Debt | 9 Months Ended |
Sep. 30, 2013 |
Debt | ' |
Debt | ' |
Note 6. Debt |
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Long-term debt consisted of the following: |
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| | September 30, 2013 | | December 31, 2012 | |
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2021 Senior Notes (5.25% fixed rate) due May 2021 | | $ | 175 | | $ | — | |
2014 Senior Notes (7.375% fixed rate) retired June 2013 | | — | | 90 | |
Revolving bank credit facility (variable rates) due November 2017 | | — | | 55.7 | |
Term Loan (variable rates) repaid June 2013 | | — | | 30 | |
Neenah Germany project financing (3.8% fixed rate) due in 16 equal semi-annual installments ending December 2016 | | 5.9 | | 6.6 | |
Second German Loan Agreement (2.5% fixed rate) due in 32 equal quarterly installments ending September 2022 | | 12.2 | | — | |
Total debt | | 193.1 | | 182.3 | |
Less: Debt payable within one year | | 1.7 | | 4.7 | |
Long-term debt | | $ | 191.4 | | $ | 177.6 | |
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Unsecured Senior Notes |
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2021 Senior Notes |
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In May 2013, the Company completed an underwritten offering of eight-year senior unsecured notes (the “2021 Senior Notes”) at a face amount of $175 million. The 2021 Senior Notes bear interest at a rate of 5.25%, payable in arrears on May 15 and November 15 of each year, commencing on November 15, 2013, and mature on May 15, 2021. Proceeds from this offering were used to redeem $70 million in aggregate principal amount of 2014 Senior Notes (as defined below), to repay approximately $56 million in outstanding Revolver (as defined below) borrowings and for general corporate purposes. The 2021 Senior Notes are fully and unconditionally guaranteed by substantially all of the Company’s domestic subsidiaries (the “Guarantors”). The 2021 Senior Notes were sold in a private placement transaction, have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold absent registration or an applicable exemption from registration requirements. |
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The 2021 Senior Notes are senior unsecured obligations of the Company and will rank equally in right of payment with all its existing and future senior unsecured indebtedness. The guarantees of the 2021 Senior Notes are senior unsecured obligations of the Guarantors and will rank equally in right of payment with all existing and future senior unsecured indebtedness of the Guarantors. The 2021 Senior Notes and the guarantees of the 2021 Senior Notes will be effectively subordinated to the Company’s and the Guarantors’ existing and future secured indebtedness (to the extent of the value of the collateral) and will be structurally subordinated to all indebtedness and other obligations of the Company’s subsidiaries that do not guarantee the 2021 Senior Notes, including the trade creditors of such non-guarantor subsidiaries. |
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The 2021 Senior Notes contain terms, covenants and events of default with which the Company must comply, which the Company believes are ordinary and standard for notes of this nature. Among other things, the 2021 Senior Notes contain covenants restricting our ability to incur certain additional debt, make specified restricted payments, pay dividends, authorize or issue capital stock, enter into transactions with our affiliates, consolidate or merge with or acquire another business, sell certain of our assets or liquidate, dissolve or wind-up the Company. As of September 30, 2013, the Company was in compliance with all terms of the indenture for the 2021 Senior Notes. |
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2014 Senior Notes |
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As of September 30, 2013, the Company had no ten-year 7.375% senior unsecured notes, originally issued on November 30, 2004 (the “2014 Senior Notes”) outstanding. In May 2013, the Company redeemed $20 million of the 2014 Senior Notes at par value. The redemption was financed with Revolver borrowings and resulted in a pre-tax loss of $0.1 million due to the write-off of related unamortized debt issuance costs. |
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In June 2013, the Company used a portion of the proceeds from the issuance of the 2021 Senior Notes to retire the remaining $70 million in outstanding 2014 Senior Notes at par value (the “Retirement of the 2014 Senior Notes”). The Retirement of the 2014 Senior Notes resulted in a pre-tax loss of $0.3 million due to the write-off of related unamortized debt issuance costs. |
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The Retirement of the 2014 Senior Notes eliminated the requirement for the Company to present condensed consolidating financial statements in lieu of consolidated financial statements for the guaranteeing subsidiaries. |
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Secured Bank Credit Facility |
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In October 2012, the Company amended and extended its secured bank credit facility by entering into a Second Amended and Restated Credit Agreement (the “Second Amended and Restated Credit Agreement”). The Second Amended and Restated Credit Agreement provides for, among other things; a secured revolving credit commitment of $105 million (the “Revolver”) and a secured $30 million term loan commitment (the “Term Loan”). In June 2013, the Company repaid all outstanding Term Loan borrowings ($29.3 million) and recognized a pre-tax loss of $0.1 million for the early extinguishment of debt due to the write-off of unamortized debt issuance costs. As of September 30, 2013, there were no Term Loan borrowings outstanding and such amounts may not be redrawn. |
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In June 2013, the Company amended the Second Amended and Restated Credit Agreement (as amended, the “Bank Credit Agreement”) to, among other things; (i) modify the Bank Credit Agreement’s accordion feature to permit the Company, subject to certain conditions, to increase the aggregate revolving credit facility commitments by up to $30 million, to a maximum amount of $180 million (ii) increase the Company’s allowable dividends paid to shareholders in any period of 12 consecutive months to $25 million, (iii) allow the Company to repurchase up to $30 million of its own common stock on or before December 31, 2014, with no more than $15 million of that amount to be repurchased on or before December 31, 2013, and (iv) make certain definitional and administrative changes. |
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As of September 30, 2013, the Company had a $105 million Revolver pursuant to the Bank Credit Agreement of which no amounts were outstanding. As of September 30, 2013, the Company had $104.3 million of available credit under the Revolver. As of December 31, 2012, the weighted-average interest rate on outstanding Revolver and Term Loan borrowings was 2.4 percent per annum and 4.0 percent per annum, respectively. |
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Terms, Covenants and Events of Default. If borrowing availability under the Revolver is less than $20 million, the Company is required to achieve a fixed charge coverage ratio (as defined in the Bank Credit Agreement) of not less than 1.1 to 1.0 for the preceding four-quarter period, tested as of the end of each quarter. As of September 30, 2013, the Company was in compliance with all terms of the Bank Credit Agreement. |
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The Company’s ability to pay cash dividends on its common stock is limited under the terms of both the Bank Credit Agreement and the 2021 Senior Notes. As of September 30, 2013, the Company’s ability to pay cash dividends on its common stock was limited to a total of $25 million in a 12-month period. |
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Other Debt |
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German Project Financing |
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German Loan Agreement. In December 2006, Neenah Germany entered into a 10-year agreement with HypoVereinsbank and IKB Deutsche Industriebank AG (“IKB”) to provide €10.0 million of project financing (the “German Loan Agreement”). As of September 30, 2013, €4.4 million ($5.9 million, based on exchange rates at September 30, 2013) was outstanding under the German Loan Agreement. |
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Second German Loan Agreement. In January 2013, Neenah Germany entered into a project financing agreement for the construction of a melt blown machine (the “Second German Loan Agreement”). The agreement provides for €9.0 million of construction financing which is secured by the melt blown machine. The loan matures in September 2022 and principal is repaid in equal quarterly installments beginning in December 2014. The interest rate on amounts outstanding is 2.45% based on actual days elapsed in a 360-day year and is payable quarterly. At September 30, 2013, €9.0 million ($12.2 million, based on exchange rates at September 30, 2013) was outstanding under the Second German Loan Agreement. |
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German Lines of Credit |
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HypoVereinsbank Line of Credit. Neenah Germany has a revolving line of credit with HypoVereinsbank (the “HypoVereinsbank Line of Credit”) that provides for secured borrowings of up to €15 million for general corporate purposes. As of September 30, 2013, no borrowings were outstanding and €15.0 million ($20.3 million, based on exchange rates at September 30, 2013) of credit was available under the HypoVereinsbank Line of Credit. |
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Commerzbank Line of Credit. Neenah Germany has a revolving line of credit with Commerzbank AG (“Commerzbank”) that provides for borrowings of up to €5 million for general corporate purposes (the “Commerzbank Line of Credit. As of September 30, 2013, no borrowings were outstanding and €5.0 million ($6.7 million, based on exchange rates at September 30, 2013) of credit was available under the Commerzbank Line of Credit. |
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Restrictions under German Credit Facilities |
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The terms of the HypoVereinsbank and Commerzbank lines of credit require Neenah Germany to maintain a ratio of stockholders’ equity to total assets equal to or greater than 45 percent. The Company was in compliance with all provisions of the HypoVereinsbank and Commerzbank lines of credit as of September 30, 2013. |
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