Blue Dolphin Energy Company (BDCO)

[Enterprising Investor]

Blue Dolphin Obtains New Financing (6/25/15)

LE Credit Facility

On June 22, 2015, Lazarus Energy, LLC, a Delaware corporation (“LE”) and wholly owned subsidiary of Blue Dolphin Energy Company (“Blue Dolphin”), entered into a Loan and Security Agreement with Sovereign Bank (“Sovereign”) as administrative agent and lender pursuant to which Sovereign agreed to make a term loan to LE in the principal amount of $25.0 million (the “LE Credit Facility”). The LE Credit Facility is guaranteed under the Business & Industry Guaranteed Loan Program administered by the United States Department of Agriculture Rural Development. The LE Credit Facility, which requires a monthly principal and interest payment, has a 19 year term with an interest rate based on the Wall Street Journal Prime Rate plus 2.75%. Proceeds of the LE Credit Facility will primarily be used to construct new petroleum product storage tanks and expand the crude oil and condensate processing facility located in Nixon, Texas (the “Nixon Facility”), as well as refinance approximately $8.5 million of debt owed to American First National Bank. Pursuant to a construction rider in the LE Credit Facility, proceeds will be placed in an escrow account whereby Sovereign will make advances for construction related expenses.

The LE Credit Facility is secured by: (i) a first lien on all Nixon Facility business assets (excluding accounts receivable and inventory), (ii) assignment of all Nixon Facility contracts, permits, and licenses, (iii) absolute assignment of Nixon Facility rents and leases, including tank rental income, (iv) a $1.0 million payment reserve account held by LE at Sovereign, and (v) a pledge of $5.0 million of a life insurance policy on Jonathan P. Carroll, President and Chief Executive Officer of Blue Dolphin (“Carroll”). The LE Credit Facility contains representations and warranties, affirmative, restrictive, and financial covenants, as well as events of default which are customary for credit facilities of this type. Repayment of funds borrowed and interest accrued under the LE Credit Facility is guaranteed by Blue Dolphin, LRM, Carroll, and Lazarus Energy Holdings, LLC (“LEH”), which owns approximately 81% of Blue Dolphin’s common stock. Carroll is also the majority owner of LEH.

LRM Credit Facility

On June 22, 2015, Lazarus Refining & Marketing, LLC, a Delaware corporation (“LRM”) and wholly owned subsidiary of Blue Dolphin, entered into a Loan and Security Agreement with Sovereign as lender pursuant to which Sovereign agreed to make a term loan to LRM in the principal amount of $3.0 million (the “LRM Credit Facility”). The LRM Credit Facility has a 6 month term with an interest rate based on the Wall Street Journal Prime Rate plus 2.75% or 6.00%, whichever is greater. The LRM Credit Facility requires a monthly payment of interest with full payment of the outstanding principal due at maturity. Proceeds of the LRM Credit Facility will be used to purchase certain process and ancillary equipment for the Nixon Facility.

The LRM Credit Facility is secured by: (i) a first lien on the equipment being purchased, (ii) a $1.5 million certificate of deposit at Sovereign, (iii) assignment of an easement agreement on land in Freeport, Texas, which is owned by Blue Dolphin Pipe Line Company, a wholly owned subsidiary of Blue Dolphin (iv) a second lien on all assets of LRM (excluding accounts receivable and inventory), and (v) a second lien and deed of trust on the Nixon Facility. The LRM Credit Facility contains representations and warranties, affirmative, restrictive, and financial covenants, as well as events of default which are customary for credit facilities of this type. Repayment of funds borrowed and interest accrued under the LRM Credit Facility is guaranteed by Blue Dolphin, LE, and Carroll.

The above summaries of the LE Credit Facility and LRM Credit Facility do not purport to be complete and are qualified in their entirety by reference to the full text of the respective loan documents, which are provided as exhibits to this Current Report Form 8-K and which are incorporated by reference into this Item 1.01.
Guaranty Fee Agreements

On June 22, 2015, Carroll entered into a Guaranty Fee Agreement with LE (the “LE Guaranty Fee Agreement”) dated June 22, 2015, in consideration for Carroll’s execution and delivery of a guaranty as security for and as a condition of the obligations of LE under the LE Credit Facility. Pursuant to the LE Guaranty Fee Agreement, LE shall pay Carroll, as a guarantor, a guaranty fee equal to 2.00% per annum, paid monthly, of the outstanding principal balance owed under the LE Credit Facility. Amounts payable to Mr. Carroll as the guaranty fee shall be paid at the end of each calendar month.

On June 22, 2015, Carroll also entered into a Guaranty Fee Agreement with LRM (the “LRM Guaranty Fee Agreement”) dated June 22, 2015, in consideration for Carroll’s execution and delivery of a guaranty as security for and as a condition of the obligations of LRM under the LRM Credit Facility and a Loan and Security Agreement (the “2014 Loan and Security Agreement”) dated May 2, 2014 between Sovereign and LRM. Pursuant to the LRM Guaranty Fee Agreement, LRM shall pay Carroll, as a guarantor, a guaranty fee equal to 2.00% per annum, paid monthly, of the outstanding principal balance owed under the LRM Credit Facility and 2014 Loan and Security Agreement. Amounts payable to Carroll as the guaranty fee shall be paid at the end of each calendar month.

http://www.sec.gov/Archives/edgar/data/793306/000101054915000224/bdco9k062615.htm