Limoneira Company (LMNR) - Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed on June 14, 2021, by Limoneira Company, a Delaware corporation. The filing reports the entry into a Material Definitive Agreement on June 14, 2021, involving a new Master Loan Agreement (MLA) with Farm Credit West, PCA. This agreement amends and restates a prior 2017 agreement.
Key Financial Metrics and Debt Structure
The filing details a new aggregate borrowing capacity of $115,000,000, structured as follows:
- Revolving Credit Facility: $75,000,000 capacity. Initial interest rate is 1.69% per annum, subject to adjustment based on one-month LIBOR plus a margin of 1.75% to 2.35% (dependent on asset/liability ratios). Maturity date is July 1, 2026. Prepayment is permitted without penalty.
- Non-Revolving Credit Facility: $40,000,000 capacity. Initial fixed rate is 4.77% for one year and one month, converting to a fixed rate of 3.57% until July 1, 2025, then variable. Maturity date is July 1, 2026. Prepayment is restricted during the fixed rate term; thereafter, a 0.50% fee applies.
The filing does not provide current revenue, profit, cash flow, or existing debt levels, as this report focuses solely on the new credit facility terms.
Material Changes and Covenants
The primary material change is the establishment of the new $115 million credit facility. The agreement imposes specific financial covenants:
- Debt Service Coverage Ratio (DSCR): The Company must maintain a DSCR of at least 1.15:1.00 based on the October 31, 2021, Annual Report (Form 10-K). This requirement increases to 1.25:1.00 for the October 31, 2022, Annual Report and annually thereafter.
- Restrictive Covenants: Includes prohibitions on incurring additional debt, restrictions on asset sales, and limitations on the purchase or sale of major business assets.
Collateral and Risks
All indebtedness under the MLA is secured by a first lien on:
- Company-owned stock or participation certificates.
- Company funds maintained with the Lender and unallocated surplus.
- Certain agricultural properties in Tulare and Ventura counties, California.
- Building fixtures, improvements, and investments in mutual water companies associated with the pledged properties.
Risks: An event of default allows the Lender to declare all indebtedness immediately due and payable without prior notice or recourse to collateral. The Company is also subject to customary default provisions and financial reporting requirements.
Investor Verification Checklist
- Verify the Company's ability to meet the 1.15:1.00 Debt Service Coverage Ratio requirement in the upcoming October 31, 2021, 10-K filing.
- Confirm the specific agricultural properties and assets pledged as collateral in the attached exhibits.
- Monitor the LIBOR rate fluctuations that will impact the variable interest rate on the $75 million revolving facility starting July 1, 2021.
- Review the full text of the Master Loan Agreement (Exhibit 10.1) for detailed default triggers and prepayment conditions.