VILLAGE FARMS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
(In thousands of United States dollars, except share and per share amounts and unless otherwise noted)
Arkansas Valley Green and Gold Hemp
On May 21, 2019, the Company entered into a joint venture with Arkansas Valley Hemp, LLC (AV Hemp) for the objective of
outdoor cultivation of high percentage cannabidiol (CBD) hemp and CBD extraction in Colorado. The joint venture, AVGG Hemp, was 60% owned by the Company, 35% owned by AV Hemp, and 5% owned by VF Hemp.
Immediately following the fourth quarter harvest for AVGG Hemp, all of the hemp was destroyed by a severe windstorm. As a result of the loss,
the Company wrote off its $1,184 loan to AVGG Hemp.
The Company has a Term Loan financing agreement with a Canadian creditor (FCC Loan). The
non-revolving variable rate term loan has a maturity date of May 1, 2021 and a balance of $31,306 as of December 31, 2019. The outstanding balance is repayable by way of monthly installments of
principal and interest based on an amortization period of 15 years, with the balance and any accrued interest to be paid in full on May 1, 2021. As of December 31, 2019 and 2018, borrowings under the FCC Loan agreement were subject to an
interest rate of 6.391% and 7.082%, respectively.
The Companys subsidiary VFCE has a loan agreement with a Canadian Chartered Bank
that includes a non-revolving fixed rate loan of CA$3.0 million with a maturity date of June 2023 and fixed interest rate of 4.98%. As of December 31, 2019 and 2018, the balance was US$1,066 and
US$1,279, respectively. The loan agreement also includes an uncommitted, non-revolving credit facility for up to CA$300 to cover Letters of Guarantee issued by the bank on behalf of the Company, with a maximum
term of 365 days, renewable annually. The loan agreement also includes an uncommitted credit facility for up to CA$700 to support financing of certain capital expenditures. The Company received an initial advance of CA$250 in October 2017. Each
advance is to be repaid on a five-year, straight-line amortization of principal, repaid in monthly installments of principal plus interest at an interest rate of CA$ prime rate plus 200 basis points. As of December 31, 2019 and 2018, the
balance was US$106 and US$138, respectively.
The weighted average interest rate on short-term borrowings as of December 31, 2019 and
2018 was 6.2% and 6.9%, respectively.
The Company has a line of credit agreement with a Canadian Chartered Bank (Operating
Loan). The revolving Operating Loan has a line of credit up to CA$13,000, less outstanding letters of credit totaling US$150 and CA$38, and variable interest rates with a maturity date on May 31, 2021. The Operating Loan is subject to
margin requirements stipulated by the bank. As of December 31, 2019 and 2018, the amount drawn on this facility was US$2,000.
Companys borrowings (Credit Facilities) are subject to certain positive and negative covenants and is required to maintain certain minimum working capital. The Company received a waiver for its annual Debt Service Coverage and Debt
to EBITDA covenants as of December 31, 2019.
Accrued interest payable on the credit facilities and loans as of December 31, 2019
and 2018 was $162 and $184, respectively, and these amounts are included in accrued liabilities in the statements of financial position.
As collateral for the FCC Loan, the Company has provided promissory notes, a first mortgage on the
VFF-owned greenhouse properties (excluding the Delta 3 and Delta 2 greenhouse facilities), and general security agreements over its assets. In addition, the Company has provided full recourse guarantees and
has granted security therein. The carrying value of the assets and securities pledged as collateral as at December 31, 2019 and 2018 was $155,548 and $101,537, respectively.
As collateral for the Operating Loan, the Company has provided promissory notes and a first priority security interest over its accounts
receivable and inventory. In addition, the Company has granted full recourse guarantees and security therein. The carrying value of the assets pledged as collateral as at December 31, 2019 and 2018 was $24,915 and $36,248, respectively.
The aggregate annual principal maturities of long-term debt for the next five years and thereafter are as follows: