v3.25.2
FINANCING ARRANGEMENTS
 12 Months Ended
Mar. 31, 2025
Debt Disclosure [Abstract]  
FINANCING ARRANGEMENTS FINANCING ARRANGEMENTS
Borrowings of the Company and its subsidiaries are summarized below at March 31, 2025 and March 31, 2024, respectively.
On May 30, 2024, Contrail, a majority-owned subsidiary of the Company, entered into a Membership Interest Redemption and Earnout Agreement (the "Redemption Agreement") with OCAS, Inc. (the "Seller"), the minority owner of Contrail. Pursuant to the Redemption Agreement, Contrail agreed to purchase and redeem from the Seller, 16% of its 21% interest in Contrail, effective as of April 1, 2024. The purchase price for the redeemed interest is $4.6 million, plus an earnout amount. The cash purchase price is payable pursuant to a secured, subordinated promissory note ("OCAS Loan"), payable beginning on May 1, 2024 and monthly thereafter for a 12-month period of interest payments only with the outstanding balance amortized and paid over the following three years. Interest accrues on the principal amount at an annual rate equal to the 10-year Treasury bond yield plus 375 basis points, compounded monthly. The rate adjusts on each anniversary date of the note. The payment obligation under the note may be deferred if Contrail’s forecast indicates that any payment following the first 12-month period would cause a loan default or a loan default exists. Initially, the payment obligation would revert back to interest o
nly, unless a default exists, in which case no payment would be required. If Contrail is unable to make a payment for 12 months, then interest shall cease to accrue. The note is expressly subordinated to the payment in full of all indebtedness of Contrail on or prior to the date of the note or thereafter. The OCAS Loan is classified as related party debt on the Company's condensed consolidated balance sheet. As a result, it is excluded from the tables of current financing arrangements and contractual financing obligations below.
On August 29, 2024, the Company and AirCo, LLC, AirCo 2, LLC, AirCo Services, LLC, Air'Zona, CSA, GGS, MAC, Stratus Aero Partners LLC, WASI, Worthington, Jet Yard and Jet Yard Solutions (the "Original Alerus Loan Parties") entered into a credit agreement (the "New Credit Agreement") with Alerus Financial ("Alerus"). The New Credit Agreement provides for a secured revolving credit facility ("Revolver - Alerus") in an initial maximum principal amount of up to $14.0 million. Availability under the Revolver - Alerus is subject to a borrowing base and provides for a sub-facility for the issuance of letters of credit in an aggregate amount not to exceed $3.0 million, with the outstanding amount of any such letters of credit reducing availability for borrowings under the revolving credit facility. Revolver - Alerus matures on February 28, 2026 and the balance outstanding on Revolver - Alerus bears interest at a rate per annum equal to the greater of 5.00% or one-month SOFR plus 2.00%. On January 21, 2025, the Original Alerus Loan Parties entered into Amendment No. 1 to Credit Agreement ("Amendment No. 1") and Other Loan Documents with Alerus which extends the maturity date of the revolving credit agreement from February 28, 2026 to August 28, 2026.

In addition to the Revolver - Alerus, the New Credit Agreement provides for two secured term loans – Term Note A ("Term Note A - Alerus") and Term Note B ("Term Note B - Alerus"). Term Note A - Alerus is a loan in the principal amount of $10.7 million that matures on August 15, 2029 that bears interest at a rate per annum equal to the greater of 5.00% or one-month SOFR plus 2.00%. Term Note A - Alerus requires monthly payments of principal commencing September 15, 2024 with such payments set at a seven year level principal amortization and a payment of $3.2 million due at maturity.

Term Note B - Alerus is a loan in the principal amount of $2.3 million that matures on August 15, 2029 and bears interest at a rate per annum equal to the greater of 5.00% or one-month SOFR plus 2.00%. Term Note B - Alerus requires monthly payments of principal commencing September 15, 2024 with such payments set at a 25 year level principal amortization and a payment of $1.8 million due at maturity.

Term Note A and Term Note B may be prepaid in whole or in part at any time, subject to accrued interest and a prepayment premium. The prepayment premium is: 3.00% of the prepaid amount in the first loan year, 2.00% in the second and third loan years, 1.00% in the fourth and fifth loan years, and no premium after the fifth loan year. No prepayment premium applies if it is refinanced by Alerus or prepaid with funds from the Original Alerus Loan Parties’ internally generated cash flows.

The Original Alerus Loan Parties are co-borrowers under the New Credit Agreement and each of the notes. The obligations of the Original Alerus Loan Parties under the New Credit Agreement and the notes are secured by a first priority security interest in substantially all of the Original Alerus Loan Parties' current assets, including accounts receivable and inventory. The Company is not a borrower under the New Credit Agreement but has guaranteed all indebtedness under the New Credit Agreement and the notes. In addition, the Company has pledged a brokerage account of marketable securities held at a securities intermediary to secure the obligations. Furthermore, the obligations are further secured by a deed of trust on approximately 4.626 acres of real estate that includes a 13,000 square foot office building in Denver, North Carolina.

In connection with the closing of the New Credit Agreement, the Company and its subsidiaries used proceeds from the new financing to satisfy and discharge all obligations, and terminated all commitments, under the Company’s previous secured credit facility with MBT. All debt issuance costs were expensed as debt extinguishment cost within other income (loss) on the condensed consolidated statement of income (loss). The Company incurred no termination penalties in connection with such termination.

On September 12, 2024, Contrail entered into the Fifth Amendment to the Master Loan Agreement dated June 24, 2019 and Supplement #11 to the Master Loan Agreement, and Term Note J with ONB. Term Note J is a term loan in the principal amount of $10.0 million. The loan bears a variable monthly interest rate at the 1-month SOFR Rate plus 3.86% and requires equal monthly payments of principal and interest until the loan maturity date of September 12, 2028. The loan requires compliance with covenants that require minimum Tangible Net Worth of $15.0 million and a Quarterly Cash Flow Coverage of not less than 1.25 to 1.0. In order to induce ONB to enter into these agreements, Contrail and OCAS, Inc. entered into a subordination agreement dated September 12, 2024 to address certain loan matters and to establish the priority of repayment of Contrail’s debt to ONB over the OCAS Loan in the original principal amount of $4.6 million.

On October 16, 2024, the Company and AAM 24-1, LLC ("AAM 24-1"), a wholly-owned subsidiary of the Company entered into a the Second Note Purchase Agreement (the “Second NPA”) with two institutional investors (the "Institutional Investors"). The Second NPA amended and restated the terms of the Company’s previously disclosed the Note Purchase Agreement (the
“Original NPA”), which was filed in a Current Report on Form 8-K on February 26, 2024. Under the Original NPA, AAM 24-1 had issued and sold $15.0 million of 8.5% senior secured notes. The Second NPA amended and restated the amount issued and sold to $30.0 million of 8.5% senior secured notes to the Institutional Investors, which includes the $15.0 million from the Original NPA bringing the total indebtedness to $30.0 million. The Notes mature on March 1, 2031 and bear an annual interest at a rate of 8.5%. In addition to the 160,000 previously pledged TruPs, 160,000 newly-issued shares of TruPs held by AAM 24-1 are now pledged to the Institutional Investors, in connection with the closing of the Second NPA.

On February 21, 2025, MAC entered into a $2.3 million term loan with BofA. The term loan requires monthly interest payments commencing March 21, 2025 until payment in full on the February 21, 2030 maturity date. The loan also requires principal payments in equal monthly installments of $9,500 and MAC may prepay the loan at any time in full or in part without penalty. The loan bears a variable monthly interest rate at the 1-month SOFR Rate plus 1.75% plus 0.11%. As part of the term loan, BofA put a lien on real property owned by MAC in Denver, North Carolina to further secure the loan. The new loan with Bank of America, N.A. contains a number of covenants, including but not limited to: providing financial information and statements, maintaining a fixed coverage ratio of at least 1.25 to 1.00, a limit on other debts and other liens, maintenance of assets, a limit on loans and investments, a prohibition on a change of ownership and additional negative covenants.

In connection with the financing, the Original Alerus Loan Parties entered into Amendment No. 2 to Credit Agreement and Consent on February 21, 2025. Amendment No. 2 updated the Credit Agreement dated as of August 29, 2024, as amended by Amendment No. 1 dated as of January 21, 2025 to remove references to Term Note B - Alerus and remove the lien and assignment of rents on the Denver, North Carolina real property. MAC used the proceeds of the new financing to repay Term Note B - Alerus with the Alerus.

On March 31, 2025, the Original Alerus Loan Parties under the Credit Agreement with Alerus entered into Amendment No. 3 to Credit Agreement with Alerus as well as a $3.0 million secured Overline Note and an Amended and Restated Revolving Credit Note in the amount of $14.0 million. The maturity date of the Overline Note is October 31, 2025 or such earlier date on which the Overline Note becomes due and payable. The Overline Note bears interest at the greater of 5.00% or one-month SOFR plus 2.00%. In connection with Amendment No. 3, AirCo, LLC, AirCo 2, LLC, AirCo Services, LLC, and Stratus Aero Partners, LLC were released as co-borrowers from the New Credit Agreement (including the Overline Note). As a result, only Air'Zona, CSA, GGS, MAC, WASI, Worthington, Jet Yard and Jet Yard Solutions remain as entities related to the Alerus note (the "Alerus Loan Parties")

The following table summarizes certain information about the current financing arrangements of the Company's and its subsidiaries as of March 31, 2025 and 2024:

(In Thousands)March 31, 2025March 31, 2024Maturity DateInterest RateUnused commitments as of March 31, 2025Type of Debt
Air T Debt
Revolver - MBT$— $— 8/31/2024
SOFR + range of 2.25% - 3.25%
Recourse
Term Note A - MBT1— 6,955 8/31/20313.42%Recourse
Term Note B - MBT1
— 2,456 8/31/20313.42%Recourse
Term Note D - MBT1
— 1,271 1/1/2028
1-month LIBOR + 2.00%
Recourse
Term Note F - MBT1
— 783 1/31/2028
Greater of 6.00% or Prime + 1.00%
Recourse
Debt - Trust Preferred Securities235,342 34,214 6/7/20498.00%Recourse
Total35,342 45,679 
AirCo 1 Debt
Term Loan - PSB3— 5,434 12/11/2025
3-month SOFR + 3.26%
Non-recourse
Total— 5,434 
Jet Yard Debt
Term Loan - MBT1
— 1,749 8/31/20314.14%Recourse
Total— 1,749 
Alerus Loan Parties Debt
Revolver - Alerus6,050 — 8/28/2026
Greater of 5.00% or 1-month SOFR + 2.00%
7,950Recourse
Overline Note - Alerus— — 10/31/2025
Greater of 5.00% or 1-month SOFR + 2.00%
3,000Recourse
Term Note A - Alerus9,827 — 8/15/2029
Greater of 5.00% or 1-month SOFR + 2.00%
Recourse
Term Note B - Alerus— — 8/15/2029
Greater of 5.00% or 1-month SOFR + 2.00%
Recourse
Total15,877 — 
Contrail Debt
Revolver - ONB3,127 3,476 11/24/2025
1-month SOFR + 3.56%
21,873Limited recourse4
Term Loan G - ONB5— 14,918 11/24/2025
1-month SOFR + 3.11%
Limited recourse3
Term Note I - ONB5
— 10,000 9/28/2025
1-month SOFR + 3.11%
Limited recourse3
Term Note J - ONB8,750 — 9/12/2028
1-month SOFR + 3.86%
Limited recourse3
Total11,877 28,394 
Wolfe Lake Debt
Term Loan - Bridgewater9,059 9,327 12/2/20313.65%Non-recourse
Total9,059 9,327 
Air T Acquisition 22.1
Term Loan - Bridgewater3,500 4,000 2/8/20274.00%Non-recourse
Term Loan A - ING1,298 1,946 2/1/20273.50%Non-recourse
Term Loan B - ING1,082 1,081 5/1/20274.00%Non-recourse
Total5,880 7,027 
WASI Debt
Promissory Note - Seller's Note398 849 1/1/20266.00%Non-recourse
Total398 849 
AAM 24-1 Debt
Promissory Notes - Institutional Investors30,000 15,000 3/1/20318.50%Non-recourse
Total30,000 15,000 
MAC Debt
Term Loan - BofA2,271 — 2/21/2030
1-month SOFR + 0.11% + 1.75%
Non-recourse
Total2,271 — 
Total Debt110,704 113,459 
Unamortized Premiums and Debt Issuance Costs(379)(533)
Total Debt, net$110,325 $112,926 
Fiscal year 2025's weighted average interest rate on short term borrowings outstanding was 7.68%. The weighted average interest rate on short term borrowings outstanding as of March 31, 2024 was 8.88%.
The New Credit Agreement between Alerus Loan Parties and Alerus includes several covenants that are measured twice a year at September 30 and March 31, including but not limited to, a negative covenant requiring a debt service coverage ratio of 1.25 and a leverage ratio greater than 3.00.
The Contrail Credit Agreement with ONB contains affirmative and negative covenants, including covenants that restrict the ability of Contrail and its subsidiaries to, among other things, incur or guarantee indebtedness, incur liens, dispose of assets, engage in mergers and consolidations, make acquisitions or other investments, make changes in the nature of its business, and engage in transactions with affiliates. The Contrail Credit Agreement also contains quarterly financial covenants applicable to Contrail and its subsidiaries, including a minimum debt service coverage ratio of 1.25 to 1.00, a minimum cash flow coverage ratio of 1.25 to 1.00, and a minimum tangible net worth of $15.0 million.
Air T Acquisition 22.1's term loans with ING include several covenants that are measured once a year at December 31, including but not limited to, a negative covenant requiring a debt service coverage ratio of 1.10 and a senior net leverage ratio of 1.50.
The Promissory Notes - Institutional Investors also contain affirmative and negative covenants, including covenants on the utilization of loan proceeds, TruPs dividends, distributions from AAM 24-1's investments and other reporting requirements.

The obligations of Contrail under the Contrail Credit Agreement with ONB are secured by a first-priority security interest in substantially all of the assets of Contrail. The obligations of Contrail under the Contrail Credit Agreement are also guaranteed by the Company, up to a maximum of $1.6 million, plus costs of collection. The Company is not liable for any other assets or liabilities of Contrail and there are no cross-default provisions with respect to Contrail’s debt in any of the Company’s debt agreements with Alerus.
At March 31, 2025, our contractual financing obligations, including payments due by period, are as follows (in thousands)
Fiscal year endedAmount
2026$9,099 
202714,135 
20285,527 
20293,208 
20305,840 
Thereafter72,895 
110,704 
Unamortized Premiums and Debt Issuance Costs(379)
$110,325 
The Company assumes various financial obligations and commitments in the normal course of its operations and financing activities. Financial obligations are considered to represent known future cash payments that the Company is required to make under existing contractual arrangements such as debt and lease agreements.
Fair Value of Debts - The following table presents the carrying amounts and estimated fair values of the Company’s debt instruments, which are not measured at fair value on a recurring basis, as of March 31, 2025 and 2024:

(in thousands)
March 31, 2025March 31, 2024
Carrying Value
$75,362 $79,245 
Estimated Fair Value
$92,984 $90,248 

The fair value of the Company’s debt was estimated using discounted cash flow models based on current market interest rates for debt instruments with similar terms, maturities, and credit risk. These estimates utilize Level 2 inputs within the fair value hierarchy.

As of March 31, 2025 and March 31, 2024, the estimated fair value exceeded the carrying value primarily due to certain outstanding borrowings bearing contractual interest rates that are above current market rates, which results in higher present values of future cash flows. The smaller differential in the prior year reflects changes in interest rate environments and debt structure.

The Company has not elected the fair value option under ASC 825-10 and continues to report its debt obligations at amortized cost. The fair value amounts are presented for disclosure purposes only.

Interest Expense, net
The components of net interest expense during the years ended March 31, 2025 and March 31, 2024 are as follows (in thousands):
March 31, 2025March 31, 2024
Contractual interest$8,606 $6,688 
Amortization of deferred financing costs323 324 
Gain on interest rate swaps
(167)(4)
Interest income(375)(92)
Total$8,387 $6,916 
Net interest expense by entity during the years ended March 31, 2025 and March 31, 2024 are as follows (in thousands):
Year Ended March 31,
20252024
Air T$3,380 $3,818 
Jet Yard31 78 
Alerus Loan Parties997 — 
Contrail1,316 1,570 
AirCo 1378 561 
Wolfe Lake345 356 
Air T Acquisition 22.1277 318 
WASI39 67 
AAM 24-11,793 132 
MAC14 — 
Gain on interest rate swaps
(167)(4)
Other(16)20 
Total$8,387 $6,916