Safe & Green Holdings Corp. (NASDAQ:SGBX), a wholesale distributor of lumber and construction materials, has entered into a significant financial agreement, securing a $4 million loan to bolster its subsidiary SG Echo LLC. The transaction, finalized on Monday, was announced in a recent 8-K filing with the SEC.
The loan, provided by Enhanced Capital Oklahoma Rural Fund, LLC, is accompanied by a Secured Promissory Note and carries an interest rate pegged to the greater of SOFR plus 6.65% or a flat 10% annually. SG Echo will pay a closing fee of $80,000 by October 1, 2025, and has the full backing of Safe & Green Holdings Corp. for its obligations under the agreement.
Repayment terms require SG Echo to make monthly interest payments starting February 2025, with principal repayments of $22,222.22 per month kicking in from January 2026. The loan is set to mature five years from the closing date, with the entire principal and accrued interest due at that time.
An Interest Reserve of $360,000 has been deposited into a segregated account, which the lender can draw from to cover monthly interest payments starting February 2025. SG Echo is not required to replenish this reserve.
Collateral for the loan includes a first priority mortgage on property located at 101 Waldron Rd., Durant, Oklahoma, and a security interest in all of SG Echo's assets.
The agreement stipulates that in case of default, the lender can demand immediate payment of all due amounts plus interest and other liabilities under the Loan Agreement.
This strategic financial move is aimed at supporting the expansion and operational capabilities of SG Echo, thereby enhancing Safe & Green Holdings Corp.'s position in the construction materials market.
The information herein is based on a press release statement and reflects the company's commitment to growth through strategic financial planning.
In other recent news, Safe & Green Holdings has made several strategic financial moves. The company secured $400,000 in funding through a Cash Advance Agreement with Pawn Funding, selling $599,600 worth of its future receivables. In a similar arrangement, Safe & Green Holdings entered a cash advance agreement with Cedar Advance LLC, selling $1,957,150 of its future receivables for a purchase price of $1,350,000. The company also issued a promissory note for $290,000 to 1800 Diagonal Lending LLC.
In an executive leadership shift, David Cross was promoted to Executive Vice President of SG Echo, LLC. Safe & Green Holdings also unlocked working capital valued at $4.7 million through a sale-leaseback deal for its Waldron facility in Durant, Oklahoma, facilitated by Northmarq Capital.
The company expanded its military contract by approximately $1 million, earmarking over $900,000 for the construction of 11 new modular office containers. Furthermore, it extended its contract with a government contractor to refurbish 15 container modules for a significant U.S. government agency. These are recent developments within the company.
InvestingPro Insights
As Safe & Green Holdings Corp. (NASDAQ:SGBX) secures a new loan to support its subsidiary, an analysis of the company's financial health is crucial for investors. According to InvestingPro data, SGBX operates with a notably small market capitalization of just $2.06 million. The company's financials show a concerning picture, with a negative P/E ratio of -0.04, reflecting its lack of profitability in recent times. The gross profit margin stands at a negative 24.27%, indicating that the company is not only failing to make a profit but is losing money on its core business activities.
InvestingPro Tips highlight several red flags: SGBX is quickly burning through cash and has a significant debt burden, which could be exacerbated by the new loan. The company's short-term obligations also exceed its liquid assets, suggesting potential liquidity issues. With a history of stock price volatility and a trend of moving inversely to the market, investors should be wary of the risks associated with this stock. For those looking to delve deeper into the company's metrics, InvestingPro offers additional tips to guide investment decisions.
It is also worth noting that SGBX does not pay a dividend, which could be a drawback for income-seeking investors. The InvestingPro Fair Value estimate for SGBX stands at $1.21, which offers a perspective on the stock's valuation relative to its current trading price. As SG Echo embarks on its expansion with the secured loan, investors should consider these financial metrics and InvestingPro Tips to assess the potential impact on Safe & Green Holdings Corp.'s future performance.
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