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CLEVELAND, Aug. 22, 2013 (GLOBE NEWSWIRE) -- Morgan's Foods, Inc. (OTC:MRFD) today announced entry into a Loan Agreement, dated August 22, 2013, with The Huntington National Bank, a national banking association ("Huntington") and the closing of two loans pursuant to the Loan Agreement.
The Loan Agreement's two new loans, in addition to funding the remodel reserve, pay off the Company's outstanding loan balance of $6,104,351, which carried an interest rate of 9.0%, with its current lender, Fortress Credit Corp., and a prepayment penalty of 1.0% of the balance.
The Loan Agreement contains two facilities consisting of a term loan and a time loan in the total amount of $8,930,000.
The Term Note consists of $7,930,000 three year term loan with an interest rate which has been fixed at the rate of 5.44% through the use of a derivative interest rate swap also entered into with Huntington. Principal and interest on the Term Note are payable in substantially equal monthly payments based on an eight year amortization with a balloon payment of the then remaining principal balance due and payable at the end of the three year term.
The Time Note consists of $1,000,000 having an 18 month term, no scheduled principal payments and a floating interest rate at 30 day LIBOR plus 4.25%. Principal payments on the Time Note are expected to be made with the proceeds of the sales by the Company of excess real estate of closed restaurants. The balance, if any, at the end of the 18 month term will become due and payable.
The Loan Agreement requires the maintenance of a cash reserve for remodel requirements of $2.5 million, reducing to $1.0 million after 18 months. It also require the Company to maintain a fixed charge coverage ratio of at least 1.15:1.00 through May 30, 2015 and thereafter at least 1.20:1.00 and cash adjusted leverage of 5.25 or less.