|3 Months Ended|
Sep. 30, 2021
|Debt Disclosure [Abstract]|
14. FINANCING AGREEMENTS
Lines of Credit
Effective March 26, 2021, through an amendment and restatement of the applicable credit documents, A-Mark renewed its uncommitted demand borrowing facility ("Trading Credit Facility") with a syndicate of banks. Under the agreements, Coöperatieve Rabobank U.A. acts as lead lender and administrative agent, and Macquarie Bank Limited acts as syndication agent. The Trading Credit Facility is secured by substantially all of the Company’s assets on a first priority basis and subsidiary guarantees, except for CFC.
As of September 30, 2021, and as a result of various amendments, the Trading Credit Facility provided the Company with access up to $330.0 million, featuring a $280.0 million base, with a $50.0 million accordion option. The Trading Credit Facility is scheduled to mature on March 25, 2022. Loan costs have been capitalized when incurred and are amortized over the term of the Trading Credit Facility. As of September 30, 2021 and June 30, 2021, the remaining unamortized balance of loan costs was approximately $0.8 million and $0.9 million, respectively.
The Company routinely uses the Trading Credit Facility to purchase and finance precious metals 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. The one-month LIBOR rate was approximately 0.08% and 0.10% as of September 30, 2021 and June 30, 2021, respectively. The Trading Credit Facility agreement contains provisions to accommodate the replacement of the existing LIBOR-based rate with a successor Secured Overnight Financing Rate (“SOFR”) based rate upon a triggering event.
Borrowings are due on demand and totaled $194.0 million and $185.0 million at September 30, 2021 and June 30, 2021, respectively. The amounts available under the respective lines of credit are determined at the end of each week and at each month end 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 borrowing base calculation. Based on the month end borrowing bases in effect, the availability under the Trading Credit Facility, after taking into account current borrowings, totaled $84.5 million and $65.4 million as determined on September 30, 2021 and June 30, 2021, respectively.
The Trading Credit Facility contains various restrictive financial covenants, all of which the Company was in compliance with as of September 30, 2021.
Interest expense related to the Company’s lines of credit totaled $2.0 million and $1.6 million, which represents 36.3% and 36.9% of the total interest expense recognized, for the three months ended September 30, 2021 and 2020, respectively. Our lines of credit carried a daily weighted average effective interest rate of 3.55% and 3.43%, respectively, for the three months ended September 30, 2021 and 2020.
In September 2018, AM Capital Funding, LLC. (“AMCF”), a wholly owned subsidiary of CFC, completed an issuance of Secured Senior Term Notes (collectively, the "Notes"): Series 2018-1, Class A (the “Class A Notes”) in the aggregate principal amount of $72.0 million and Secured Subordinated Term Notes, Series 2018-1, Class B (the “Class B Notes” and together with the Class A Notes, the “Notes”) in the aggregate principal amount of $28.0 million. The Class A Notes bear interest at a rate of 4.98% and the Class B Notes bear interest at a rate of 5.98%. The Notes have a maturity date of December 15, 2023. The Notes were issued under a Master Indenture and the Series 2018-1 Supplement thereto between AMCF and Citibank, N.A., as trustee. The Company holds $5.0 million of the Class B Notes in order to comply with the Credit Risk Retention Rules of Section 15G of the Securities Exchange Act of 1934. The $5.0 million portion of the Class B Notes retained by the Company is eliminated in consolidation.
AMCF applied the net proceeds from the sale to the Company’s purchase loans and precious metals inventory, and to pay certain costs and expenses. CFC and A-Mark may from time to time also contribute cash or sell precious metals to AMCF in exchange for cash or subordinated, deferred payment obligations from AMCF. In addition, AMCF may from time to time sell precious metals to A-Mark for cash.
As of September 30, 2021, the consolidated carrying balance of the Notes was $93.4 million (which excludes the $5.0 million note that the Company retained), and the remaining unamortized loan cost balance was approximately $1.6 million, which is amortized using the effective interest method through the maturity date. As of September 30, 2021, the balance of the interest payable was $0.2 million. Interest on the Notes is payable monthly in arrears at the aggregate rate of 5.26% per annum.
For the three months ended September 30, 2021 and 2020, the interest expense related to the Notes (including loan amortization costs) totaled $1.4 million and $1.4 million, which represents 26.3% and 33.0% of the total interest expense recognized by the Company, respectively. For the three months ended September 30, 2021 and 2020, the Notes' weighted average effective interest rate was 5.88% and 5.88%, respectively.
Liabilities on Borrowed Metals
The Company recorded liabilities on borrowed precious metals with market values totaling $74.6 million as of September 30, 2021, with corresponding metals totaling $56.4 million and $18.2 million included in precious metals held under financing arrangements and inventories, respectively, on the condensed consolidated September 30, 2021 balance sheet. The Company recorded liabilities on borrowed metals with market values totaling $91.9 million as of June 30, 2021 with corresponding metals totaling $71.0 million and $20.9 million included in precious metals held under financing arrangements and inventories, respectively, on the condensed consolidated June 30, 2021 balance sheet.
Advanced pool metals
The Company borrows precious metals from its suppliers and customers under short-term agreements using other precious metals from its inventory as collateral. The Company has the ability to sell the metals advanced. These arrangements can be settled by repayment in similar metals or in cash. Once the obligation is settled, the metals held as collateral are released back to the Company.
Liabilities on borrowed metals — Other
Liabilities may also arise from: (i) unallocated metal positions held by customers in the Company’s inventory, (ii) amounts due to suppliers for the use of their consigned inventory, and (iii) shortages in unallocated metal positions held by the Company in the supplier’s inventory. Unallocated or pool metal represent an unsegregated inventory position that is due on demand, is a specified physical form, based on the total ounces of metal held in the position. Amounts due under these arrangements require delivery either in the form of precious metals, or in cash.
Product Financing Arrangements
The Company has agreements with third party financial institutions which allow the Company to transfer its gold and silver inventory at an agreed-upon price, which is based on the spot price. 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 party charges a monthly fee as a 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 are reflected in the condensed consolidated balance sheet as product financing arrangements. 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 obligations totaled $219.4 million and $201.0 million as of September 30, 2021 and June 30, 2021, respectively.
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef