| Senior and Other Debt | Note 5. Senior and Other Debt
Asia-Pacific Leasing Senior Credit Facility
ANZ/CBA Credit Facility
At September 30, 2017, Royal Wolf had a $117,510,000
(AUS$150,000,000) secured senior credit facility, as last amended
in December 2016, under a common terms deed arrangement with the
Australia and New Zealand Banking Group Limited (“ANZ”)
and Commonwealth Bank of Australia (“CBA”) (the
“ANZ/CBA Credit Facility”). Under the common deed
arrangement of the ANZ/CBA Credit Facility, ANZ’s
proportionate share of the borrowing capacity was $70,506,000
(AUS$90,000,000) and CBA’s proportionate share was
$47,004,000 (AUS$60,000,000). The ANZ/CBA Credit Facility was
secured by substantially all of the assets of the Company’s
Australian and New Zealand subsidiaries and had $78,340,000
(AUS$100,000,000) maturing on January 31, 2022 (Facility A),
and $39,170,000 (AUS$50,000,000) maturing on July 31, 2019
(Facility B).
For the ANZ proportionate share, borrowings under the ANZ/CBA
Credit Facility bore interest at the bank bill swap interest rate
in Australia (“BBSY”) or New Zealand
(“BKBM”), plus a margin of 1.40% - 2.40% per annum on
Facility A and 1.35% - 2.40% on Facility B, depending on the net
debt leverage ratio (“NDLR”), as defined. The CBA
proportionate share had a margin of 1.75% - 2.65% per annum on
Facility A and 1.45% - 2.35% on Facility B. At September 30,
2017, the 30-day 90-day sub-facilities non-operating
At September 30, 2017, total borrowings and availability under
the ANZ/CBA Credit Facility totaled $84,061,000 (AUS$107,303,000)
and $13,500,000 (AUS$17,232,000), respectively. Of the total
borrowings, $52,236,000 (AUS$66,678,000) was drawn under Facility A
and $31,825,000 (AUS$40,625,000) was drawn under Facility B.
Deutsche Bank Credit Facility
On July 11, 2017, Deutsche Bank AG, Sydney Branch
(“Deutsche Bank”), GFN and GFNAPH entered into an
agreement (the “Commitment Letter”) wherein Deutsche
Bank committed to arrange, underwrite and syndicate a three-year,
$97,925,000 (AUS$125,000,000) senior secured credit facility (the
“Deutsche Bank Credit Facility”) to refinance,
subsequent to September 30, 2017, the existing ANZ/CBA Credit
Facility following completion of the acquisition of the
noncontrolling interest of Royal Wolf (see Note 4).
Pursuant to the Commitment Letter, Deutsche Bank committed to enter
into the Deutsche Bank Credit Facility subject to the terms and
conditions of a syndicated facility agreement attached to the
Commitment Letter. The Deutsche Bank Credit Facility would consist
of a $15,668,000 (AUS$20,000,000) Facility A that would amortize
semi-annually; a $66,589,000 (AUS$85,000,000) Facility B with no
scheduled amortization; and a $15,668,000 (AUS$20,000,000)
revolving Facility C to be used for working capital purposes.
Amounts borrowed will bear interest at the rate of 5.0% per annum
until delivery of the first compliance certificate and thereafter
at the BBSY, plus a margin of 4.25% to 5.50% per annum, as
determined by net leverage. The Deutsche Bank Credit Facility will
be secured by substantially all of the assets and by the pledge of
all capital stock of RWH and its subsidiaries and will be subject
to certain financial and other customary covenants, including,
among other things, compliance with specified net leverage and debt
requirement or fixed charge ratios based on EBITDA, as defined.
The above amounts were translated based upon the exchange rate of
one Australian dollar to $0.7834 U.S. dollar at September 30,
2017.
Bison Capital Notes
General
On September 19, 2017, Bison Capital, GFN, GFN U.S., GFNAPH
and GFNAPF, entered into that certain Amended and Restated
Securities Purchase Agreement dated September 19, 2017 (the
“Amended Securities Purchase Agreement”). On
September 25, 2017, pursuant to the Amended Securities
Purchase Agreement, GFNAPH and GFNAPF issued and sold to Bison an
11.9% secured senior convertible promissory note dated
September 25, 2017 in the original principal amount of
$26,000,000 (the “Convertible Note”) and an 11.9%
secured senior promissory note dated September 25, 2017 in the
original principal amount of $54,000,000 (the “Senior
Note” and collectively with the Convertible Note, the
“Bison Capital Notes”). Net proceeds from the sale of
the Bison Capital Notes were used to repay in full all principal,
interest and other amounts due under the term loan to Credit Suisse
(see below), to acquire the 49,188,526 publicly-traded shares of
RWH not owned by the Company and to pay all related fees and
expenses.
The Bison Capital Notes have a maturity of five years and bear
interest from the date of issuance, payable quarterly in arrears
beginning on January 2, 2018. The Company may elect to defer
interest under the Bison Capital Notes until the second anniversary
of issuance. Interest on the Bison Capital Notes are payable in
Australian dollars, but the principal must be repaid in U.S.
dollars. The Bison Capital Notes are secured by a first priority
security interest over all of the assets of GFN U.S., GFNAPH and
GFNAPF, by the pledge by GFN U.S. of the capital stock of GFNAPH
and GFNAPF and by of all of the capital stock of RWH. The Bison
Capital Notes are subject to all terms, conditions and covenants
set forth in the Amended Securities Purchase Agreement. The Amended
Securities Purchase Agreement contains certain financial and other
customary and restrictive covenants, including, among other things,
a minimum EBITDA requirement to equal or exceed AUS$30,000,000 per
trailing 12-month
Convertible Note
At any time prior to maturity, Bison Capital may convert unpaid
principal and interest under the Convertible Note into shares of
GFN common stock based upon a price of $8.50 per share, subject to
adjustment as described in the Convertible Note. If GFN common
stock trades above 150% of the conversion price over 30 consecutive
trading days and the aggregate dollar value of all GFN common stock
traded on NASDAQ exceed $600,000 over a period of 20 consecutive
days, GFN may force Bison Capital to convert all or a portion of
the Convertible Note. The Convertible Note also provides that Bison
Capital shall not be entitled, and GFN shall not be obligated, to
convert the Convertible Note into shares of GFN common stock if
such conversion would result in holders of the Convertible Note
beneficially owning in excess of 5,200,000 shares of GFN common
stock, or approximately 19.5% of the number of shares of GFN common
stock outstanding immediately prior to issuance of the Convertible
Note. The Convertible Note grants Bison Capital and holders of the
Convertible Note a preemptive right to invest in any issuance GFN
equity securities, options or warrants to maintain its
proportionate interest in GFN common stock, after giving effect to
the conversion of the entire Convertible Note. In addition, the
Convertible Note includes a provision which requires GFNAPH and
GFNAPF to pay Bison Capital, via the payment of principal, interest
and the value of GFN common stock received upon conversion of all
or a portion of the Convertible Note, a minimum return of 1.75
times the original $26,000,000 principal amount. The Convertible
Note must also be repaid upon a change of control, as defined. In
the event that Bison Capital or holders of the Convertible Note
receive aggregate proceeds in excess of $48,900,000 from the sale
of GFN common stock received from conversion of the Convertible
Note, then 50% of the interest accrued and actually paid to Bison
Capital (such amount, the “Price Increase”) shall be
repaid by Bison Capital or holders of the Convertible Note by
either (i) paying such Price Increase to GFNAPH or GFNAPF in
the form of cash, (ii) returning to GFN shares of GFN Common
Stock with a value equal to the Price Increase or (iii) any
combination of (i) or (ii) above that if the aggregate equals
the Price Increase. The value of the GFN common stock for purposes
of the return of shares to GFN by the shall be deemed to be the
average price per share of GFN common stock realized by the
Convertible Note holder in the sale of such shares. The Convertible
Note holder may satisfy such obligations by returning to GFN shares
of GFN common stock with an aggregate value equivalent to the Price
Increase.
The Company evaluated the Convertible Note and determined that
certain conversion rights were an embedded derivative that required
bifurcation because they were not deemed to be clearly and closely
related to the Convertible Note. As a result, the Company will
separately account for these conversion rights as a standalone
derivative. As of September 30, 2017, the fair value of this
standalone derivative is included as a part of senior and other
debt in the accompanying consolidated balance sheets. The
Company will determine the fair value of the embedded derivative
using a valuation model and market prices and will reassess the
fair value of the embedded derivative at the end of each reporting
period, or more frequently as deemed necessary, with any changes in
value reported in the accompanying consolidated statements of
operations.
Senior Note
The Senior Note may not be prepaid prior to its first anniversary
of issuance. GFNAPH and GFNAPF may prepay the Senior Note at 102%
of the original principal amount, plus accrued interest, after the
first anniversary and prior to the second anniversary of issuance,
at 101% of the original principal amount, plus accrued interest,
after the second anniversary and prior to the third anniversary of
issuance and with no prepayment premium after the third anniversary
of issuance.
North America Senior Credit Facility
The North America leasing (Pac-Van
The Wells Fargo Credit Facility is secured by substantially all of
the rental fleet, inventory and other assets of the Company’s
North American leasing and manufacturing operations. The FILO Term
Loan also contains a first priority lien on the same collateral,
but on a “last out basis,” after all of the outstanding
obligations to the primary lenders in the Wells Fargo Credit
Facility have been satisfied. The Wells Fargo Credit Facility
effectively not only finances the North American operations, but
also the funding requirements for the Series C Preferred Stock (see
Note 3), the term loan with Credit Suisse (see below) and the
publicly-traded unsecured senior notes. The maximum amount of
intercompany dividends that Pac-Van Pac-Van
Borrowings under the Wells Fargo Credit Facility accrue interest,
at the Company’s option, either at the base rate, plus 0.5%
and a range of 1.00% to 1.50%, or the LIBOR rate, plus 1.0% and a
range of 2.50% to 3.00%. The FILO Term Loan within the Wells Fargo
Credit Facility bears interest at 11.00% above the LIBOR rate, with
a LIBOR rate floor of 1.00%. The Wells Fargo Credit Facility
contains, among other things, certain financial covenants,
including fixed charge coverage ratios, and other covenants,
representations, warranties, indemnification provisions, and events
of default that are customary for senior secured credit facilities;
including a covenant that would require repayment upon a change in
control, as defined.
At September 30, 2017, borrowings and availability under the
Wells Fargo Credit Facility totaled $187,654,000 and $35,044,000,
respectively.
Credit Suisse Term Loan
On March 31, 2014, the Company entered into a $25,000,000
facility agreement, as amended, with Credit Suisse (“Credit
Suisse Term Loan”) as part of the financing for the
acquisition of Lone Star and, on April 3, 2014, the Company
borrowed the $25,000,000 available to it. The Credit Suisse Term
Loan provided that the amount borrowed would bear interest at LIBOR
plus 7.50% per year, would be payable quarterly and that all
principal and interest would mature on July 1, 2018. In
addition, the Credit Suisse Term Loan was secured by a first
ranking pledge over substantially all shares of RWH owned by GFN
U.S., required a certain coverage maintenance ratio in U.S. dollars
based on the value of the RWH shares and, among other things, that
an amount equal to six-months
On September 25, 2017, in connection with the acquisition of
the noncontrolling interest of Royal Wolf (see Note 4), the Credit
Suisse Term Loan was fully repaid.
Senior Notes
On June 18, 2014, the Company completed the sale of unsecured
senior notes (the “Senior Notes”) in a public offering
for an aggregate principal amount of $72,000,000. On April 24,
2017, the Company completed the sale of a “tack-on” Pac-Van Pac-Van ‘tack-on”
The Senior Notes were issued in minimum denominations of $25 and
integral multiples of $25 in excess thereof and pursuant to the
First Supplemental Indenture (the “First Supplemental
Indenture”) dated as of June 18, 2014 by and between the
Company and Wells Fargo, as trustee (the “Trustee”).
The First Supplemental Indenture supplements the Indenture entered
into by and between the Company and the Trustee dated as of
June 18, 2014 (the “Base Indenture” and, together
with the First Supplemental Indenture, the
“Indenture”). The Senior Notes bear interest at the
rate of 8.125% per annum, mature on July 31, 2021 and are not
subject to any sinking fund. Interest on the Senior Notes is
payable quarterly in arrears on January 31, April 30,
July 31 and October 31, commencing on July 31, 2014.
The Senior Notes rank equally in right of payment with all of the
Company’s existing and future unsecured senior debt and
senior in right of payment to all of its existing and future
subordinated debt. The Senior Notes are effectively subordinated to
any of the Company’s existing and future secured debt, to the
extent of the value of the assets securing such debt. The Senior
Notes are structurally subordinated to all existing and future
liabilities of the Company’s subsidiaries and are not
guaranteed by any of the Company’s subsidiaries.
The Company had an option, prior to July 31, 2017, to redeem
the Senior Notes in whole or in part upon the payment of 100% of
the principal amount of the Senior Notes being redeemed, plus any
additional amount required by the Indenture. In addition, the
Company may have redeemed up to 35% of the aggregate outstanding
principal amount of the Senior Notes before July 31, 2017 with
the net cash proceeds from certain equity offerings at a redemption
price of 108.125% of the principal amount plus accrued and unpaid
interest. The Company has not redeemed any of its Senior Notes as
July 31, 2017.
If the Company sells certain of its assets or experiences specific
kinds of changes in control, as defined, it must offer to redeem
the Senior Notes. The Company may, at its option, at any time and
from time to time, on or after July 31, 2017, redeem the
Senior Notes in whole or in part. The Senior Notes will be
redeemable at a redemption price initially equal to 106.094% of the
principal amount of the Senior Notes (and which declines each year
on July 31) plus accrued and unpaid interest to the date of
redemption. On and after any redemption date, interest will cease
to accrue on the redeemed Senior Notes.
The Indenture contains covenants which, among other things, limit
the Company’s ability to make certain payments, to pay
dividends and to incur additional indebtedness if the incurrence of
such indebtedness would cause the company’s consolidated
fixed charge coverage ratio, as defined in the Indenture, to be
below 2.0 to 1.0. The Senior Notes are listed on NASDAQ under the
symbol “GFNSL.”
Other
At September 30, 2017, other debt totaled $9,683,000.
The Company was in compliance with the financial covenants under
all its credit facilities as of September 30, 2017.
The weighted-average interest rate in the Asia-Pacific area was
5.0% and 4.6% in FY 2017 and FY 2018, respectively; which does not
include the effect of translation, interest rate swap contracts and
options and the amortization of deferred financing costs. The
weighted-average interest rate in North America was 4.9% and 6.0%
in FY 2017and FY 2018, respectively, which does not include the
effect of the amortization of deferred financing costs and
accretion of interest. |
