| Debt Financing and Revolving Credit Facilities | Note 8 – Debt Financing and Revolving Credit Facilities Term Loan Credit Agreement On October 13, 2020, the Company entered into a Credit Agreement (the “Term Loan Credit Agreement”) by and among the Company, as guarantor, FreightCar North America (“Borrower” and together with the Company and certain other subsidiary guarantors, collectively, the “Loan Parties”), CO Finance LVS VI LLC, as lender (the “Lender”), and U.S. Bank National Association, as disbursing agent and collateral agent (“Agent”). Pursuant to the Term Loan Credit Agreement, the Lender committed to the extension of a term loan credit facility in the principal amount of $ 40,000 , consisting of a single term loan to be funded upon the satisfaction of certain conditions precedent set forth in the Term Loan Credit Agreement, including stockholder approval of the issuance of the common stock underlying the Warrant described below (the funding date of such term loan, the “Closing Date”). FreightCar America, Inc. stockholders approved the issuance of the common stock underlying the Warrant at a special stockholders’ meeting on November 24, 2020. The $ 40,000 term loan closed and was funded on November 24, 2020. The Company incurred $ 2,872 in deferred financing costs related to the Term Loan Agreement. The deferred financing costs are presented as a reduction of the long-term debt balance and amortized to interest expense over the term of the Term Loan Agreement. The Term Loan Credit Agreement has a term ending five years following the Closing Date. The term loan outstanding under the Term Loan Credit Agreement bears interest, at Borrower’s option and subject to the provisions of the Term Loan Credit Agreement, at Base Rate (as defined in the Term Loan Credit Agreement) or Eurodollar Rate (as defined in the Term Loan Credit Agreement) plus the Applicable Margin (as defined in the Term Loan Credit Agreement) for each such interest rate set forth in the Term Loan Credit Agreement. As of September 30, 2021, the interest rate on the original advance under the Term Loan Credit Agreement was 14.0 %. The Term Loan Credit Agreement has both affirmative and negative covenants, including, without limitation, minimum liquidity, limitations on indebtedness, liens and investments. The Term Loan Credit Agreement also provides for customary events of default. Pursuant to the terms and conditions set forth in the Term Loan Credit Agreement and the related loan documents, each of the Loan Parties granted to Agent a continuing lien upon all of such Loan Parties’ assets to secure the obligations of the Loan Parties under the Term Loan Credit Agreement. On May 14, 2021, FreightCar North America (“Borrower” and together with the Company and certain other subsidiary guarantors, collectively, the “Loan Parties”) entered into an Amendment No. 2 to the Term Loan Credit Agreement (the “Amendment” and together with the Term Loan Credit Agreement, the “Term Loan Credit Agreement”) with CO Finance LVS VI LLC, as lender (the “Lender”), an affiliate of a corporate credit fund, and U.S. Bank National Association, as disbursing agent and collateral agent (“Agent”), pursuant to which the principal amount of the term loan credit facility was increased by $ 16,000 to a total of $ 56,000 , with such additional $ 16,000 (the “Additional Loan”) to be funded upon the satisfaction of certain conditions precedent set forth in the Amendment. The Additional Loan closed and was funded on May 17, 2021. The Company incurred $ 480 in deferred financing costs related to the Amendment which are presented as a reduction of the long-term debt balance and amortized on a straight-line basis to interest expense over the term of the Amendment. The Additional Loan will bear interest, at Borrower’s option and subject to the provisions of the Term Loan Credit Agreement, at Base Rate (as defined in the Term Loan Credit Agreement) or Eurodollar Rate (as defined in the Term Loan Credit Agreement) plus the Applicable Margin (as defined in the Term Loan Credit Agreement) for each such interest rate set forth in the Term Loan Credit Agreement. As of September 30, 2021, the interest rate on the Additional Loan was 14.0 %. Pursuant to the Amendment, in the event that the Additional Loan is not repaid in full by March 31, 2022, the Company shall issue to the Lender and/or an affiliate of the Lender a warrant (the “Additional Warrant”) to purchase a number of shares of the Company’s common stock, par value $ 0.01 per share, equal to 5 % of the Company’s outstanding common stock on a fully-diluted basis at the time the Additional Warrant is exercised (after giving effect to such issuance). The Additional Warrant, if issued, will have an exercise price of $ 0.01 and a term of ten years . The Company believes that it is probable that the Additional Warrant will be issued and as such has recorded an additional warrant liability of $ 7,351 as of September 30, 2021. The Amendment contains additional covenants, including, among other things, that the Company i) obtain a term sheet for additional financing of no less than $ 15,000 by July 31, 2021 and ii) file a registration statement on Form S-3 registering Company securities, including the shares of Company common stock issuable upon exercise of the Additional Warrants, by no later than August 31, 2021. On July 30, 2021, FreightCar North America, LLC (“Borrower” and together with the Company and certain other subsidiary guarantors, collectively, the “Loan Parties”) entered into an Amendment No. 3 to Credit Agreement (the “Third Amendment” and together with the Credit Agreement, as amended, the “Term Loan Credit Agreement”) with CO Finance LVS VI LLC, as lender and letter of credit provider (the “Lender”), an affiliate of a corporate credit fund, and U.S. Bank National Association, as disbursing agent and collateral agent (the “Agent”), pursuant to which, among other things, Lender obtained a standby letter of credit (as may be amended from time to time, the “Third Amendment Letter of Credit”) from Wells Fargo Bank, N.A., in the principal amount of $ 25,000 for the account of the Company and for the benefit of Siena Lending Group LLC (the “Revolving Loan Lender”). Reimbursement Agreement Letter of Credit Fee 500 , which shall be due and payable quarterly beginning on August 2, 2021, and every three months thereafter. Equity Fee 0.01 per share, of the Company (the “Common Stock”). The Equity Fee shall be calculated by dividing $ 1,000 by the volume weighted average price of the Company’s Common Stock on the Nasdaq Capital Market for the ten (10) trading days ending on the last business day of the applicable Measurement Period. The Company can opt to pay the Equity Fee in cash, in the amount of $ 1,000 , if, and only if, (x) the Company has already issued as Equity Fees a number of shares of its Common Stock equal to (I) 5.0 % multiplied by (II) the total number of shares of Common Stock outstanding as of July 30, 2021, rounded down to the nearest whole share of Common Stock, and (y) the Company has at least $ 15,000 of Repayment Liquidity after giving effect to such payment. The term Repayment Liquidity, as defined in the Term Loan Credit Agreement, means (a) all unrestricted and unencumbered cash and cash equivalents of the Loan Parties, plus (b) the undrawn and available portion of the commitments under that certain Amended and Restated Loan and Security Agreement by and among the Loan Parties and the Revolving Loan Lender (as described below), minus (c) all accounts payable of the Loan Parties that are more than 30 days past due. The Equity Fee shall no longer be paid once the Company has issued to Lender and/or OC III LVS XII LP Equity Fees in an amount of Common Stock equal to 9.99 % multiplied by the total number of shares of Common Stock outstanding as of July 30, 2021, rounded down to the nearest whole share of Common Stock (the “Maximum Equity”). Cash Fee 1,000 , provided that, in the quarter in which the Maximum Equity is issued, such fee shall be equitably reduced by the value of any Equity Fee issued by the Company that quarter. Warrant In connection with the entry into the Term Loan Credit Agreement, the Company issued to an affiliate of the Lender (the “Warrantholder”) a warrant (the “Warrant”), pursuant to that certain warrant acquisition agreement, dated as of October 13, 2020 (the “Warrant Acquisition Agreement”), by and between the Company and the Lender to purchase a number of shares of the Company’s common stock, par value $ 0.01 per share, equal to 23 % of the outstanding common stock on a fully-diluted basis at the time the Warrant is exercised (after giving effect to such issuance). The Warrant is exercisable for a term of ten years from the date of the issuance of the Warrant. The Warrant was issued on November 24, 2020 after the Company received stockholder approval of the issuance of the common stock issuable upon exercise of the Warrant by the Warrantholder. In connection with the issuance of the Warrant, the Company and the Lender entered into a registration rights agreement (the “Registration Rights Agreement”) as of the Closing Date of November 24, 2020. As of September 30, 2021 and December 31, 2020, the Warrant was exercisable for an aggregate of 5,386,591 and 5,307,539 shares, respectively of common stock of the Company with a per share exercise price of $ 0.01 . The Company determined that the Warrant should be accounted for as a derivative instrument and classified as a liability on its Consolidated Balance Sheets primarily due to the instrument obligating the Company to settle the Warrant in a variable number of shares of common stock. The Warrant was recorded at fair value and is treated as a discount on the term loan. The discount on the associated debt is amortized over the life of the Term Loan Credit Agreement and included in interest expense. As part of the Second Amendment Loans executed on May 14, 2021, if any amount remains outstanding on March 31, 2022, the Company shall immediately issue to the Lenders additional Warrants to purchase 5.0 % of the outstanding common stock on a fully-diluted basis at the date of any partial or full exercise of such Warrants at the agreed purchase price of $ 0.01 per share. The Company believes that it is probable that the Additional Warrant will be issued and as such has recorded an additional warrant liability of $ 7,351 as of September 30, 2021. The following schedule shows the change in fair value of the Warrant as of September 30, 2021.
Warrant liability as of December 31, 2020 $ 12,730
Change in fair value 18,969
Warrant liability as of September 30, 2021 $ 31,699 The change in fair value of the Warrant is reported on a separate line in the consolidated statement of operations. The Term Loan Credit Agreement is presented net of the unamortized discount and unamortized deferred financing costs. Siena Loan and Security Agreement On October 8, 2020, the Company entered into a Loan and Security Agreement (the “Siena Loan Agreement”) by and among the Company, as guarantor, and certain of its subsidiaries, as borrowers (together with the Company, the “Loan Parties”), and Siena Lending Group LLC, as lender (“Siena”). Pursuant to the Siena Loan Agreement, Siena provided an asset backed credit facility, in the maximum aggregate principal amount of up to $ 20,000 , (the "Maximum Revolving Facility Amount") consisting of revolving loans (the Revolving Loans"). The Siena Loan Agreement replaced the Company’s prior revolving credit facility under the Credit and Security Agreement (the “BMO Credit Agreement”) dated as of April 12, 2019, among the Company and certain of its subsidiaries, as borrowers and guarantors, and BMO Harris Bank N.A., as lender, as amended from time to time, which was terminated effective October 8, 2020 and otherwise would have matured on April 12, 2024. The Siena Loan Agreement provided for a revolving credit facility with maximum availability of $ 20,000 , subject to borrowing base requirements set forth in the Siena Loan Agreement, which generally limited availability under the revolving credit facility to (a) 85 % of the value of eligible accounts and (b) up to the lesser of (i) 50 % of the lower of cost or market value of eligible inventory and (ii) 85 % of the net orderly liquidation value of eligible inventory, and as reduced by reserves established by Siena from time to time in accordance with the Siena Loan Agreement. On July 30, 2021, the Loan Parties and Siena Lending Group LLC ( the "Revolving Loan Lender") entered into an Amended and Restated Loan and Security Agreement (the “Amended and Restated Loan and Security Agreement”), which amended and restated the terms and conditions of the Siena Loan Agreement in its entirety. Pursuant to the Amended and Restated Loan and Security Agreement, the Maximum Revolving Facility Amount was increased to $ 25,000 , provided, however, that the outstanding balance of all Revolving Loans may not exceed the lesser of (A) the Maximum Revolving Facility Amount minus the Availability Block and (B) an amount equal to the issued and undrawn portion of the Third Amendment Letter of Credit (as defined above) minus the Availability Block. The term “Availability Block”, as defined in the Amended and Restated Loan and Security Agreement, means 3.0 % of the issued and undrawn amount under the Third Amendment Letter of Credit. The Amended and Restated Loan and Security Agreement has a term ending on October 8, 2023. Revolving Loans outstanding under the Amended and Restated Loan and Security Agreement bear interest, subject to the provisions of the Amended and Restated Loan and Security Agreement, at an interest rate of 2 % per annum in excess of the Base Rate (as defined in the Siena Loan Agreement). As of September 30, 2021, the interest rate on outstanding debt under the Amended and Restated Loan and Security Agreement was 5.26 %. The Amended and Restated Loan and Security Agreement contains affirmative and negative covenants, including, without limitation, limitations on future indebtedness, liens and investments. The Amended and Restated Loan and Security Agreement also provides for customary events of default. Pursuant to the terms and conditions set forth in the Amended and Restated Loan and Security Agreement, each of the Loan Parties granted Siena a continuing lien upon certain assets of the Loan Parties to secure the obligations of the Loan Parties under the Amended and Restated Loan and Security Agreement. As of September 30, 2021, the Company had $ 24,164 in outstanding debt under the Siena Loan Agreement and remaining borrowing availability of $ 31 . As of December 31, 2020, the Company had $ 6,874 in outstanding debt under the Siena Loan Agreement and remaining borrowing availability of $ 9,701 . The Company incurred $ 1,101 in deferred financing costs related to the Siena Loan Agreement and incurred $ 1,037 in additional deferred financing costs related to the Amended and Restated Loan and Security Agreement. The deferred financing costs are presented as an asset and amortized to interest expense on a straight-line basis over the term of the Siena Loan Agreement. SBA Paycheck Protection Program Loan In March 2020, Congress passed the Paycheck Protection Program (“PPP”), authorizing loans to small businesses for use in paying employees that they continue to employ throughout the global pandemic and for rent, utilities and interest on mortgages. In June 2020, Congress enacted the Paycheck Protection Program Flexibility Act (“PPPFA”), amending the PPP. Loans obtained through the PPP, as amended, are eligible to be forgiven as long as the proceeds are used for qualifying purposes and certain other conditions are met. On April 16, 2020, the Company received a loan from BMO Harris Bank N.A. in the amount of $ 10,000 (the “PPP Loan”). Since the entire PPP Loan was used for payroll, utilities and interest, management anticipated that the majority of the PPP Loan would be forgiven. The Company filed an application for PPP Loan forgiveness on October 28, 2020 along with a request for extension of the term of the PPP Loan to five years. On July 14, 2021, the Company received a notification from BMO Harris Bank N.A. that the Small Business Administration approved the Company’s PPP Loan forgiveness application for the entire $ 10,000 balance, together with interest accrued thereon, of the PPP Loan and that the remaining balance of the PPP Loan was zero . The Company recognized a gain on extinguishment of debt of $ 10,129 related to PPP Loan forgiveness during the third quarter of 2021. M&T Credit Agreement On April 16, 2019, FreightCar America Leasing 1, LLC, an indirect wholly-owned subsidiary of the Company (“Freightcar Leasing Borrower”), entered into a Credit Agreement (the “M&T Credit Agreement”) with M & T Bank, N.A., as lender (“M&T”). Pursuant to the M&T Credit Agreement, M&T extended a revolving credit facility to Freightcar Leasing Borrower in an aggregate amount of up to $ 40,000 for the purpose of financing railcars which will be leased to third parties. On April 16, 2019, Freightcar Leasing Borrower also entered into a Security Agreement (the “M&T Security Agreement”) pursuant to which it granted a security interest in all of its assets to M&T to secure its obligations under the M&T Credit Agreement. On April 16, 2019, FreightCar America Leasing, LLC, a wholly-owned subsidiary of the Company and parent of Freightcar Leasing Borrower (“Freightcar Leasing Guarantor”), entered into (i) a Guaranty Agreement (the “M&T Guaranty Agreement”) pursuant to which Freightcar Leasing Guarantor guarantees the repayment and performance of certain obligations of Freightcar Leasing Borrower and (ii) a Pledge Agreement (the “M&T Pledge Agreement”) pursuant to which Freightcar Leasing Guarantor pledged all of the equity of Freightcar Leasing Borrower held by Freightcar Leasing Guarantor. The loans under the M&T Credit Agreement are non-recourse to the assets of the Company or its subsidiaries other than the assets of Freightcar Leasing Borrower and Freightcar Leasing Guarantor. The M&T Credit Agreement had a term ending on April 16, 2021 (the “Term End”). Loans outstanding thereunder will bear interest, accrued daily, at the Adjusted LIBOR Rate (as defined in the M&T Credit Agreement) or the Adjusted Base Rate (as defined in the M&T Credit Agreement). The M&T Credit Agreement has both affirmative and negative covenants, including, without limitation, maintaining an Interest Coverage Ratio (as defined in the M&T Credit Agreement) of not less than 1.25 :1.00, measured quarterly, and limitations on indebtedness, loans, liens and investments. The M&T Credit Agreement also provides for customary events of default. As of September 30, 2021 and December 31, 2020, FreightCar Leasing Borrower had $ 10,161 and $ 10,105 , respectively, in outstanding debt under the M&T Credit Agreement, which was collateralized by leased railcars with a carrying value of $ 6,842 and $ 6,975 , respectively. As of September 30, 2021, the interest rate on outstanding debt under the M&T Credit Agreement was 4.18 % . On August 7, 2020, FreightCar Leasing Borrower received notice (the “First Notice”) from M&T that, based on an appraisal (the “Appraisal”) conducted by a third party at the request of M&T with respect to the railcars in FreightCar Leasing Borrower’s Borrowing Base (as defined in the M&T Credit Agreement) under the M&T Credit Agreement, the unpaid principal balance under the M&T Credit Agreement exceeded the availability under the M&T Credit Agreement as of the date of the Appraisal by $ 5,081 (the “Payment Demand Amount”). In the First Notice, M&T Bank: (a) asserted that an Event of Default under the M&T Credit Agreement has occurred because FreightCar Leasing Borrower did not pay the Payment Demand Amount to M&T within five days of the asserted change in availability; (b) demanded payment of the amount within five days of the date of the First Notice; and (c) terminated the commitment to advance additional loans under the M&T Credit Agreement. On December 18, 2020, FreightCar Leasing Borrower received a revised notice (the “Second Notice,” and together with the First Notice, the “Notices”) from M&T asserting that: (a) as a result of the continuing Event of Default that M&T alleged to have occurred under the M&T Credit Agreement, M&T has declared a default and accelerated and demands immediate payment by FreightCar Leasing Borrower of $ 10,114 (the “Outstanding Amount”); (b) FreightCar Leasing Borrower is liable for all interest that continues to accrue on the Outstanding Amount; and (c) FreightCar Leasing Borrower is liable for all attorneys’ fees, costs and expenses as set forth in the M&T Credit Agreement. On April 20, 2021, FreightCar Leasing Borrower received a notice from M&T that an Event of Default had occurred due to all amounts outstanding under the M&T Credit Agreement having not be paid by the Term End. FreightCar Leasing Borrower has continued discussions with M&T during the quarter ended September 30, 2021 regarding the Event of Default. Long-term debt consists of the following as of September 30, 2021 and December 31, 2020:
September 30, December 31,
2021 2020
M&T Credit Agreement outstanding $ 10,161 $ 10,105
SBA Payroll Protection Program Loan outstanding - 10,000
Siena Loan Agreement outstanding 24,164 6,874
Term Loan Credit Agreement outstanding 56,914 40,000
Total debt 91,239 66,979
Less Term Loan Credit Agreement discount ( 7,531 ) ( 8,892 )
Less Term Loan Credit Agreement deferred financing costs ( 2,827 ) ( 2,814 )
Total debt, net of discount and deferred financing costs 80,881 55,273
Less amounts due within one year ( 10,161 ) ( 17,605 )
Long-term debt, net of current portion $ 70,720 $ 37,668 The fair value of long-term debt approximates its carrying value as of September 30, 2021 and December 31, 2020. |
