On October 21, 2010, YTB International, Inc. (the “ Company ”) executed a Contract to Accept Deed in Payment of Mortgage Debt (the “ Prestige Contract ”) with Prestige Management Services, LLC (“ Prestige ”) with respect to the Company’s former headquarters located at One Country Club View Drive, Edwardsville, Illinois 62025 (the “ Property ”). On December 16, 2008, the Company entered into a sales contract with Prestige pursuant to which Prestige agreed to purchase the Property for $1.5 million. Prestige provided payment of $300,000 at closing and delivered a $1.2 million promissory note (the “ Prestige Note ”) secured by a mortgage on the Property. Pursuant to the Prestige Contract, the Company agreed to cancel the Prestige Note and the indebtedness evidenced thereby and Prestige agreed to convey the Property to the Company.And if I mess up the summary, cut me some slack because this was convoluted.
Also, on October 21, 2010, the Company agreed to refinance its mortgage on the Property (the “ Mortgage ”) with Normandy Corporation (“ Normandy ”). On January 20, 2010, as evidence of the Mortgage indebtedness, the Company executed a commercial promissory note (the “ Original Normandy Note ”) in favor of Normandy in the amount of $650,000 with a maturity date of September 15, 2010. The Original Normandy Note bore interest at a rate of 14.5% per annum, payable in monthly installments of interest only beginning on February 16, 2010. In connection with execution of the Original Normandy Note, the Company agreed to pay a loan fee to Normandy in the amount of $45,500, of which $3,250 was paid by the Company upon acceptance of the Original Normandy Note commitment letter, $9,750 was paid at closing and the remaining $32,500 was to be paid at maturity, along with the remaining unpaid principal amount on the Original Normandy Note and all accrued and unpaid interest thereon.
In connection with the refinance of the Mortgage, the Company agreed to pay off the Original Normandy Note and execute a new secured promissory note (the “ New Normandy Note ”) in favor of Normandy with a principal amount of $685,000 that matures September 1, 2011. The New Normandy Note bears interest at 14.5% per annum, payable in monthly installments of principal and interest of $58,000 beginning on November 1, 2010. The New Normandy Note is secured by the Mortgage on the Property. The Company agreed to pay an origination loan fee for the New Normandy Note to Normandy in the amount of $17,063, of which $3,413 was paid by the Company upon acceptance of the New Normandy Note commitment letter, and the remaining $13,650 was paid at closing.
In the event of Default, as defined in the New Normandy Note, Normandy must provide to the Company a written notice of default. If the default is not cured within 10 days from the date of the notice in respect of a monetary default, and within 20 days from the date of the notice in respect of a non-monetary default, the remaining unpaid principal, any accrued and unpaid interest, and any applicable prepayment penalties, shall, at Normandy’s option and without further notice immediately become due and payable in full. Any payment of interest due under the New Normandy Note made 10 or more days after its due date must be accompanied by a late charge in the amount of 6% of the payment. Any payment of principal made 10 or more days after its due date shall be accompanied by a late charge in the amount of 6% of the payment. From and after the date of any Default or in the event the New Normandy Note is not paid in full at its maturity, the principal sum and all interest or other charges then accrued shall bear interest at the rate equal to the greater of: (i) 18% per annum; or (ii) the maximum allowable by law.
1. YTB sold their former HQ to Prestige when they were flush with cash. They got a down payment and Prestige defaulted on the remaining balance. YTB, exercising their rights, acted on the lien and retook the building back. Essentially Prestige paid YTB $300K for rent for almost two years.
2. In January, YTB took out a loan of $650K at 14.5% interest and paid a processing fee to Normandy of $45.5K. The deal was for interest only payments with the principal being due in September 2010. This principal was paid.
3. Now, YTB and Normandy agree to essentially renew the note. But this note is for $685K and an additional $17.5K in processing fees and 14.5% interest. The note begins anew and comes with a $58K monthly payment of principal and interest. The loan matures in September 2011.
4. Of interest in this note is that if YTB is late with any payment more than 10 days, there is a 6% penalty ($5,100). Additionally, in the event of a default--either a late pay, no pay, or other non monetary default, the interest adjusts from 14.5% to 18%!
It seems like YTB is still robbing Peter to pay Paul and hanging on by a thread. They entered into a bum deal for the old HQ, have had to sell off their current one. And the latest quarterly reports are due out in two and a half weeks.
It will be interesting to see the results and the accompanying spin!