interest recorded in other accounts payable and accrued liabilities is approximately $359. As part of the consideration for Amendment No. 11, the Company will (a) pay the Lenders a potential fee of $1,100 as follows: $200 upon signing of Amendment No. 11, and scheduled weekly installments ranging from $200 to $50 beginning February 10, 2012 through April 20, 2012 unless the Credit Agreement is fully refinanced prior to the payment due dates, in which case any remaining payments will be waived, (b) grant to the Lenders ten year Warrants to purchase an aggregate of 434,200 shares of Class A Common Stock of the Company at an exercise price of $0.01 per share, with a put provision exercisable after two (2) years that enables the holder to request a cash settlement equal to the then fair market value of the Warrants in an amount not to exceed $1.50 per share for each share issuable upon the exercise of the Warrants (the “October 2011 Warrants”); and (c) if the Credit Agreement is not refinanced prior to certain scheduled dates, the Company may grant to the Lenders additional ten year Warrants in four monthly installments beginning March 1, 2012 and on the first day of each month through June 1, 2012, to purchase an aggregate of 1,592,067 shares of Class A Common Stock of the Company (equal to an amount not to exceed 20 percent of the issued and outstanding shares of Class A Common Stock of the Company on September 27, 2010) each at an exercise price of $0.01 per share, and each with a put provision exercisable after two (2) years that enables the holder to request a cash settlement equal to the then fair market value of the Warrants in an amount not to exceed $1.50 per share for each share issuable upon the exercise of the Warrants.

The October Warrants are presented as a liability ($391 at December 31, 2011) under other long term liabilities. The value of the October Warrants is marked to market at the end of each reporting period and the change in value is recorded in interest expense. During the quarter and six months ended December 31, 2011, the value of the October warrants decreased with a reduction in interest expense of $61.

On December 15, 2011, the Company and certain of its subsidiaries entered into Amendment No. 12 to the Credit Agreement (“Amendment No. 12”) with Bank of America, N.A. as a Lender and as Administrative Agent, and certain other lenders. Amendment No. 12 amended the terms of the Credit Agreement to (i) allow the sale of the Company’s real property located in Tranas, Sweden, for a purchase price of not less than the Dollar equivalent of 4,360,000 Swedish Krona (approximately $634), to be consummated no later than December 31, 2011, and (ii) provide that the net cash proceeds from the sale of the aforementioned real property be used by the Company for working capital purposes.

On December 22, 2011, the Company and certain of its subsidiaries entered into Amendment No. 13 (“Amendment No. 13”) to the Credit Agreement. Among other things, Amendment No. 13 (i) deferred until May 15, 2012 the Lenders’ right to be granted the Amendment No. 11 Additional Warrants (as defined in Amendment No. 11, described above), (ii) deferred until May 15, 2012 the additional fees owed to the Lenders under Amendment No. 11, (iii) deferred until May 15, 2012 the Incremental Interest (as such term is defined in the Credit Agreement), and (iv) provided that each of such deferrals shall become permanent upon the closing of the Merger no later than May 15, 2012, subject to an extension until May 30, 2012 if the stockholder meeting to vote on the Merger has been scheduled by May 15, 2012.

The Credit Agreement, as amended by Amendment No 13, continues to require that the Company satisfy certain minimum EBITDA, Minimum Currency Adjusted Net Sales, Capital Expenditures, and Minimum Liquidity tests. At December 31, 2011 the Company was in compliance with these covenants. The Company anticipates that it will be in compliance with these covenants for the remainder of the term of the Credit Agreement. However, the Company’s ability to meet its debt obligations (including compliance with applicable financial covenants) is dependent upon the Company’s future performance and its cash flows from operations, both of which are subject to prevailing economic conditions and financial, business, and other known and unknown risks and uncertainties, certain of which are beyond the Company’s control.

The Credit Agreement matures on July 2, 2012. The lenders under the Credit Agreement (the “Lenders”) have advised the Company that they are unwilling to continue to lend to the Company beyond that date. The Company has been actively seeking to identify sources of equity and debt financing, including by engaging Bryant Park Capital, Inc. (“Bryant Park”) to act as its financial advisor and consultant responsible for, among other things, seeking and contacting prospective lenders and investors. However, to date, the Company has been unable to identify any sources adequate to sufficiently refinance its indebtedness under the Credit Agreement or otherwise enable the Company to sufficiently satisfy its liquidity requirements. Accordingly, there is no assurance that we will be able to obtain financing from the Lenders or from other sources on acceptable terms or at all. If the Company is unable to obtain sufficient financing to fund its operations or capital expenditures, it is unlikely that the Company will be able to meet its obligations as they become due and may be rendered insolvent.

(b) Five year term loan with principal and interest payments due and payable in five annual installments. The balance at December 31, 2011 was $1,170.

(c) Five year subordinated promissory note with principal and interest payments due and payable in five annual installments. The balance at December 31, 2011 was $2,132.

(d) Five year term loan with principal and interest payable in five annual installments. The balance at December 31, 2011 was $1,300.

The Company maintains relationships with both foreign and domestic banks, which combined have extended short- and long-term credit facilities to the Company totaling $26,370. As of December 31, 2011, the Company had $23,069 outstanding (including Letters of Credit of $1,055). The amount available under these credit facilities at December 31, 2011 was $100.

BALDWIN TECHNOLOGY CO INC 10-Q