| Long-term Debt / Line of Credit / Bridge Loan Financing | Note 4. Long ‑term Debt / Line of Credit
Long ‑term debt at January 31, 201 7 and April 30, 2016 consisted of borrowings pursuant to the loans and other credit facilities discussed below, as follows (dollars in thousands):
(Unaudited) January 31, 2017
April 30, 2016
Attitash/Mount Snow Debt; payable in monthly interest only payments at an increasing interest rate ( 11.10% at January 31, 2017 and April 30, 2016); remaining principal and interest due on December 1, 2034
$ 51,050
$ 51,050
Credit Facility Debt; payable in monthly interest only payments at an increasing interest rate ( 10.28% at January 31, 2017 and 10.13% at April 30, 2016 ); remaining principal and interest due on December 1, 2034
37,562
37,562
West Lake Water Project EB-5 Debt; payable in quarterly interest only payments ( 1.0% at January 31, 2017); remaining principal and interest due on December 27, 2021
30,000
-
Carinthia Ski Lodge EB-5 Debt; payable in quarterly interest only payments ( 1.0% at January 31, 2017); remaining principal and interest due on December 27, 2021
21,500
-
Hunter Mountain Debt; payable in monthly interest only payments at an increasing interest rate ( 8.0% at January 31, 2017 and April 30, 2016); remaining principal and interest due on January 5, 2036
21,000
21,000
Royal Banks of Missouri Debt; payable in principal and interest payment at prime plus 1.0% ( 4.75% at January 31, 2017); remaining principal and interest due on February 6, 2020
10,000
-
Sycamore Lake (Alpine Valley) Debt; payable in monthly interest only payments at an increasing interest rate ( 10.72% at January 31, 2017 and 10.56% at April 30, 2016 ); remaining principal and interest due on December 1, 2034
4,550
4,550
Wildcat Mountain Debt; payable in monthly installments of $27 , including interest at a rate of 4.00% ; remaining principal and interest due on December 22, 2020
3,472
3,612
Other debt
2,964
3,231
Less unamortized debt issuance costs
(5,666)
(1,903)
176,432
119,102
Less: current maturities
2,453
759
$ 173,979
$ 118,343
Debt Restructure
On November 10, 2014, in connection with the Company’s initial public offering, the Company entered into a Restructure Agreement with certain affiliates of EPR Properties (“EPR”), the Company’s primary lender, providing for the (i) prepayment of approximately $75.8 million of formerly non-prepayable debt secured by the Crotched Mountain, Attitash, Paoli Peaks, Hidden Valley and Snow Creek resorts and (ii) retirement of one of the notes associated with the future development of Mount Snow (the “Debt Restructure”). On December 1, 2014, the Company entered into various agreements in order to effectuate the Debt Restructure, as more fully described in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 5, 2014 and below (collectively, the “Debt Restructure Agreements”) . Pursuant to the Debt Restructure, the Company paid a defeasance fee of $5.0 million to EPR in addition to the consideration described below.
In exchange for the prepayment right, the Company granted EPR a purchase option on the Boston Mills, Brandywine, Jack Frost, Big Boulder and Alpine Valley properties, subject to certain conditions. If EPR exercises a purchase option, EPR will enter into an agreement with the Company for the lease of each such acquired property for an initial term of 20 years, plus options to extend the lease for two additional periods of ten years each. All previously existing option agreements between the Company and EPR were terminated.
Over the years, the Company has depreciated the book value of these properties pursuant to applicable accounting rules, and as such, it has a low basis in the properties. As a result, the Company will realize significant gains on the sale of the properties to EPR if the option is exercised. The Company will be required to pay capital gains tax on the difference between the purchase price of the properties and the tax basis in the properties, which is expected to be a substantial cost. To date, EPR has not exercised the option.
Additionally, the Company agreed to extend the maturity dates on all non-prepayable notes and mortgages secured by the Mount Snow, Boston Mills, Brandywine, Jack Frost, Big Boulder and Alpine Valley properties remaining after the Debt Restructure by seven years to December 1, 2034, and to extend the lease for the Mad River property, previously terminating in 2026, until December 31, 2034 (the “Lease Amendment”).
The Company also granted EPR a right of first refusal to provide all or a portion of the financing associated with any purchase, ground lease, sale/leaseback, management or financing transaction contemplated by the Company with respect to any new or existing ski resort property for a period of seven years or until financing provided by EPR for such transactions equals or exceeds $250 million in the aggregate. Proposed financings from certain types of institutional lenders providing a loan to value ratio of less than 60% (as relates to the applicable property being financed) are excluded from the right of first refusal. The Company granted EPR a separate right of first refusal in the event that the Company wishes to sell, transfer, convey or otherwise dispose of any or all of the Attitash ski resort for seven years. The Attitash right excludes the financing or mortgaging of Attitash.
In connection with the Debt Restructure, the Company entered into a Master Credit and Security Agreement with EPR (the “Master Credit Agreement”) governing the restructured debt with EPR. Pursuant to the Master Credit Agreement, EPR agreed to maintain the following loans to the Company following the prepayment of certain outstanding debt with proceeds from the Company’s initial public offering: (i) a term loan in the amount of approximately $51.1 million to the Company and its subsidiary Mount Snow, Ltd., (included in the table above as the “Attitash/Mount Snow Debt”); (ii) a term loan in the amount of approximately $23.3 million to the Company and its subsidiaries Brandywine Ski Resort, Inc. and Boston Mills Ski Resort, Inc. (the “Boston Mills/Brandywine Debt”); (iii) a term loan in the amount of approximately $14.3 million to the Company and its subsidiary JFBB Ski Areas, Inc. (the “JFBB Debt” and together with the Boston Mills/Brandywine Debt, included in the table above as the “Credit Facility Debt”); and (iv) a term loan in the amount of approximately $4.6 million to the Company and its subsidiary Sycamore Lake, Inc. (included in the table above as the “Sycamore Lake (Alpine Valley) Debt”).
Interest will be charged at a rate of (i) 10.13% per annum as to each of the Boston Mills/Brandywine Debt and JFBB Debt ; (ii) 10.40% per annum as to the Sycamore Lake (Alpine Valley) Debt; and (iii) 10.93% per annum pursuant to the Attitash/Mount Snow Debt. Each of the notes governing the restructured debt provides that interest will increase each year by the lesser of the following: (x) three times the percentage increase in the Consumer Price Index as defined in the notes (“CPI”) from the CPI in effect on the applicable adjustment date over the CPI in effect on the immediately preceding adjustment date or (y) 1.5% (the “Capped CPI Index). Past due amounts will be charged a higher interest rate and be subject to late charges.
The Master Credit Agreement further provides that in addition to interest payments, the Company must pay the following with respect to all restructured debt other than the Attitash/Mount Snow Debt: an additional annual payment equal to 10% of the gross receipts attributable to the properties serving as collateral of the restructured debt (other than Mount Snow) for such year in excess of an amount equal to the quotient obtained by dividing (i) the annual interest payments payable pursuant to the notes governing the restructured debt (other than with respect to the Attitash/Mount Snow Debt) for the immediately preceding year by (ii) 10% . The Company must pay the following with respect to the Attitash/Mount Snow Debt: an additional annual payment equal to 12% of the gross receipts generated at Mount Snow for such year in excess of an amount equal to the quotient obtained by dividing (i) the annual interest payments payable under the note governing the Attitash/Mount Snow Debt for the immediately preceding year by (ii) 12%. An additional interest payment of $0.2 million was due for the three and nine months ended January 31, 2017.
The Master Credit Agreement includes restrictions on certain transactions, including mergers, acquisitions, leases, asset sales, loans to third parties, and the incurrence of certain additional debt and liens. The Master Credit Agreement includes certain financial covenants, some of which were modified by the terms set forth in the Modification of Master Credit Agreements entered into by the Company and EPR effective as of October 24, 2016 (the “Modification Agreement”). The Modification Agreement modified the financial covenants of the Master Credit Agreement, Hunter Mountain Credit Agreement and Bridge Loan Agreement, as defined herein (together, the “EPR Credit Agreements”).
Financial covenants set forth in the Master Credit Agreement consist of a maximum leverage ratio (as defined in the Master Credit Agreement) of 65%, above which the Company and certain of its subsidiaries are prohibited from incurring additional indebtedness, and a consolidated fixed charge coverage ratio (as defined in the Master Credit Agreement) covenant. As modified by the Modification Agreement, no later than 30 days after the closing of the Private Placement with CAP 1 LLC, as defined in Note 5 , “Private Placement, ” the Company shall deliver to the lender either (the “One Month Interest Obligation”) (i) a letter of credit in favor of the lender in the amount equal to one month of the lease payment obligations and debt service payments, as defined in the EPR Credit Agreements; or (ii) cash equal to the same amount. The terms of the Modification Agreement further provide that the lender may draw upon any letter of credit issued pursuant to the Modification Agreement upon the occurrence of certain events (the “Letter of Credit Events”), including, but not limited to, (i) any event of default under the EPR Credit Agreements; (ii) the Company’s failure to maintain a consolidated fixed charge coverage ratio of 1.50 :1.00 on a rolling four quarter basis, as calculated pursuant to the terms of the EPR Credit Agreements, on or after May 1, 2017; and (iii) at any time within 60 days prior to the expiration date of any letter of credit. In the event of the occurrence of any Letter of Credit Events, the Company must replace the One Month Interest Obligation with (i) a replacement letter of credit in favor of the lender in the amount equal to three months of lease payment obligations and debt service payments, as defined in the EPR Credit Agreements; or (ii) cash in the same amount. Pursuant to the terms of the Modification Agreement, the Company must obtain the consent of the lender prior to redeeming any preferred or common stock. The Private Placement closed on November 2, 2016, and the Company provided EPR with the One Month Interest Obligation letter of credit (the “Interest Letter of Credit”) in the amount of $1.1 million on December 1, 2016 in accordance with the terms of the Modification Agreement. The Interest Letter of Credit is collateralized by a certificate of deposit in the amount of $1.1 million. The Master Credit Agreement prohibits the Company from paying dividends if the fixed charge coverage ratio is below 1.25 :1.00 and during default situations. During the first two quarters of fiscal year 2017, the Company’s fixed charge coverage ratios fell below the required ratios, resulting in the actions described above. As of January 31, 201 7 , the Company is in compliance with all debt covenants.
Under the terms of the Master Credit Agreement and pursuant to the Master Cross Default Agreement, as amended , the occurrence of a change of control is an event of default. A change of control will be deemed to occur if (i) within two years after the effective date of the Hunter Mountain Credit Agreement, the Company’s named executive officers (Messrs. Timothy Boyd, Stephen Mueller and Richard Deutsch) cease to beneficially own and control less than 50% of the amount of the Company’s outstanding voting stock that they own as of the effective date of the Master Credit Agreement, or (ii) the Company ceases to beneficially own and control less than all of the outstanding shares of voting stock of those subsidiaries which are borrowers under the Master Credit Agreement. Other events of default include, but are not limited to, a default on other indebtedness of the Company or its subsidiaries.
None of the restructured debt may be prepaid without the consent of EPR. Upon an event of default, as defined in the Debt Restructure Agreements, EPR may, among other things, declare all unpaid principal and interest due and payable. Each of the notes governing the restructured debt matures on December 1, 2034.
As a condition to the Debt Restructure, the Company entered into the Master Cross Default Agreement with EPR (the “Master Cross Default Agreement”). The Master Cross Default Agreement provides that any event of default under existing or future loan or lien agreements between the Company or its affiliates and EPR, and any event of default under the Lease Amendment, shall automatically constitute an event of default under each of such loan and lien agreements and Lease Amendment, upon which EPR will be entitled to all of the remedies provided under such agreements and Lease Amendment in the case of an event of default.
Also in connection with the Debt Restructure, the Company and EPR entered into the Guaranty Agreement (the “2014 Guaranty Agreement”). The 2014 Guaranty Agreement obligates the Company and its subsidiaries as guarantors of all debt evidenced by the Debt Restructure Agreements. The table below illustrates the potential interest rates applicable to the Company’s fluctuating interest rate debt for each of the next five years, assuming an effective rate increase by the Capped CPI Index:
Rates as of January 31,
Attitash/Mount Snow Debt
Credit Facility Debt
Hunter Mountain Debt
Sycamore Lake/(Alpine Valley) Debt
2017 (1)
11.10%
10.28%
8.00%
10.72%
2018
11.27%
10.43%
8.14%
10.88%
2019
11.44%
10.59%
8.28%
11.04%
2020
11.61%
10.75%
8.43%
11.21%
2021
11.78%
10.91%
8.57%
11.38%
2022
11.96%
11.07%
8.72%
11.55%
(1) For 201 7 , the dates of the rates presented are as follows: (i) April 1, 2016 for the Attitash/Mount Snow Debt; (ii) October 1, 2016 for the Credit Facility Debt; (iii) January 6, 2016 for the Hunter Mountain Debt ; and (iv) December 1, 201 6 for the Sycamore Lake (Alpine Valley) Debt.
The Capped CPI Index is an embedded derivative, but the Company has concluded that the derivative does not require bifurcation and separate presentation at fair value because the Capped CPI Index was determined to be clearly and closely related to the debt instrument.
Wildcat Mountain Debt
The Wildcat Mountain Debt due December 22, 2020 represents amounts owed pursuant to a promissory note in the principal amount of $4.5 million made by WC Acquisition Corp. in favor of Wildcat Mountain Ski Area, Inc., Meadow Green ‑Wildcat Skilift Corp. and Meadow Green ‑Wildcat Corp. (the “Wildcat Note”). The Wildcat Note, dated November 22, 2010, was made in connection with the acquisition of Wildcat Mountain, which was effective as of October 20, 2010. The interest rate as set forth in the Wildcat Note is fixed at 4.00% .
Hunter Mountain Debt
On January 6, 2016, the Company completed the acquisition of the Hunter Mountain ski resort located in Hunter, New York through the purchase of all of the outstanding stock of each of Hunter Mountain Ski Bowl, Inc., Hunter Mountain Festivals, Ltd., Hunter Mountain Rentals, Inc., Hunter Resort Vacations, Inc., Hunter Mountain Base Lodge, Inc., and Frosty Land, Inc. (collectively, “Hunter Mountain”) pursuant to the terms of the Stock Purchase Agreement with Paul Slutzky, Charles B. Slutzky, David Slutzky, Gary Slutzky and Carol Slutzky-Tenerowicz entered into on November 30, 2015. The Company acquired Hunter Mountain for total cash consideration of $35.0 million plus the assumption of two capital leases estimated at approximately $1.7 million. A portion of the Hunter Mountain acquisition price was financed pursuant to the Master Credit and Security Agreement (the “Hunter Mountain Credit Agreement”) entered into between the Company and EPR as of January 6, 2016.
The Hunter Mountain Debt due January 5, 2036 represents amounts owed pursuant to a promissory note (the “Hunter Mountain Note”) in the principal amount of $21.0 million made by the Company in favor of EPR pursuant to the Hunter Mountain Credit Agreement, which was effective as of January 6, 2016. The Company used $20.0 million of the Hunter Mountain Debt to finance the Hunter Mountain acquisition and $1.0 million to cover closing costs and to add to its interest reserve account.
The Hunter Mountain Credit Agreement and Hunter Mountain Note provide that interest will be charged at an initial rate of 8.00% , subject to an annual increase beginning on February 1, 2017 by the lesser of the following: (x) three times the percentage increase in the CPI (as defined in the Hunter Mountain Note) from the CPI in effect on the applicable adjustment date over the CPI in effect on the immediately preceding adjustment date or (y) 1.75% . Past due amounts will be charged a higher interest rate and be subject to late charges .
The Hunter Mountain Credit Agreement further provides that in addition to interest payments, the Company must pay an additional annual payment equal to 8.00% of the gross receipts in excess of $35.0 million that are attributable to all collateral under the Hunter Mountain Note for such year.
The Hunter Mountain Credit Agreement includes restrictions or limitations on certain transactions, including mergers, acquisitions, leases, asset sales, loans to third parties, and the incurrence or guaranty of certain additional debt and liens. Financial covenants and dividend restrictions set forth in the Hunter Mountain Credit Agreement are identical to those set forth in the Master Credit Agreement, as modified by the Modification Agreement, described above. In accordance with the terms of the Modification Agreement, the Company provided EPR with the Interest Letter of Credit on December 1, 2016 in the amount of $1.1 million, collateralized by a certificate of deposit for the same amount. During the first two quarters of fiscal year 2017, the Company’s fixed charge coverage ratios fell below the required ratios, resulting in the actions described above. As of January 31, 201 7 , the Company is in compliance with all debt covenants.
Under the terms of the Hunter Mountain Credit Agreement, the occurrence of a change of control is an event of default. A change of control will be deemed to occur if (i) within two years after the effective date of the Hunter Mountain Credit Agreement, the Company’s named executive officers (Messrs. Boyd, Mueller and Deutsch) cease to beneficially own and control less than 50% of the amount of the Company’s outstanding voting stock that they own as of the effective date of the Hunter Mountain Credit Agreement, or (ii) the Company ceases to beneficially own and control less than all of the outstanding shares of voting stock of those subsidiaries which are borrowers under the Hunter Mountain Credit Agreement. Other events of default include, but are not limited to, a default on other indebtedness of the Company or its subsidiaries.
The Hunter Mountain Note may not be prepaid without the consent of EPR. Upon an event of default, as defined in the Hunter Mountain Note, EPR may, among other things, declare all unpaid principal and interest due and payable. The Hunter Mountain Note matures on January 5, 2036.
In connection with entry into the Hunter Mountain Credit Agreement on January 6, 2016, the Company entered into the Amended and Restated Master Cross-Default Agreement with EPR, which adds the Hunter Mountain Credit Agreement, Hunter Mountain Note and related transaction documents to the scope of loan agreements to which the cross-default provisions of the Master Cross Default Agreement apply.
Also on January 6, 2016, in connection with entry into the Hunter Mountain Credit Agreement, the Company entered into a Guaranty Agreement for the benefit of EPR, which adds the Company’s new Hunter Mountain subsidiary borrowers under the Hunter Mountain Credit Agreement as guarantors pursuant to the same terms of the 2014 Guaranty Agreement and adds the debt evidenced by the Hunter Mountain Credit Agreement and Hunter Mountain Note to the debt guaranteed by the Company pursuant to the 2014 Guaranty Agreement.
Substantially all of the Company’s assets serve as collateral for the Company’s long - term debt.
Future aggregate annual principal payments under all indebtedness (including the Company’ line of credit, current debt and long-term debt) reflected by fiscal year are as follows (in thousands):
(Unaudited)
January 31,
2017 (Remaining)
$ 227
2018
7,071
2019
1,114
2020
9,498
2021
2,834
Thereafter
165,854
$ 186,598
Deferred financing costs are net of accumulated amortization of $1,192 and $482 at January 31, 201 7 and April 30, 2016, respectively. Amortization of deferred financing costs will be $221 for the remainder of the year ending April 30, 2017, $939 f or the year ended April 30, 2018 and $932 for each of the three years ending April 30, 2019 , 2020 and 2021 .
Line of Credit / Royal Banks of Missouri Debt
The remaining $15.0 million of the Hunter Mountain acquisition price was financed with funds drawn on the Company’s line of credit with Royal Banks of Missouri pursuant to the Credit Facility, Loan and Security Agreement (the “Line of Credit Agreement”) between the Company and Royal Banks of Missouri, effective as of December 22, 2015. The Company drew an additional $0.5 million to pay closing costs. On July 20, 2016, the Company borrowed an additional $1.75 million under the Line of Credit Agreement for working capital purposes. Additionally, on August 5, 2016, the Company borrowed the remaining $2.75 million under the Credit Agreement for working capital purposes, bringing the total principal amount borrowed under the Line of Credit Agreement to $20 .0 million.
The Line of Credit Agreement provides for a 12-month line of credit for up to $20.0 million to be used for acquisition purposes and working capital of up to 5.0% of the acquisition purchase price, subject to the Company’s ability to extend the line of credit for up to an additional 12 -month period upon the satisfaction of certain conditions. In connection with entry into the Line of Credit Agreement, the Company executed a promissory note (the “Initial Line of Credit Note”) in favor of Royal Banks of Missouri, pursuant to which the initial amounts borrowed under the Line of Credit Agreement matured on December 22, 2016 and January 6, 2017 and were repaid or converted, as described in the paragraph below . The additional $1.75 million borrowed by the Company on July 20, 2016 was borrowed pursuant to the terms of the Initial Line of Credit Note. The remaining $2.75 million drawn under the Line of Credit Agreement on August 5, 2016 was borrowed pursuant to a second promissory note executed by the Company on August 5, 2016 (the “Second Line of Credit Note”), maturing on August 5, 2017.
On December 15, 2016 and January 5, 2017, the Company repaid $0.5 million and $5.0 million, respectively, of the total amount outstanding under the Line of Credit Agreement with proceeds from the Private Placement described in Note 5 . On January 6, 2017, pursuant to the terms of the Line of Credit Agreement, the Company elected to convert $10.0 million of the outstanding amount to a term loan (included in the table above as the “Royal Banks of Missouri Debt”). The terms of the Royal Banks of Missouri Debt are evidenced by a promissory note in favor of Royal Banks of Missouri in the principal amount of $10.0 million, dated as of January 6, 2017 (the “Royal Banks Note”).
The Royal Banks of Missouri Debt bears interest at the prime rate plus 1.0% per annum. The Royal Banks Note matures on February 6, 2020. Except in the case of default, the Company may prepay the Royal Banks of Missouri Debt without penalty. From and after maturity of the Royal Banks Note and in the case of any default, interest on the unpaid principal and interest shall accrue at an annual rate equal to five percentage points over the rate of interest otherwise payable on outstanding amounts. Events of default under the Royal Banks Note include any default under the terms of the Line of Credit Agreement.
The Royal Banks Note is subject to the terms and conditions set forth in the Line of Credit Agreement, as described herein.
As of January 31, 2017, a total of $4.5 million remained outstanding under the Line of Credit Agreement, which includes $1.75 million borrowed pursuant to the terms of the Initial Line of Credit Note and $2.75 million borrowed pursuant to the Second Line of Credit Note. The remaining line of credit debt is included as a current liability given the initial 12-month term.
Interest on the amounts borrowed pursuant to the Initial Line of Credit Note is charged at the prime rate plus 1.0% , provided that past due amounts shall be subject to higher interest rates and late charges. The effective rate at January 31, 201 7 was 4.75% on the line of credit borrowings made pursuant to the Initial Line of Credit Note.
Interest on the amount borrowed pursuant to the Second Line of Credit Note is charged at 6.00% per annum, provided that past due amounts shall be subject to higher interest rates and late charges. The Company is required to make interest only payments under the Second Line of Credit Note.
The Line of Credit Agreement includes restrictions or limitations on certain transactions, including mergers, acquisitions, leases, asset sales, loans to third parties, and the incurrence of certain additional debt and liens. Financial covenants set forth in the Line of Credit Agreement consist of a maximum leverage ratio (as defined in the Line of Credit Agreement) of 65% , above which the Company is prohibited from incurring additional indebtedness, and a debt service coverage ratio (as defined in the Line of Credit Agreement) of 1.25 :1 . 00 on a fiscal year basis. The Line of Credit Agreement requires that the Company comply with the consolidated fixed charge coverage ratio requirements and provisions set forth in the Master Credit Agreement, as modified by the Modification Agreement, and includes identical dividend payment restrictions as the Master Credit Agreement . In accordance with the terms of the Modification Agreement, the Company provided EPR with the Interest Letter of Credit on December 1, 2016 in the amount of $1.1 million, collateralized by a certificate of deposit for the same amount. During the first two quarters of fiscal year 2017, the Company’s fixed charge coverage ratios fell below the required ratios, resulting in the actions described above. As of January 31, 2017, the Company is in compliance with all debt covenants.
If the outstanding line of credit debt is not paid in full by the maturity date, and the Company is otherwise in full compliance with the terms and conditions of the Line of Credit Agreement and Initial Line of Credit Note, the Company may elect to convert only the outstanding debt borrowed pursuant to the Initial Line of Credit Note to a three -year term loan, subject to an additional extension, with principal payments amortized over a 20 -year period bearing interest at the prime rate plus 1.00% per annum. The amount borrowed pursuant to the Second Line of Credit Note is not subject to the renewal and conversion provisions of the Line of Credit Agreement.
Except in the case of a default, the Company may prepay all or any portion of the outstanding line of credit debt and all accrued and unpaid interest due prior to the maturity date without prepayment penalty.
In the case of a default, the outstanding line of credit debt shall, at the lender’s option, bear interest at the rate of 5.0% percent per annum in excess of the interest rate otherwise payable thereon, which interest shall be payable on demand.
Under the terms of the Line of Credit Agreement, the occurrence of a change of control is an event of default. A change of control will be deemed to occur if (i) for so long as the line of credit debt is outstanding and such individuals are employed by the Company, the Company’s key shareholders (Messrs. Timothy Boyd, Stephen Mueller and Richard Deutsch) cease to beneficially own and control less than 50% of the amount of the Company’s outstanding voting stock that they own as of the effective date of the Line of Credit Agreement, or (ii) the Company ceases to beneficially own and control less than all of the outstanding shares of voting stock of the subsidiary borrowers. Other events of default include, but are not limited to, a default on other indebtedness of the Company or its subsidiaries.
Amounts outstanding under the Line of Credit Agreement are secured by the assets of each of the subsidiary borrowers under the Line of Credit Agreement.
West Lake Water Project and Carinthia Ski Lodge EB-5 Debt
The Company established two affiliate limited partnerships of Mount Snow, Carinthia Group 1, L.P. and Carinthia Group 2, L.P. (collectively, the ‘‘Partnership’’), to operate two Mount Snow development projects funded by $52.0 million raised by the Partnership pursuant to the U.S. government’s Immigrant Investor Program, commonly known as the EB-5 program (the “EB-5 Program”). The EB-5 Program was first enacted in 1992 to stimulate the U.S. economy through the creation of jobs and capital investments in U.S. companies by foreign investors. In turn, these foreign investors are, pending petition approval, granted visas for lawful residence in the U.S. Mount Snow GP Services LLC, a wholly owned subsidiary of Mount Snow, Ltd. (wholly owned by the Company), serves as the general partner for the Partnership. The Company has evaluated the Partnership under ASC 810, “Consolidations,” and determined the Partnership does not require consolidation because the Company does not have a variable interest in the Partnership.
The Mount Snow development projects include: (i) the West Lake Water Project, which includes the construction of a new water storage reservoir for snowmaking; and (ii) the Carinthia Ski Lodge Project, which includes the construction of a new skier service building. In December 2016, the first I-526 petition submitted by an investor in the EB-5 Program was approved, and the $52.0 million was released from escrow to the Partnership. Upon release of the EB-5 Program funds, the Company was reimbursed in full for the approximately $15.0 million that the Company had invested in the construction of the Mount Snow development projects while awaiting release of the funds. The remaining $36.5 million is included in long-term asset restricted cash, construction, due to the earmark associated with the Mount Snow development project.
Mount Snow, Ltd. formed West Lake Water Project LLC and Carinthia Ski Lodge LLC, each wholly owned by Mount Snow, Ltd., to manage the construction of the West Lake Water Project and Carinthia Ski Lodge Project, respectively.
Pursuant to the terms of the EB-5 Program, the Partnership is obligated to invest or loan the funds raised from its EB-5 investors in or to a business carrying on a commercial venture. In accordance with these requirements, on December 27, 2016, the Partnership entered into a loan agreement with West Lake Water Project LLC providing West Lake Water Project LLC a line of credit of up to $30.0 million (the “West Lake Loan Agreement”) to be used in the construction of the West Lake Water Project. In connection with entry into the West Lake Loan Agreement, West Lake Water Project LLC executed a line of credit note in favor of the Partnership in the amount of $30.0 million (the “West Lake Note”). The debt owed pursuant to the West Lake Loan Agreement and West Lake Note is included in the table above as the “West Lake Water Project EB-5 Debt.”
Also on December 27, 2016, the Partnership entered into a loan agreement with Carinthia Ski Lodge LLC providing Carinthia Ski Lodge LLC a l |
