Business Context and Reporting Period
Company: Optical Cable Corporation (OCC)
Filing Type: Form 8-K (Current Report)
Date of Report: October 31, 2023
Event: Entry into a Definitive Agreement (Omnibus Amendment of Loan Documents) with Northeast Bank.
Key Financial Metrics
This filing reports on debt restructuring rather than operating performance. No revenue, profit, or cash flow data is provided in this document.
- Outstanding Principal Balance (Virginia Real Estate Loan): Approximately $2,675,244 as of October 31, 2023.
- Interest Rate (Note B): Prime Rate (adjusted monthly) with a floor of 8.50% per annum.
- Maturity Date: Extended to May 5, 2026.
- Amortization Schedule: 240 months (20 years) for monthly principal payments commencing November 5, 2023.
- Prepayment Penalty: Subject to "Minimum Interest" equal to 24 months of interest on the outstanding balance as of the amendment date, less interest paid since the amendment.
Material Changes Versus Prior Period
The amendment resulted in the following changes to the Company's credit facilities:
- Loan Consolidation: The North Carolina Real Estate Loan (Note A) was paid off in full, and its collateral was released.
- Debt Reduction: The balance on the Virginia Real Estate Loan (Note B) was paid down.
- Term Extension: The maturity date of the remaining Virginia Real Estate Loan was extended from its previous date to May 5, 2026.
- Rate Modification: The interest rate on Note B was modified to a floating Prime Rate with an 8.50% floor, effective October 5, 2023.
Guidance, Outlook, and Risks
Management Commentary: The primary purpose of the amendment was to consolidate debt, extend the maturity of the remaining facility, and release collateral associated with the North Carolina facility.
Risks and Contingencies:
- Prepayment Restrictions: Early repayment of the loan is subject to a significant minimum interest charge (24 months of interest), which may limit financial flexibility.
- Collateral: The remaining loan is secured by the Company's headquarters and manufacturing facilities in Roanoke, Virginia.
- Interest Rate Risk: While the rate is tied to the Prime Rate, the 8.50% floor ensures a minimum cost of capital regardless of market rate declines.
Key Facts for Investor Verification
- Verify the exact principal balance of $2,675,244 in the Company's most recent 10-Q or 10-K to confirm the post-amendment debt load.
- Review the Company's liquidity position to ensure it can meet the new monthly principal and interest payments starting November 5, 2023.
- Assess the impact of the 8.50% interest rate floor on future interest expense compared to the previous rate structure.
- Confirm the release of the North Carolina collateral and its potential impact on future financing options for that asset.