Business Context and Reporting Period
Applied Optoelectronics, Inc. filed this Form 8-K on March 25, 2015, to report the renewal of a material definitive agreement. The filing details a credit facility renewal with Mega International Commercial Bank Co., Ltd. in Taiwan.
Key Financial Metrics
- Credit Facility Amount: US$4 million revolving credit facility.
- Term: One year, with a draw period from November 28, 2014, to November 27, 2015.
- Draw Term: Each individual draw shall not exceed 180 days.
- Collateral: Secured by a US$4 million cash deposit in a one-year Certificate of Deposit (CD) with the Bank.
- Interest Rates:
- USD Borrowings: LIBOR + 1.0%, divided by 0.946.
- New Taiwan Dollar Borrowings: Bank's base lending rate + 0.76%.
- Other Currencies: Bank's base lending rate + 1.0%, divided by 0.946.
- Current Base Rate: 2.875%.
Material Changes
The Company renewed its existing credit facility originally dated December 20, 2013. The filing does not provide comparative financial data (revenue, profit, cash flow, or margins) as this is a current report regarding a specific agreement rather than a periodic financial statement.
Outlook, Risks, and Commentary
Management Commentary: Borrowings under the facility are designated for general corporate purposes. The agreement includes customary representations, warranties, and events of default.
Risks and Contingencies: The facility is fully secured by a cash deposit, mitigating default risk for the lender. The filing notes that the description provided is not a complete statement of rights and obligations and refers to the full agreement attached as Exhibit 10.1.
Investor Verification Checklist
- Verify the full text of the US$4 Million Credit Facility Agreement (Exhibit 10.1) for specific covenants and default triggers.
- Confirm the current LIBOR rate to calculate the precise cost of USD borrowings.
- Review the Company's cash position to ensure the US$4 million CD collateral remains funded.
- Check subsequent filings for any utilization of the credit facility or changes in the base lending rate.