Being Conservative, TBS Reclassifies

Following the accounting rules, TBS International reclassified its long-term debt as current. According to GAAP, long-term loans must “be classified as a current liability when either a covenant violation that gives the lender the right to call the debt has occurred at the balance sheet date, or such a covenant violation would have occurred absent a waiver of those covenants, and in either case it is probable that the covenant violation will not be cured within the next 12 months.”

Although the Company was in compliance with all modified additional covenants and the debt is not currently callable, the Company would have been in violation of the previously effective minimum consolidated fixed charge coverage ratio and the maximum consolidated leverage ratio. Moreover, based upon current internal projections, management anticipates that it is likely that the original covenant requirements will not be met during the next twelve months. Accordingly, long-term loans are classified as a current liability in the September 30th balance sheet.

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