MENDOCINO BREWING COMPANY, INC. (OTCMKTS:MENB) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01. Entry into a Material Definitive Agreement
Extension of MB Financial Facility
Effective March 16, 2017, Mendocino Brewing Company, Inc. (the
Registrant), Releta Brewing Company LLC, a Delaware
limited liability company (RBC and together with the
Registrant, the Borrowers) and MB Financial Bank, N.A.
(Lender), successor in interest to Cole Taylor Bank
entered into a Tenth Amendment (the Tenth Amendment) to
the Credit and Security Agreement (as amended, the
Agreement) by and between the Borrowers and Cole Taylor
Bank dated June 23, 2011, as previously amended on March 29,
2013, January 21, 2015 (the Second Amendment), June 20,
2016, July 22, 2016, September 21, 2016, October 18, December 22,
2016, January 25, 2017 and February 23, 2017.
The Agreement provides the Borrowers a credit facility, secured
by the personal property of the Registrant and RBC, and the
Registrants Ukiah, California facility, among other items of the
Borrowers property. Prior to the Tenth Amendment, the credit
facility was to mature on March 31, 2017, and consisted of a
$1,250,000 revolving facility, a $1,934,000 machinery and
equipment term loan, a $2,947,000 real estate term loan and a
$1,000,000 capital expenditure line of credit.
Borrowers advised the Lender that they will be unable to pay the
Obligations (as defined in the Agreement) by the current maturity
date of March 31, 2017 and requested that the Lender amend the
Credit Agreement to extend the current maturity date. The Tenth
Amendment extends the maturity date of the Credit Agreement from
March 31, 2017 to April 30, 2017. Lender has absolutely no
commitment and has made no agreement to extend the maturity date
beyond April 30, 2017. In connection with the Tenth Amendment,
Borrowers paid a $15,000 amendment fee to the Lender, which was
charged to the revolving line of credit provided by Lender under
the Agreement.
The Tenth Amendment also confirms the continuance of certain
events of default under the Agreement. The Borrowers have
previously received notices from the Lender regarding the
exercise of rights related to events of default on September 18,
2013, April 18, 2014 and August 18, 2014 (the Default
Notices), as described in current reports on Form 8-K of the
Registrant filed on September 24, 2013, April 24, 2014 and August
22, 2014, respectively. As previously disclosed in the
Registrants current reports on Form 8-K filed on May 3, 2013,
September 24, 2013, April 24, 2014, August 22, 2014, January 27,
2015, and June 9, 2015, quarterly reports on Form 10-Q filed on
August 14, 2013, November 14, 2013, August 14, 2014, November 11,
2014, May 15, 2015, August 14, 2015, November 16, 2015, May 16,
2016, August 15, 2016 and November 14, 2016, annual reports on
Form 10-K filed on March 31, 2014, March 31, 2015 and April 14,
2016 (which are incorporated by reference herein to the extent
they refer to the Agreement), the Borrowers have been in default
under certain provisions of the Agreement.
to the Agreement, the Borrowers must maintain certain financial
metrics. As stated in the Tenth Amendment, the Borrowers have
continued to be in default on the fixed charge coverage ratio as
of the period ending December 31, 2016 and the dates set forth in
the Second Amendment. The fixed charge coverage ratio is required
to be 1.15 to 1.00. As of December 31, 2016, the fixed charge
coverage ratio was -1.22 to 1.00.
The Tenth Amendment also states that the tangible net worth of
the Borrowers has continued to fall short of the required amount
as of the period ending December 31, 2016 and the dates set forth
in the Second Amendment. The Registrant calculates the required
tangible net worth of the Borrowers to be $6,181,400 as of
December 31, 2016 and the actual tangible net worth on such date
to be $2,832,600. The Registrant does not anticipate that the
Borrowers will be able to regain compliance with the required
fixed charge coverage ratio or the minimum tangible net worth in
the near future.
The Lender has not waived the events of default described in the
Default Notices or the Ninth Amendment and has reserved the right
to exercise all available rights and remedies. The Lender could
declare the full amount owed under the Agreement due and payable
at any time for any reason or no reason. If the Lender exercises
additional remedies, such exercise would have a material adverse
effect on the Registrants financial condition and the Registrants
ability to continue to operate.
As previously disclosed in the Registrants current report on Form
8-K filed on January 14, 2016, the Registrant engaged Gordian
Group, LLC to assist it in evaluating, exploring and, if deemed
appropriate by the Registrant, pursuing and implementing certain
strategic and financial options and transactions, including
refinancing the credit facility (a Financial Transaction).
While the Registrant has commenced evaluating its available
options, no conclusion as to any specific option or transaction
has been reached, nor has any specific timetable been fixed for
this effort, and there can be no assurance that any Financial
Transaction will be presented, implemented or consummated. If the
Registrant is unable to complete a Financial Transaction, or to
otherwise refinance the credit facility or further extend the
Credit Agreement, such events would have a material adverse
effect on the Borrowers financial condition and their ability to
continue to operate.
The foregoing is not intended to be a complete description of the
Tenth Amendment and is subject to, and qualified in its entirety
by, the full text of the Ninth Amendment filed as Exhibit 10.1 to
this current report on Form 8-K.
Item 2.03. Creation of a Direct Financial Obligation or
an Obligation under an Off-Balance Sheet Arrangement of a
Registrant.
See Item 1.01 above.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| Exhibit Number | Description | |
| 10.1 |
Tenth Amendment to Credit and Security Agreement, effective as of March 16, 2017, by and among MB Financial Bank, N.A., successor in interest to Cole Taylor Bank, Mendocino Brewing Company, Inc., a California corporation, and Releta Brewing Company LLC, a Delaware limited liability company. |
About MENDOCINO BREWING COMPANY, INC. (OTCMKTS:MENB)
Mendocino Brewing Company, Inc. (MBC) is a craft brewer. The Company produces ales and lagers in its breweries in the United States. The Company operates through two segments: brewing operations, tavern and tasting room operations in the United States and Canada (the North American Territory), and distributor operations in Europe (including Austria, Belgium, Denmark, Ireland, Italy, the Netherlands, France, Finland, Germany, Greece, Iceland, Liechtenstein, Luxembourg, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom) (the Foreign Territory). The Company’s operations in the North American Territory consist primarily of brewing and marketing craft beers. The Company’s operations in the Foreign Territory consist primarily of the marketing and distribution of Kingfisher Premium Lager in the Foreign Territory through Indian restaurants, chain retail grocers, liquor stores and other retail outlets (such as convenience stores). MENDOCINO BREWING COMPANY, INC. (OTCMKTS:MENB) Recent Trading Information
MENDOCINO BREWING COMPANY, INC. (OTCMKTS:MENB) closed its last trading session 00.000 at 0.227 with 1,000 shares trading hands.