Item 1.01 Entry into a Material Definitive Agreement.
On January 15, 2021, Corning Natural Gas Corporation ("Corning Gas"), a
wholly-owned subsidiary of Corning Natural Gas Holding Corporation, obtained an
$850,000 loan (the "Loan") from M&T Bank, a New York banking corporation
("M&T"). Corning Gas will use the Loan for short-term general operating expenses
and working capital purposes.
To evidence the Loan, Corning Gas issued a term note to M&T in the principal
amount of $850,000 (the "Note"). The Note bears interest at a rate equal to 2.6%
plus the one-month LIBOR rate, with a floor of 3.1%. The Note is payable in
three equal monthly installments on February, March and April 15, 2021; Corning
Gas expects to repay the loan from operating revenues.
In connection with the Loan, Corning Gas entered into a credit agreement with
M&T (the "Credit Agreement"). The Credit Agreement contains various affirmative
and negative covenants including, among others: (i) Corning Gas must maintain a
"Total Funded Debt to Tangible Net Worth" ratio of not greater than 1.40 to 1.0,
a "Total Funded Debt to EBITDA" ratio of not greater than 3.75 to 1.0, and a
minimum "Cash Flow Coverage" of not less than 1.10 to 1.0, in each case measured
quarterly based on Corning Gas's trailing twelve month operating performance;
(ii) Corning Gas must deliver to M&T quarterly and annual financial statements,
compliance and other documents; and (iii) prohibitions on any sale of all or
substantially all of Corning Gas's assets, acquisitions of substantially all the
asset of any other entity, doing business under any assumed name, material
changes to its business, purposes, structure or operations which could
materially adversely affect Corning Gas, or any merger, consolidation or other
similar transaction.
Events of default under the Credit Agreement and Note which permit M&T to
exercise its remedies, including immediate acceleration of the principal and
interest on the Note, include, among others: (i) default in the payment of
principal or interest on the Note, (ii) default by Corning Gas on any other
obligation under the Credit Agreement and related documents, (iii) failure to
pay when due in any other obligations of Corning Gas which could result in the
acceleration of that obligation, (iv) entry of any judgments or order of any
court or governmental entity against Corning Gas, (v) various bankruptcy and
insolvency events, (vi) any adverse change in Corning Gas, its business, assets,
operations, affairs or condition which M&T determines will have a material
adverse effect on Corning Gas, its business, assets, operation or condition
(financial or otherwise) or on its ability to repay its debts, and (vii) at any
time M&T in good faith considers itself insecure with respect to payment of
Corning Gas's obligations to it or other performance of such obligations.
The Loan is subject to Corning Gas's existing general security agreement with
M&T dated August 31, 2020 (the "Security Agreement"). The Security Agreement
secures all obligations of Corning Gas to M&T including, without limitation,
principal and interest on the Note and any fees and charges. The security
interest granted under the Security Agreement covers all personal property of
Corning Gas including, among other things, accounts, deposit accounts, general
intangibles, inventory, and all fixtures, including, among other things,
pipelines, easements, rights of way and compressors in Corning Gas's gas
distribution system. The Security Agreement contains various representations,
warranties, covenants and agreements customary in security agreements and
various events of default substantially similar to those in the Credit Agreement
with remedies under the New York Uniform Commercial Code and the Security
Agreement. The Security Agreement was filed as Exhibit 10.3 to Corning Natural
Gas Holding Corporation's Current Report on Form 8-K dated August 21, 2020.
2
The Note, Credit Agreement and Security Agreement have been previously filed or
are filed as exhibits to this Current Report on Form 8-K. The descriptions above
are qualified in their entirety by reference to the full text of these
documents.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The disclosure included under Item 1.01 above is incorporated by reference to
this Item 2.03.
Item 9.01 Financial Statements and Exhibits.
Exhibit 10.1 Credit Agreement, dated January 15, 2021, between Corning
Natural Gas Company and M&T Bank.
Exhibit 10.2 Term Note, dated January 15, 2021, from Corning Natural Gas
Corporation to M&T Bank in the principal amount of $850,000.
3
© Edgar Online, source Glimpses