Financing Agreements |
9 Months Ended |
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Mar. 31, 2016 | |
| Debt Disclosure [Abstract] | |
| Financing Agreements |
FINANCING AGREEMENTS
Lines of Credit
On March 31, 2016, the Company established a new borrowing facility ("Trading Credit Facility') with a syndicate of banks, with Coöperatieve Rabobank U.A. ("Rabobank") acting as lead lender and administrative agent for the syndicate. The Trading Credit Facility, which replaced the Company's previous borrowing facility with a group of financial institutions under an inter-creditor agreement, provides the Company with access up to $275.0 million, featuring a $225.0 million base with a $50.0 million accordion option. The Trading Credit Facility has a one-year maturity. Simultaneously with the effectiveness of the new Trading Credit Facility, the Company entered into a security agreement with the banks securing the Trading Credit Facility with substantially all of the Company’s assets on a first priority basis.
The Company routinely uses the Trading Credit Facility to purchase precious metals from suppliers and for operating cash flow purposes. Amounts under the Trading Credit Facility bear interest based on London Interbank Offered Rate (“LIBOR”) plus a 2.50% margin for revolving credit line loans and a 4.50% margin for bridge loans (that is, for loans that exceed the available revolving credit line). The one-month LIBOR rate was approximately 0.44% and 0.19% as of March 31, 2016 and June 30, 2015, respectively. Borrowings are due on demand and totaled $190.0 million and $147.0 million at March 31, 2016 and at June 30, 2015, respectively. The amounts available under the respective borrowing facilities are determined at the end of each week following a specified borrowing base formula. The Company is able to access additional credit as needed to finance operations, subject to the overall limits of the borrowing facilities and lender approval of the revised borrowing base calculation. Based on the latest approved borrowing bases in effect, the amounts available under the Trading Credit Facility after taking into account current borrowings, totaled $28.8 million and $20.9 million at March 31, 2016 and June 30, 2015, respectively.
The Trading Credit Facility has certain restrictive financial covenants, including one which requires the Company to maintain a minimum tangible net worth. As of March 31, 2016 the minimum tangible net worth financial covenant under the Trading Credit Facility was $35.0 million. The Company is in compliance with all restrictive financial covenants as of March 31, 2016.
Interest expense related to the Company’s current and preceding borrowing arrangements totaled $1.3 million and $0.9 million, which represents 76.7% and 80.8% of the total interest expense recognized, for the three months ended March 31, 2016 and 2015, respectively. Interest expense related to the Company’s borrowing arrangements totaled $3.6 million and $2.7 million, which represents 84.4% and 85.2% of the total interest expense recognized, for the nine months ended March 31, 2016 and 2015, respectively. Our borrowing arrangements carried a daily weighted average effective interest rate of 2.82% and 2.82%, respectively, for the three months ended March 31, 2016 and 2015. Our borrowing arrangements carried a daily weighted average effective interest rate of 2.79% and 2.94%, respectively, for the nine months ended March 31, 2016 and 2015.
Liability on Borrowed Metals
The Company borrows precious metals from its suppliers under short-term agreements, which bear interest at a designated rate. Amounts under these agreements are due at maturity and require repayment either in the form of precious metals or cash. The Company's inventories included borrowed metals with market values totaling $5.6 million and $9.5 million as of March 31, 2016 and June 30, 2015, respectively.
Product Financing Arrangement
The Company has agreements with financial institutions (third party) that allows the Company to transfer its gold and silver inventory at a fixed price to this third party. Such agreements allow the Company to repurchase this inventory at an agreed-upon price based on the spot price on the repurchase date. The third parties charges a monthly fee as percentage of the market value of the outstanding obligation; such monthly charges are classified in interest expense. These transactions do not qualify as sales, and therefore have been accounted for as financing arrangements and reflected in the condensed consolidated balance sheet within product financing obligation. The obligation is stated at the amount required to repurchase the outstanding inventory. Both the product financing obligation and the underlying inventory (which is entirely restricted) are carried at fair value, with changes in fair value recorded as a component of cost of sales in the condensed consolidated statements of income. Such obligation totaled $93.2 million and $39.4 million as of March 31, 2016 and June 30, 2015, respectively.
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