v3.26.1
FINANCING ARRANGEMENTS
 12 Months Ended
Mar. 31, 2026
Debt Disclosure [Abstract]  
FINANCING ARRANGEMENTS FINANCING ARRANGEMENTS
Borrowings of the Company and its subsidiaries are summarized below.
In connection with the acquisition of Royal on May 15, 2025, Air'Zona, CSA, GGS, MAC, WASI, Worthington, Jet Yard, Jet Yard Solutions, and Royal ("the Alerus Loan Parties") under the Revolving Credit Agreement with Alerus entered into Amendment No. 4 to Credit Agreement and Consent and Term Loan C with Alerus in the amount of $1.1 million. The purpose of the Amendment and Term Note was to provide a term loan to finance the full purchase price of the acquisition, to add Royal as an Alerus Loan Party to the Alerus credit agreement, as amended and to memorialize Alerus’ consent to the Royal acquisition. The new term loan matures May 15, 2030 and bears interest at the greater of 5.00% or the CME one-month term SOFR rate plus 2.25%. The term loan is secured by the terms of the Security Agreement dated as of August 29, 2024.

On May 30, 2025, the Company, along with AAM 24-1 (the "Issuer"), entered into new transaction documents with two Institutional Investors that replaced the Second Note Purchase Agreement ("Second NPA") transaction documents. Pursuant to the Third Note Purchase Agreement ("Third NPA") with the Institutional Investors, the Issuer agreed to issue and sell a Multiple Advance Senior Secured Note in an aggregate principal amount of up to $100.0 million (the “Multiple Advance Note”). For purposes of clarity and the avoidance of doubt, as of the closing date, the Institutional Investors advanced an additional $10.0 million to the Issuer and, as of May 30, 2025, had collectively advanced under the Multiple Advance Note to the Issuer the aggregate amount of $40.0 million. Provided no default or event of default of the Issuer exists, and subject to satisfaction of all requirements for any closing as set forth in the Third NPA, the Investors are obligated to advance to the Issuer an additional aggregate $60.0 million in $10.0 million increments, each on or within fifteen days of the following dates:

September 30, 2025$10.0 million
January 30, 2026$10.0 million
May 30, 2026$10.0 million
September 30, 2026$10.0 million
January 30, 2027$10.0 million
May 30, 2027$10.0 million
The Multiple Advance Note bears annual interest at a rate of 8.5% which is computed on the basis of a 30/360-day year and actual days elapsed and is payable semi-annually in arrears, pursuant to the terms of the Multiple Advance Note. The maturity date of the Multiple Advance Note is May 31, 2035. The Multiple Advance Note contains standard and customary events of default. The prior notes were cancelled and replaced by the Multiple Advance Note. Funds advanced under the Multiple Advance Note may be reinvested for a period of six years from the date of closing.

The Issuer may prepay all or a portion of the outstanding principal and accrued but unpaid interest at any time, provided that (i) if the Issuer prepays all or any portion of the Multiple Advance Note within one year from the Issue Date, the Issuer is required to pay the Investors a prepayment premium equal to 2.0% of the amount being prepaid, and (ii) if the Issuer prepays all or any portion of the Multiple Advance Note after the first anniversary of the Issue Date but on or prior to the second anniversary of the Issue Date, the Issuer is required to pay the Investors a prepayment premium equal to 1.0% of the amount being prepaid. If
the Issuer elects to prepay a portion of the outstanding principal and accrued but unpaid interest, then in no event can such prepayment be for an amount less than $1.0 million.

The various equity interests that were assigned by the Company to the Issuer on or about the closing date of the original financings continue to serve as collateral for the repayment of the Multiple Advance Note as do all of the issued and outstanding capital stock of the Issuer owned by the Company, and the 320,000 Trust Preferred Securities, held by the Issuer.
On September 3, 2025, the Alerus Loan Parties under the Revolving Credit Agreement with Alerus entered into Amendment No. 5 to Credit Agreement, the Amended and Restated Revolving Credit Note, and the Amended and Restated Term Note A.
Pursuant to Amendment No. 5 to Credit Agreement, the Overline Note provisions and note were eliminated.
Pursuant to the Amended and Restated Revolving Credit Note, the revolving credit commitment to make revolving credit loans and to issue letters of credit was increased to an aggregate principal amount not to exceed $20.0 million. The interest rate on the Revolving Credit Note was decreased to the greater of 5.00% or 1-month SOFR plus 1.90%. The maturity date was extended to August 28, 2027. The financial covenants are to be measured semi-annually at December and March of each year and the Alerus Loan Parties are to deliver quarterly financial statements to Alerus.
Pursuant to the Amended and Restated Term Note A, Term Note A was amended and restated by the Alerus Loan Parties in the principal amount of $9.2 million. The maturity date remains August 15, 2029. The Term Note A interest rate was revised to 1-month SOFR plus 2.00%.
Pursuant to Amendment No. 5 to Credit Agreement, the Alerus Loan Parties must maintain a debt service coverage ratio of at least 1.25 to 1.00 measured on December 31 and March 31 of each year and a leverage ratio not to exceed 3.00 to 1.00 measured annually on March 31.
On November 24, 2025, Air T Acquisition 22.1, LLC ("ATA 22.1") entered into a $6.0 million term loan with Alerus. The loan proceeds were used to repay amounts due on the $3.5 million term loan from Bridgewater Bank. The new term loan is due on or before November 24, 2032 and has an interest rate of the greater of 5.00% or 1-month SOFR plus 1.90%. The loan may be prepaid at any time without penalty. The loan contains normal and customary default provisions and is secured by all the assets and membership interests of ATA 22.1 and 200,000 shares of TruPs owned by ATA 22.1, as well as an investment account of Air T. The loan requires ATA 22.1 to maintain marketable securities pledged as collateral in an amount that is at all times not less than the outstanding principal amount of the term loan, measured as of the end of each calendar month.
On November 24, 2025, Contrail entered into a Master Loan Agreement and Supplement No. 1 to Master Loan Agreement (collectively the “Master Loan Agreement”) with Alerus. The agreement provides for a $15.0 million revolving loan facility that is evidenced by a Promissory Note Revolving Note dated November 24, 2025 in the principal amount of $15.0 million. The funds are to be used for the purchases of engines and working capital needs. The revolving loan carries interest at the rate of 1-month SOFR plus 3.11% and the loan requires payments of interest only until maturity at November 24, 2027. There is no penalty on prepayment and the loan includes a 30 day resting period requirement if Contrail’s debt service coverage ratio exceeds 1.25 to 1.00, at any time during each annual period ending on the anniversary of the date of the revolving loan. The loan contains normal and customary default provisions and is secured by a security interest in all of Contrail’s assets. In addition, the loan is secured by a payment guaranty of Air T, in an aggregate amount not to exceed $2.0 million plus collection and collateral recovery costs. The Master Loan Agreement contains customary affirmative and negative covenants such as maintaining, as of the last day of each fiscal quarter, a quarterly rolling cash flow coverage ratio of not less than 1.25 to 1.00 and maintaining a tangible net worth of at least $15.0 million at all times.
On December 15, 2025, the Company and its wholly-owned subsidiary Air T Acquisition 25.1, LLC ("ATA 25.1"), entered into a Note Purchase Agreement (the “Agreement”) with two Institutional Investors (the "Investors"), which Investors had previously entered into the Third Note Purchase Agreement with the Company. Pursuant to the Agreement, ATA 25.1 issued to the Investors a 11.5% Senior Secured Note due December 15, 2031 in the aggregate principal amount of $40.0 million (the “Investor Note”). The loan proceeds were made immediately available to ATA 25.1’s wholly-owned subsidiary Air T Lending 25.1, LLC (“ATL 25.1”) and used to provide financing to Rex pursuant to the Syndicated Loan Note Subscription Agreement – Project Mustang dated December 17, 2025 between and among ATL 25.1, Rex and additional parties (the “New Cap Note Facility”). The New Cap Note Facility provides a A$50.0 million line of credit, matures on December 15, 2030, and bears interest at 12.0% per annum. Interest on the New Cap Note Facility must be paid equally between cash and capitalization (i.e., paid-in-kind through the issuance of additional debt), during the initial period, as defined in the Intercreditor Deed (i.e., the period commencing on December 17, 2025 and ending on the earlier of the date the applicable availability period in the New Facility Agreement (as defined below) has ended and the facilities under such loan agreement are fully drawn). Interest under the New Cap Note Facility is first payable on December 31, 2025, and such interest is payable quarterly thereafter. The New Cap Note Facility further permits the Rex Companies to incur other unsecured financial indebtedness up to an aggregate limit of A$10.0 million.
Interest on the Investor Note accrues at the rate of 11.5% per annum on the basis of a 30/360-day year (and actual days elapsed) and is payable quarterly in arrears. The Investor Note matures on December 15, 2031 and may not be prepaid, in whole or in part, prior to June 15, 2027 unless the prepayment premium specified therein has been paid. The Investor Note is secured by a pledge of all equity interests of ATA 25.1 and is guaranteed by the Company, which guarantee generally covers 25% of principal and interest due under the Investor Note and related documents. The Agreement includes customary covenants and events of default.
In connection with the Investor Note, the Company, ATA 25.1, Air T Rex, as defined in Note 2, and the Investors entered into a Contingent Payment Agreement that provides the Investors with the right to receive up to A$8.0 million (the "Maximum Contingent Payment Amount") of contingent payments after the Investor Note has been repaid in full, based on the gross revenues of Air T Rex and its direct and indirect subsidiaries on a consolidated basis. Upon full repayment of the Investor Note, ATA 25.1 shall pay the Investors contingent payments equal to 0.5% of the aggregate gross revenue of Air T Rex and its direct and indirect subsidiaries for each fiscal year beginning with the year the Investor Note has been repaid in full and continuing until the Investors have received an aggregate of the Maximum Contingent Payment Amount. Each annual payment is capped at A$2.0 million, with any excess above the cap treated as a rollover amount that carries forward to subsequent years until the Maximum Contingent Payment amount is reached. The Company determined the fair value of the Contingent Payment Agreement using a Monte Carlo simulation to estimate the potential contingent payments, and is considered a Level 3 fair value measurement. The simulation risk-adjusted the metric forecast by the metric discount factor, determined using a short-term revenue discount rate. The fair value of the Contingent Payment Agreement would have been different if there was a significant change in estimated gross revenues and the short-term revenue discount rate. As of March 31, 2026, the carrying value of the Contingent Payment Agreement was $1.3 million.
In December 2025, as part of the Company's acquisition of Rex, further discussed in Note 2, the Company assumed approximately $71.2 million in liabilities associated with the Commonwealth Facility Agreement originally dated November 11, 2024, with the Commonwealth. The Company determined the fair value of the CFA Debt using a discounted cash flow approach, consistent with market practice and applicable accounting standards for valuing long-dated, non-tradeable debt instruments. As of March 31, 2026, the carrying value of the CFA Debt was $23.8 million.
In December 2025, Rex and the Commonwealth entered into (i) an amendment and restatement of the Commonwealth Facility Agreement originally dated November 11, 2024 (the “Commonwealth Term Loan”), and (ii) a new facility agreement (the “New Facility Agreement” and, together with the Commonwealth Term Loan, the “Commonwealth Facilities”).
The Commonwealth Term Loan is for an initial term of 30 years and permits extension of the termination date by up to an additional 20 years (in two 10‑year increments) subject to specified conditions and requires mandatory prepayments from Excess Cash Flow in accordance with the Intercreditor Deed. The Commonwealth Term Loan does not bear interest, provided that if Rex fails to maintain compliance with certain ‘Rex Regional Commitments’ (and a resulting event of default occurs), interest shall accrue on the outstanding principal at a rate of 2.00% per annum during the period of such non-compliance.
The fair value of the Commonwealth Term Loan on the date of the Rex acquisition was approximately $22.2 million, estimated using a DCF approach, consistent with market practice and applicable accounting standards to estimate the fair value based on the absence of observable market inputs, and is considered a Level 3 fair value measurement. The DCF values the forecasted cash flows related to Rex operations that are required to be used to prepay the note over its term. The fair value of the debt would have been different if there was a significant change to the cash flows for prepayment and the 15% discount rate applied to the cash flows. The face value exceeded the estimated fair value primarily due to the Commonwealth Term Loan bearing no contractual interest.
The New Facility Agreement bears interest at 12.0% per annum (which rate shall increase by 2.00% per annum if the Rex Companies fail to maintain compliance with certain “Rex Regional Commitments” regarding flight service levels and route profitability). The interest rate applicable to the New Facility Agreement is subject to adjustment from time to time in accordance with the Intercreditor Deed to match the interest rate applicable to the New Cap Note Facility. The New Facility Agreement matures on December 17, 2032 and provides for differing availability periods: (i) a three-year availability period for the A$40.0 million facility for engine care and maintenance; and (ii) a two-year availability period for the A$20.0 million business operations facility.
The Commonwealth Facilities are secured by general security deeds and certain real property and aircraft‑related security and, among other things: (i) include a financial covenant requiring the Rex Companies to maintain a minimum cash balance of A$5.0 million at all times until the New Cap Note Facility is fully drawn, (ii) require application of Excess Cash Flow as mandatory prepayments pursuant to the Intercreditor Deed, (iii) under the New Facility Agreement, provide for mandatory prepayments from asset sale proceeds, insurance proceeds not applied to repair or replacement, and Excess Cash Flow, (iv) restrict the sale or disposal of assets outside the ordinary course of business, subject to a basket for disposals where the market value or consideration does not exceed A$1.0 million in any financial year; and (v) under the Commonwealth Term Loan, requires mandatory prepayments from Excess Cash Flow in accordance with the Intercreditor Deed. Excess Cash Flow is calculated as available cash flow for that relevant period less required debt payments for that relevant period (excluding capitalized interest).
The following table provides certain information about the current financing arrangements of the Company and its subsidiaries (other than related party obligations) as of March 31, 2026 and 2025:

(In Thousands)March 31, 2026March 31, 2025Maturity DateInterest RateUnused commitments as of March 31, 2026Type of Debt
Air T Debt
Debt - Air T Funding Trust Preferred Securities1$38,719 $35,342 6/7/20498.00%Recourse
Total38,719 35,342 
Alerus Loan Parties Debt
Revolver - Alerus10,545 6,050 8/28/2027
Greater of 5.00% or 1-month SOFR + 1.90%
$9,455 Recourse
Overline Note - Alerus— — 10/31/2025
Greater of 5.00% or 1-month SOFR + 2.00%
— Recourse
Term Note A - Alerus8,295 9,827 8/15/2029
1-month SOFR + 2.00%
Recourse
Term Note C - Alerus925 — 5/15/2030
Greater of 5.00% or 1-month SOFR + 2.25%
Recourse
Total19,765 15,877 
Contrail Debt
Revolver - Alerus8,181 — 11/24/2027
1-month SOFR + 3.11%
6,819 Limited recourse2
Revolver - ONB— 3,127 11/24/2025
1-month SOFR + 3.56%
— Limited recourse3
Term Note J - ONB— 8,750 9/12/2028
1-month SOFR + 3.86%
Limited recourse3
Total8,181 11,877 
Wolfe Lake Debt
Term Loan - Bridgewater8,778 9,059 12/2/20313.65%Non-recourse
Total8,778 9,059 
ATA 22.1 Debt
Term Loan - Alerus6,000 — 11/24/2032
Greater of 5.00% or 1-month SOFR + 1.90%
Non-recourse
Term Loan - Bridgewater— 3,500 2/8/20274.00%Non-recourse
Term Loan A - ING690 1,298 2/1/20273.50%Non-recourse
Term Loan B - ING1,150 1,082 5/1/20274.00%Non-recourse
Total7,840 5,880 
WASI Debt
Promissory Note - Seller's Note— 398 1/1/20266.00%Non-recourse
Total— 398 
AAM 24-1 Debt
Promissory Notes - Institutional Investors60,000 30,000 5/31/20358.50%Non-recourse
Total60,000 30,000 
MAC Debt
Term Loan - Bank of America, N.A.2,157 2,271 2/21/2030
1-month SOFR + 0.11% + 1.75%
Non-recourse
Total2,157 2,271 
Rex Debt
Term Loan - Commonwealth423,842 — 11/11/2054—%Non-recourse
Line of Credit - Commonwealth— — 12/17/203212.00%41,070 Non-recourse
Total23,842 — 
ATA 25.1
Term Note - Institutional Investors41,271 — 12/15/203111.50%Recourse
Total41,271 — 
Total Debt210,553 110,704 
Unamortized Premiums and Debt Issuance Costs(2,357)(379)
Total Debt, net$208,196 $110,325 
The weighted average interest rate on short term borrowings outstanding as of March 31, 2026 and 2025 was 3.50% and 7.68%, respectively.
ATA 22.1's term loans with ING include several covenants that are measured once a year at March 31, including but not limited to, a negative covenant requiring a debt service coverage ratio of at least 1.10 to 1.00 and a senior net leverage ratio not greater than 1.50 to 1.00.
AAM 24-1's promissory notes with the Institutional Investors contain customary affirmative and negative covenants.
The MAC term loan with Bank of America, N.A. contains a number of covenants, including but not limited to maintaining a fixed coverage ratio of at least 1.25 to 1.00.
At March 31, 2026, our contractual financing obligations, including payments due by period, are as follows (in thousands):
Due byAmount
March 31, 2027$3,633 
March 31, 202822,829 
March 31, 20292,965 
March 31, 20306,847 
March 31, 20311,519 
Thereafter172,760 
210,553 
Unamortized Premiums and Debt Issuance Costs(2,357)
$208,196 
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 (in thousands):

March 31, 2026March 31, 2025
Carrying Value $210,553 $75,362 
Estimated Fair Value$200,081 $92,984 

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.

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 fiscal years ended March 31, 2026 and March 31, 2025 were as follows (in thousands):
Year Ended March 31,
20262025
Contractual interest$10,969 $8,606 
Amortization of deferred financing costs268 323 
Gain on interest rate swaps(2)(167)
Interest income(748)(375)
Accretion of fair value discount1,328 — 
Other225 — 
Total$12,040 $8,387 
Net interest expense for the Company and its subsidiaries were as follows for the fiscal years ended March 31, 2026 and 2025 (in thousands):
Year Ended March 31,
20262025
Air T$2,872 $3,504 
Jet Yard— 31 
Alerus Loan Parties1,486 997 
Contrail715 981 
AirCo 1— 378 
Wolfe Lake335 345 
ATA 22.1333 277 
WASI11 39 
AAM 24-13,310 1,793 
MAC233 58 
Rex917 — 
ATA 25.11,584 — 
Other244 (16)
Total$12,040 $8,387 
Cash paid for interest totaled $8.5 million and $8.4 million during the twelve months ended March 31, 2026 and 2025, respectively.