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| DEBT |
NOTE E - DEBT The table below summarizes our notes pa yable and long-term debt at June 30, 2023 and at December 31, 2022:
Amendments to Senior Credit Agreement On May 4, 2020, BKRF OCB, LLC, a wholly-owned subsidiary of GCEH, entered into the Senior Credit Agreement with a group of lenders (the “Senior Lenders”) pursuant to which the Senior Lenders agreed to initially provide a $ 300.0 million senior secured term loan facility to BKRF OCB to pay the costs of retooling the Bakersfield Renewable Fuels Refinery. Through various amendments, the commitments under the Senior Credit Agreement have subsequently been increased to $451.6 million. As of June 30, 2023, we have borrowed $448.6 million under the Senior Credit Agreement, and have borrowed an additional $19.3 million through August 14, 2023. The Company deferred interest payments of $34.8 million in the six months ending June 30, 2023 for a total deferred amount of $73.4 million as of June 30, 2023.As Tranche C Commitments
were funded, the Company
was
required to issue to the Tranche C lenders warrants to purchase up to 15,000,000 shares of the Company’s common stock, exercisable until December 23, 2028 at an exercise price of $0.075 per share (the “Tranche C Lender Warrants”). The Company issued 13,875,000 Lender Warrants in connection with funds drawn under Amendment No. 10 of Tranche C during the six months ended June 30, 2023.
T he Tranche C loans are subject to a subordinated premium (the “Tranche C Subordinated Premium”) which requires the Company to pay an additional amount upon repayment equal to the interest, with respect to any Tranche C Loan, that would have been payable over the 79-month anniversary of the applicable Tranche C loan funding date. The Tranche C Lender Warrants result in a discount on the Tranche C loans that will be recognized over the contractual term of the Tranche C loans through interest expense.On May 19, 2023, the Company entered into Amendment No. 11 to the Senior Credit Agreement, whereby the Senior Lenders agreed to increase the Tranche C Commitments from $40 million to $47 million. In exchange, the Company issued to the lenders, as payment of an amendment and upsize premium, Lender Warrants to purchase up to 3,750,000 shares of the Company’s common stock, exercisable until December 23, 2028 at an exercise price of $0.075 per share.
On June 21, 2023, the Company entered into Amendment No. 12 to the Senior Credit Agreement which provided for an incremental $7.0 million increase in availability to Tranche C, for a total commitment of $54 million and issued an additional 1,500,000 of Lender Warrants.
During the six months ended June 30, 2023, the Company recognized a debt discount related to the issuance of 19,125,000 Tranche C Lender Warrants in the amount of $18,489,471 (See Note G - Stock Options and Warrants).
On July 5, 2023, the Company entered into Amendment No. 13 to the Senior Credit Agreement that provides for, among other things, a new $110 million Tranche D term loan facility, which may be increased up to $140 million upon the consent of the Required Lenders (as defined within Amendment No. 13). See Note J - Subsequent Events for further information. Fixed Payment Obligation The Company amended a derivative forward contract with the counterparty which terminated the derivative forward contract and replaced it with a fixed payment obligation. Since the Bakersfield Renewable Fuels Refinery was not
commercially operational to make payments from refinery operations,
the Company amended the agreement in May 2022 and again in February 2023. Effective February 27, 2023,
the Company amended
its fixed payment obligation whereby we will begin making payments in September 2023 with the first payment of $1.2 million and escalating monthly with the final payment of $6 million scheduled for March 2024. The total amount of the payments is now $26.4 million.
Other Notes Payable Included in “Other notes” are several notes payable that are used to finance the Company’s insurance policies. At various times the Company enters into new insurance policies to replace certain policies that are expiring and to insure for additional identified risks. As of June 30, 2023, the Company had two policies financed at a rate of 5.45% to 8.2% with a down payment ranging from 9% to 30% with monthly payments up to and including September 2023. The Company expects that it will continue to finance certain policy premiums. Convertible Note Payable to Executive Officer On October 16, 2018, Richard Palmer, the Company’s Chief Executive Officer and President, entered into a new employment agreement with the Company and concurrently agreed to defer $1 million of his accrued unpaid salary and bonus. In order to evidence the deferral, the Company and Mr. Palmer entered into a $1 million convertible promissory note (the “Convertible Note”). The Company recorded a nominal amount of interest expense on this note for the three and six months ended June 30, 2023 and 2022, respectively. The Company had recorded an accrued interest payable of approximately $0.2 million and $0.2 million as of June 30, 2023 and December 31, 2022 respectively. Under the Convertible Note, Mr. Palmer has the right, exercisable at any time until the Convertible Note is fully paid, to convert all or any portion of the outstanding principal balance and accrued and unpaid interest into shares of the Company’s common stock at an exercise price of $0.154 per share. Effective July 26, 2023, Mr. Palmer converted the convertible note into 7,582,318 shares of the Company’s common stock (see Note J - Subsequent Events, for further information).
The following table summarizes the minimum required payments of notes payable and long-term debt as of June 30, 2023:
Class B Units Pursuant to the Senior Credit Agreement, BKRF HCB, LLC, an indirect wholly-owned subsidiary of the Company, has issued
397.6 million Class B Units to the Senior Lenders as of June 30, 2023. To the extent that there is distributable cash, the Company is obligated to make certain distribution payments to holders of Class B Units, and after the distributions reach a certain limit the units will no longer require further distributions and will be considered fully redeemed. The aggregate total payments (including distributions to the Class B Units, all interest and principal payments) to the Senior Lenders cannot exceed two times the amount of the borrowings under the Senior Credit Agreement, or approximately $795.2 million. The Tranche A and B loans under the Senior Credit Agreement, which represent $397.6 million of the $448.6 million outstanding, do earn Class B Units, while the Tranche C loans do not receive Class B Units. The aggregate fair value of such units on the date of their issuances totaled approximately $16.5 million which were recorded as debt discount. The aggregate fair value of the earned units as of June 30, 2023 and December 31, 2022 was approximately $11.6 million and $12.0 million, respectively. It is expected that the fair value will fluctuate depending on market inputs that impact the projected distributable cash.The Class B Units meet the definition of a mandatorily redeemable financial instrument under ASC 480 because BKRF HCB, LLC has an unconditional obligation to redeem the Class B Units by transferring assets at a specified time. Pursuant to ASC 825-10, the Company has elected the fair value option for the Class B Units.
Accordingly, at each borrowing the Company will initially recognize the Class B Unit liability based on the issuance date fair value with an offset to the discount on the Senior Credit Agreement. The Company measures their Class B Units at fair value at eac h reporting date with changes recognized in other income/expense.
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