SYNTEC OPTICS HOLDINGS, INC. Debt Disclosure
Note 6 Line of Credit
The Company has a line of credit available in the amount of $8,000,000. Borrowings may be made against the line of credit as Secured Overnight Financing Rate (“SOFR”) Loans. The weighted average rate on outstanding borrowings as of December 31, 2024 was 7.63%. As of December 31, 2024 and 2023, the Company had $6,263,863 and $6,537,592, respectively, outstanding under the line of credit facility.
The Credit Agreement contains customary covenants and restrictions on the Company’s ability to engage in certain activities and financial covenants requiring the Company to maintain certain financial ratios. At September 30, 2024, the Company was not in compliance with the minimum fixed charge coverage ratio and maximum total leverage ratio as defined in the Credit Agreement. On November 12, 2024, the Company obtained a waiver with respect to the Credit Agreement, pursuant to which the sections of the agreement mentioned above are waived for the period ending September 30, 2024.
As the result of defaults on the loan covenant calculations for the quarterly periods ended June 30, 2024 and September 30, 2024, on November 29, 2024, the Company’s credit agreement dated November 8, 2023 was amended. The bank waived certain criteria, including a minimum fixed charge coverage ratio and a maximum total leverage ratio, subject to certain modifications of the agreement, specifically, a reduction of the revolving line of credit to $8,000,000 and a reduction of the equipment loan amount to $3,000,000. As a result of these reduced credit limits the company reduced the size of the deferred financing costs. The modified interest margin rate margin was adjusted to 3.00%. The leverage ratio was modified to be no greater than 5.25 for 1Q 2025, no greater than 5.0 for 2Q 2025, no greater than 4.75 for 3Q 2025, no greater than 4.25 for 4Q 2025, and no greater than 3.50 after that. The fixed charge ratio was suspended for 1Q 2025 and no less than 1.10 to 1.00 after that. As of December 31, 2024, the Company was not in compliance with the loan covenants and received a waiver letter from the lender, dated March 21, 2025.
SYNTEC OPTICS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2024 AND 2023
About Debt Disclosures
Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.
Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.