Section 2.04. Trigger events that accelerate or increase a direct financial obligation or an obligation under an off-balance sheet arrangement.
Star Equity Holdings, Inc. (the “Company”) is party to a loan and guarantee agreement (the “loan agreement”) dated March 29, 2019by and among the Company, certain affiliates of the Company identified on the signature pages of the Loan Agreement, (collectively, the “Borrowers”) and Webster Bank, North Americaentitled to Sterling National Bank, in its capacity as Lender. The loan agreement provides for a five-year revolving credit facility for a maximum credit amount of $20 million (the “BNS Credit Facility”). The SNB Credit Facility is secured by a first ranking lien on substantially all of the assets of the Corporation and the borrowers and a pledge of all the shares of the borrowers. The SNB credit facility requires compliance with certain covenants, including quarterly compliance with financial covenants. The Company has notified the lender that it was not in compliance with the maximum leverage ratio and minimum fixed charge coverage ratio under the BNS Credit Facility at the close of its first financial quarter ended March 31, 2022. Failure to meet these financial covenants constitutes an event of default under the Loan Agreement, which, if not waived, would entitle the Lender to declare the loans and all other obligations under the Loan Agreement immediately due and payable and to increase the rate of interest at which the Loans and the obligations under the Loan Agreement bear interest.
The Company is currently in negotiations and discussions with the Lender to remedy these breaches of the covenants, the loan relationship and the various alternatives available to the Company and the Lender. However, the Corporation cannot guarantee that the lenders will not choose to accelerate the repayment of indebtedness under the SNB Credit Facility. The Company is currently in discussions with the Lender regarding the possibility of obtaining a waiver of the breaches of the aforementioned financial covenants.
Item 9.01. Financial statements and supporting documents.
104 Cover Page Interactive Data (embedded within the Inline XBRL document).
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the duly authorized undersigned.
Star Equity Holdings, Inc.
Date: May 17, 2022 By: /s/ Jeffrey E. Eberwein
Name: Jeffrey E. Eberwein
Title: Executive Chairman
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