Notes Payable and Long-Term Debt | 9 Months Ended |
Sep. 30, 2013 |
Notes Payable and Long-Term Debt | ' |
Notes Payable and Long-Term Debt | ' |
Note 8 — Notes Payable and Long-Term Debt |
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Outstanding debt obligations are as follows (in thousands): |
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| | September 30, 2013 | | December 31, 2012 | |
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Term Loan (for more information, see below) | | $ | 82,395 | | $ | 76,520 | |
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Revolving Credit loan payable under the Credit Agreement. The weighted average interest rate of all borrowings was 6.79% and 7.78% at September 30, 2013 and December 31, 2012 (for more information, see below) | | 37,900 | | 22,300 | |
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Borrowings under revolving credit facilities with a consortium of banks in Spain (for more information, see below) | | 7,472 | | 5,021 | |
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Payment due for the Engineering S.A. acquisition | | — | | 5,327 | |
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Borrowings under unsecured credit facility with Caja Badajoz (for more information, see below) | | 2,024 | | — | |
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Borrowings under revolving credit facility with the National Bank of Abu Dhabi (for more information, see below) | | 2,332 | | — | |
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Other debt obligations | | 107 | | 267 | |
| | 132,230 | | 109,435 | |
Less current maturities | | 20,583 | | 21,769 | |
Notes payable and long-term debt, net of current maturities | | $ | 111,647 | | $ | 87,666 | |
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Term Loan Agreement |
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The Company entered into a Term Loan Agreement on October 18, 2012, which was amended on May 23, 2013 (the “First Amendment”). The First Amendment contains identical provisions as those in the Fourth Amendment to Credit Agreement (see below). Borrowings under the Term Loan Agreement are collateralized by a second lien on substantially all of the Company’s assets, including, without limitation, accounts receivable, equipment, securities, financial assets and the proceeds of the foregoing, as well as by a pledge of 65% of the outstanding capital stock of our wholly-owned subsidiary, Hill International N.V. and of certain of our other foreign subsidiaries. The maturity date of the Term Loan is October 18, 2016. |
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The Company will pay interest on amounts outstanding from time to time under the Term Loan at a rate per annum equal to 7.50%, however, such rate may be increased to 9.50% per annum if fixed price contracts (as defined under the Term Loan Agreement) or certain accounts receivable of the Company and its subsidiaries exceed percentages specified in the Term Loan Agreement. |
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Also, contemporaneous with its entry into the Term Loan Agreement, the Company entered into a Fee Letter. The Fee Letter requires the Company to pay to the Lenders an exit fee (the “Exit Fee”), which fee shall be earned in full on the Closing Date and due and payable on the date the Term Loan is paid in full (the “Exit Date”). “Exit Fee” means the amount, if any, when paid to the Term Loan Lenders on the Exit Date, that will result in the internal annual rate of return to the Term Loan Lenders on the Exit Date being equal to, but no greater than, 20%; provided that in no event shall the Exit Fee Amount be less than $0 or greater than $11,790,000. The IRR is to be calculated as the rate of return earned by the Term Loan Lenders on their initial investment in the Term Loan (to be calculated as the principal amount of the Term Loan less the Closing Fee of $25,000,000) through the Exit Date taking into account the payment by the Company to the Term Loan Lenders of all principal, interest and other payments to the Term Loan Lenders pursuant to the Term Loan Agreement. |
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At September 30, 2013, the Company was in compliance with all of the Term Loan covenants. |
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Revolving Credit Agreement |
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The Company entered into a Credit Agreement, dated June 30, 2009 (the “Credit Agreement”), with Bank of America, N.A., Capital One, N.A., The PrivateBank and Trust Company, PNC Bank N.A., and Bank of America, N.A., as Administrative Agent. The Credit Agreement has been amended from time to time, most recently on May 23, 2013 when the Company entered into a Fourth Amendment to Credit Agreement pursuant to which, among other things, the lenders agreed to : (a) permit the Company to enter into an agreement with Qatar National Bank for the issuance of letters of credit (“LCs”) not to exceed $17,000,000, (b) increase the limit on LCs available to the Company’s foreign subsidiaries who are not loan parties from $4,000,000 to $11,800,000 and (c) permit the Company to provide up to $20,000,000 as cash collateral for letters of credit and performance bonds. The Company paid an amendment fee of $150,000 to the Agent and reimbursed the Agent for its out-of-pocket costs amounting to approximately $372,000. These amounts are included in interest expense and related financing fees, net in the consolidated statements of operations for the nine-month period ended September 30, 2013. |
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The Credit Agreement requires the Company to comply with a consolidated leverage ratio, a consolidated fixed charge ratio and a senior leverage ratio. The following table sets forth those requirements for the period ended September 30, 2013: |
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Consolidated Leverage Ratio | | Consolidated Fixed Charge Ratio | | Senior Leverage Ratio | | | |
Not to exceed 6.00 to 1.00 | | Not less 1.00 to 1.00 | | Not to exceed 2.25 to 1.00 | | | |
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The following table presents the Company’s actual ratios at September 30, 2013: |
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Consolidated Leverage Ratio | | Consolidated Fixed Charge Ratio | | Senior Leverage Ratio | | | |
4.54 to 1.00 | | 1.31 to 1.00 | | 1.83 to 1.00 | | | |
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At September 30, 2013, the Company had $17,484,000 in outstanding letters of credit pursuant to the Credit Agreement and total remaining availability on such date was $9,616,000. |
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Other Debt Arrangements |
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The Company’s subsidiary, Gerens Hill, maintains a revolving credit facility with 12 banks in Spain providing for total borrowings, with interest at 6.50%, of up to €5,640,000 (approximately $7,611,000 and $7,460,000 at September 30, 2013 and December 31, 2012). At September 30, 2013 and December 31, 2012, total borrowings outstanding were €5,537,000 and €3,796,000 (approximately $7,472,000 and $5,021,000, respectively). |
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Gerens Hill also maintains an unsecured credit facility with the Caja Badajoz bank in Spain for €1,500,000 (approximately $2,024,000 and $1,984,000) at September 30, 2013 and December 31, 2012, respectively. The interest rate at September 30, 2013 is the three-month EURIBOR rate of 0.54% plus 3.00% (or 3.54%) but no less than 5.00%. At September 30, 2013, total borrowings outstanding were €1,500,000 (approximately $2,024,000). At December 31, 2012, there were no borrowings outstanding. |
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The Company maintains a credit facility with the National Bank of Abu Dhabi which provides for total borrowings of up to AED 11,500,000 (approximately $3,131,000 at both September 30, 2013 and December 31, 2012) collateralized by certain overseas receivables. The interest rate is the one-month Emirates InterBank Offer Rate plus 3.00% (or 4.25% and 4.30%, at September 30, 2013 and December 31, 2012, respectively) but no less than 5.50%. At September 30, 2013, total borrowings outstanding were AED 8,564,000 (approximately $2,332,000). At December 31, 2012, there were no borrowings outstanding. This facility is renewed on a month-to-month basis. The credit facility with the National Bank of Abu Dhabi also allows for up to AED 150,000,000 (approximately $40,844,000 at September 30, 2013) in letters of guarantee of which AED 115,987,000 (approximately $31,583,000) was utilized at September 30, 2013. |
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The Company also maintains a revolving credit facility with Egnatia Bank for up to €1,000,000 (approximately $1,351,000 at September 30, 2013), with interest of 1.23% plus Egnatia Bank’s prime rate of 5.00% (or 6.23%) at September 30, 2013, collateralized by certain assets of the Company. There were no borrowings outstanding under this facility at September 30, 2013 and December 31, 2012. The facility also allows for letters of guarantee up to €4,500,000 (approximately $6,080,000 at September 30, 2013), of which €1,745,000 (approximately $2,357,000 had been utilized at September 30, 2013. |
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Engineering S.A. maintains three unsecured revolving credit facilities with two banks in Brazil aggregating 2,900,000 Brazilian Reais (BRL) (approximately $1,288,000 at September 30, 2013), with a weighted average monthly interest rate of 2.64%. There were no borrowings outstanding on any of these facilities at September 30, 2013 or December 31, 2012. |
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A revolving credit facility with Barclays Bank PLC for up to £550,000 (approximately $889,000 at September 30, 2013), with interest of 2.00% plus the Bank of England rate of 0.50% (or 2.50%) at September 30, 2013, collateralized by cross guarantees of several of the United Kingdom companies. Aggregate of all debt owing to the bank will be, at all times, covered 3 times by the aggregate value of the UK accounts receivable less than 90 days old and excluding any receivables which are due from any associate, subsidiary or overseas client. At September 30, 2013 and December 31, 2012, there were no borrowings outstanding. |
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At September 30, 2013, the Company had $4,466,000 of available borrowing capacity under its foreign credit agreements. |
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In connection with the 2011 acquisition of Engineering S.A., the Company incurred indebtedness to the sellers amounting to 17,200,000 BRL (approximately $10,376,000 at the date of acquisition) and discounted that amount using an interest rate of 4.72%, the Company’s weighted average interest rate at that time. The Company paid the first installment amounting to 6,624,000 BRL (approximately $3,508,000) on April 30, 2012 and paid the second installment amounting to 11,372,000 BRL (approximately $5,095,000) on July 23, 2013. |