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Replies to post #4180 on Excel Corporation (EXCC)
11/13/17 11:07 AM
11/16/17 2:32 AM
On May 5, 2017, the Company received a written notice from GACP that it was in default under the terms of the Loan Agreement for a breach of covenants. As a result of the default, the Lender increased the cash interest payable on the loan from 13% per annum to 16% per annum (the “Default Rate”). In addition, as of April 30, 2017, the principal due under the Loan Agreement was $13,783,602. The April 30, 2017 loan balance was in excess of the borrowing base as calculated under the Loan Agreement and the Company made a principal payment on May 8, 2017 of $512,583 to reduce the loan balance to be within the borrowing base as defined in the Loan Agreement. The Lender also terminated its commitment to lend or extend credit under the Loan Agreement. As such, the note is classified as current on the accompanying consolidated balance sheets in accordance with ASC 470-10-45.
The Company also has identified potential transactions and acquisitions which, if completed, would be expected to improve income from operations and the ability to service debt. In addition, the Company could also sell a portion of its residual portfolio and use the proceeds to pay down all or a portion of the Loan. Although the Company believes that it will be able to resolve the default with the Lender or if it is unable to do so, either refinance the Loan or sell a portion of its residual portfolio to repay the Loan or some combination of all of these options.,
On October 16, 2017, the parties to the Loan Agreement entered into a Forbearance Agreement and Second Amendment to Loan and Security Agreement (the “Forbearance Agreement”), as a result of which GACP and the lenders have agreed to temporarily forbear exercising their rights and remedies under the Loan Agreement, specifically the demand of immediate payment of all obligations owing under the Loan Agreement and the disposition of the collateral, until December 12, 2017 (or earlier if there are further defaults by the Company under either the Loan Agreement or the Forbearance Agreement). Under the Forbearance Agreement, the Company agreed to take certain actions in furtherance of exploring strategic alternatives, including, without limitation, potential sale opportunities of the Company and its portfolios.
On June 19, 2017, the District Court held the Injunction Hearing. On June 20, 2017, the District Court (a) granted the Company’s application for a temporary injunction against the Defendants (the “Injunction”), and (b) found that the Defendants violated their fiduciary duties (including their duty of loyalty) owed to the Company by causing payments of $750,000 in bonuses to themselves, and that the Company’s board of directors had terminated both Defendants’ employment agreements and removed both Defendants from their positions as officers.
