Question-and-Answer Session
Operator
(Operator Instructions) The first question comes from the line of Greg Mason – Stifel Nicolaus & Company, Inc.
Greg Mason – Stifel Nicolaus & Company, Inc.
First I would like to touch on the credit facility. In your 10K there are several subsequent events in your liquidity section about some additional problems loans that can reduce your borrowing base to about $48.3 million versus I believe you say at April 30th your debt outstanding was $57.8 million. So a few questions. What is causing the big $7.8 million decline in the borrowing base that you say expected June of this year? How can you keep from violating that borrowing base test if both of those events happen and it declines to $48 million?
Richard Allorto, Jr.
The $7.8 million is associated with one of the respective assets and the borrowing base is a dynamic function in how it is calculated. If both of those two credit events that are in the K do happen, when you factor in the cash on hand or the pro forma cash, we will still be compliant with the borrowing base.
Greg Mason – Stifel Nicolaus & Company, Inc.
If something else happens and you don’t have the cash, what is the cure period for the borrowing base default and how is that calculated? Is it calculated based on the last SEC filing value of the assets?
Richard Allorto, Jr.
We calculate our borrowing base at every month end and depending on respective compliance at that month-end we have a 30 day cure period. With regard to kind of SEC reporting, to kind of somewhat clarify what is in the K for the majority of our assets the collateral value is based upon the fair values we have in our financial statements which are updated quarterly. That limits the fluctuation of market values in the borrowing base calculation on a quarterly basis.
Greg Mason – Stifel Nicolaus & Company, Inc.
So the potential benefit from an increase in the S&P index that you mentioned in the press release would actually not positively impact the borrowing base until next time you file an SEC filing?
Richard Allorto, Jr.
That is correct.
Greg Mason – Stifel Nicolaus & Company, Inc.
On the new credit facility amendment the text in that amendment sounds like when you have to make your dividend payment that it has to be 90% in stock. Are we reading that Deutsche is saying you have to do a max dividend of stock?
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