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Item 1.01.
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Entry into a Material Definitive Agreement.
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Second Amended
and Restated Loan and Security Agreement
On August 2, 2017, Kinergy
Marketing LLC (“Kinergy”), a wholly-owned subsidiary of Pacific Ethanol, Inc. (the “Company”), and Pacific
Ag. Products, LLC, a wholly-owned subsidiary of Kinergy (“PAP,” and together with Kinergy, the “Borrowers”)
entered into a Second Amended and Restated Loan and Security Agreement (“Amended Loan Agreement”) dated August 2, 2017
with the parties thereto from time to time as Lenders (the “Lenders”) and Wells Fargo Bank, National Association (“Agent”).
Pursuant to the Amended
Loan Agreement, Kinergy’s revolving credit facility increased to $100,000,000 from $85,000,000, based on the Borrowers’
eligible accounts receivable and inventory levels from time to time, subject to any reserves established by Agent. The Borrowers
may also obtain letters of credit under the credit facility, subject to a letter of credit sublimit of $20,000,000. The credit
facility is subject to certain other sublimits, including as to inventory loan limits.
The Borrowers may borrow
under the credit facility based upon a rate equal to (a) the daily three-month London Interbank Offered Rate (LIBOR),
plus
(b) an applicable margin of 1.50% to 2.00% depending on the quarterly average amounts available for additional borrowings under
the credit facility for the prior quarter. The applicable margin resets each quarter for all outstanding loans and applies initially
to all additional borrowings during that quarter. In addition, the Borrowers are required to pay an unused line fee at a rate equal
0.25% to 0.375% depending on the average amounts outstanding as well as other customary fees and expenses associated with the credit
facility and issuances of letters of credit.
The Borrowers’ obligations
under the Amended Loan Agreement are secured by a first-priority security interest in all of their assets in favor of the Lenders
and Agent.
The Amended Loan Agreement
contains numerous customary representations, warranties, affirmative and negative covenants and other customary terms and conditions,
including periodic collateral and financial reporting obligations, events of default and remedies in favor of the Lenders and Agent.
The Amended Loan Agreement also contains restrictions on distributions of funds from the Borrowers to the Company.
The Amended Loan Agreement
also retains a financial covenant concerning the Borrowers’ fixed-charge coverage ratios. As of the end of each fiscal month,
the Borrowers must maintain a fixed-charge coverage ratio of not less than 2.0:1.0 with respect to the twelve (12) consecutive
calendar month period then ended.
The credit facility matures
on August 2, 2022, unless sooner terminated. The Borrowers are permitted to terminate the credit facility early upon ten days prior
written notice. The Lenders and Agent may terminate the credit facility early at any time on or after an event of default has occurred
and is continuing. The Amended Loan Agreement eliminated any early termination fee.
Kinergy paid a closing
fee of $375,000 to the Lenders and paid the legal fees of legal counsel to the Lenders and Agent.
The description of the
Amended Loan Agreement does not purport to be complete and is qualified in its entirety by reference to the Amended Loan Agreement,
which is filed as Exhibit 10.1 to this report and is incorporated herein by this reference.
Guarantee
On August 2, 2017, the
Company entered into a Second Amended and Restated Guarantee (“Guarantee”) dated August 2, 2017 in favor of Agent for
and on behalf of the Lenders. The Guarantee provides for the unconditional guarantee by the Company of, and the Company agreed
to be liable for, the payment and performance when due of the Borrowers’ obligations under the Amended Loan Agreement. The
Guarantee contains numerous customary representations and warranties and other customary terms and conditions.
The description of the
Guarantee does not purport to be complete and is qualified in its entirety by reference to the Guarantee, which is filed as Exhibit
10.2 to this report and incorporated by reference herein.
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Item 1.02
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Termination of a Material Definitive Agreement.
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Upon entry into the Amended
Loan Agreement, as described in Item 1.01 above, that certain Amended and Restated Loan and Security Agreement dated May 4, 2012
by and among the Borrowers, the parties thereto from time to time as Lenders, and Agent, as amended, was terminated. Descriptions
of such Amended and Restated Loan and Security Agreement are set forth in the Company’s Current Reports on Forms 8-K for
May 4, 2012 and July 1, 2015 filed with the Securities and Exchange Commission on May 8, 2012 and July 6, 2015, respectively, and
are incorporated herein by this reference.
Upon entry into the Guarantee,
as described in Item 1.01 above, that certain Amended and Restated Guarantee dated May 4, 2012 by the Company in favor of Agent,
was terminated. A description of such Amended and Restated Guarantee is set forth in the Company’s Current Report on Form
8-K for May 4, 2012 filed with the Securities and Exchange Commission on May 8, 2012 and is incorporated herein by this reference.