UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
CURRENT REPORT
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Item 2.04. Triggering Events that Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
On October 25, 2022, Harbor Custom Development, Inc., a Washington corporation (the “Company”), calculated that the Company failed to meet a financial covenant of that certain Loan Agreement with BankUnited, N.A. (the “Lender”), dated March 7, 2022 (the “Loan”). Under the Loan, the Company covenanted that it would not allow its Interest Coverage Ratio as of the last day of each fiscal quarter to be less than 2.50. The Interest Coverage Ratio is defined as the ratio of EBITDA for the trailing four quarters to Interest Expense for the trailing four quarters. The Company had an Interest Coverage Ratio of 1.4 on September 30, 2022. Under the Loan, a failure to maintain the required Interest Coverage Ratio financial covenant is defined as an Event of Default. For such an Event of Default, the Lender may accelerate all amounts due under the Loan. The Lender has informed the Company that the Lender is sending the Loan to its restructuring department for potential restructuring, and, to date, has not provided the Company with a Notice of Default or Lender’s intention to accelerate payment of all amounts due under the Loan. The Company will update this disclosure when the results of the potential restructuring are known.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Harbor Custom Development, Inc. | ||
| Date: October 28, 2022 | By: | /s/ Lance Brown |
| Lance Brown | ||
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | ||