Great Lakes Aviation Ltd. has defaulted on its debt, giving its lender the right to seize its assets and resulting in an increased interest rate. The Cheyenne, Wyo., regional airline carrier disclosed Sept. 18, in a Securities and Exchange Commission filing that lender Callidus Capital Corp.

had sent a notice of default on Aug. 28, blaming the borrower's failure to comply with the fixed charge coverage ratio covenant on its first-lien credit agreement. In the filing, Great Lakes said Callidus now has the right to declare its $27.5 million in loans due immediately, to refuse to advance further amounts and to take control of substantially all of its assets.

The default also increased the airline's interest rate to 17% from 14%. Great Lakes had an Aug. 28 deadline to cure the fixed charge coverage breach and said in an Aug.

14 financial report that it didn't expect it would be able to do so. The financial report also mentioned a $425,000 fee that would be triggered in the case of a default, which would create a further challenge given the mere $555,421 in cash and cash equivalents the company recorded as of June 30. The company's first-lien credit agreement includes a $25 million term loan, a $6 million revolver and a separate $3 million revolver.

Those loans, secured by substantially all of the company's assets, mature on Dec. 22, 2017. The loan package from Toronto's Callidus, which provides financing for companies that can't tap traditional lenders, refinanced Great Lakes' previous debt structure.

The new debt structure went into effect on Dec. 22 following a strategic review mandated by the company's lenders at the time, Boston middle-market lender Crystal Financial LLC and GB Merchant Partners LLC as part of a forbearance agreement.