AMREP Corp. Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed by AMREP Corporation on June 17, 2019. The filing discloses the entry into a new material definitive agreement and the termination of a prior agreement regarding development financing for the Lomas Encantadas subdivision in Rio Rancho, New Mexico.
Key Financial Metrics and Debt Obligations
The filing details a new non-revolving line of credit facility with the following terms:
- Total Commitment: Up to $2,475,000.
- Interest Rate: 30-day LIBOR plus 3.0% (adjusted monthly).
- Maturity Date: June 17, 2022.
- Collateral: Secured by a mortgage on planned residential lots within the Lomas Encantadas subdivision.
- Guarantor: AMREP Southwest Inc. (an indirect subsidiary) has guaranteed the obligations.
- Repayment Schedule:
- $900,000 by March 17, 2021
- $300,000 by June 17, 2021
- $300,000 by September 17, 2021
- $262,500 by December 17, 2021
- $525,000 by March 17, 2022
- $187,500 by June 17, 2022
- Lien Release: The lender must release the mortgage lien on any lot upon a principal payment of $37,500.
The filing does not provide specific revenue, profit, cash flow, or margin data for the period.
Material Changes Versus Prior Period
Termination of Prior Facility: On June 17, 2019, AMREP terminated a previous Development Loan Agreement entered into in December 2017. That facility had a commitment of up to $4,750,000. The borrower has repaid all outstanding amounts due under the prior loan.
New Facility: The new $2,475,000 facility replaces the terminated agreement to continue funding the development of residential lots.
Guidance, Risks, and Covenants
Covenants and Default: The loan agreement includes a financial covenant requiring the Guarantor to maintain a tangible net worth of at least $32 million. Failure to meet this requirement, along with standard events such as missed payments or insolvency, constitutes an event of default.
Consequences of Default: Upon an event of default, the lender may declare the entire outstanding principal and obligations immediately due and payable.
Prepayment: The loan may be prepaid at any time without penalty.
Investor Verification Checklist
- Verify the current tangible net worth of AMREP Southwest Inc. to ensure compliance with the $32 million covenant.
- Confirm the status of the Lomas Encantadas subdivision development and the utilization rate of the new $2,475,000 credit line.
- Review the company's liquidity position to ensure it can meet the scheduled principal repayments starting March 17, 2021.
- Monitor LIBOR fluctuations, as the interest rate is variable (LIBOR + 3.0%).