Debt | 9 Months Ended |
Sep. 30, 2013 |
Debt Disclosure [Abstract] | |
Debt Disclosure [Text Block] | Note 8. Debt |
Long-term debt consists of the following (in thousands): |
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| | September 30, 2013 | | December 31, 2012 | | | | |
Term Loan Credit Facility (net of discount of $1,969 and $0) | | $ | 416,981 | | $ | - | | | | |
Senior Secured Notes (net of discount of $0 and $7,152) | | | - | | | 354,840 | | | | |
Revolving Credit Facility | | | 15,000 | | | 39,000 | | | | |
Detroit Investment Fund indebtedness | | | - | | | 476 | | | | |
Other foreign subsidiary indebtedness | | | 88,036 | | | 90,228 | | | | |
Total debt | | | 520,018 | | | 484,544 | | | | |
Less: Current maturities | | | -68,228 | | | -72,954 | | | | |
Long-term debt, net of current portion | | $ | 451,790 | | $ | 411,590 | | | | |
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The current maturities do not include capital lease obligations of $1.2 million and $1.7 million as of September 30, 2013 and December 31, 2012, respectively. |
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Term Loan Credit Facility |
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On April 23, 2013, the Company entered into a Term Loan and Guaranty Agreement (the “Term Loan Credit Agreement”) by and among Tower Automotive Holdings USA, LLC (the “Term Loan Borrower”), the Company, Tower Automotive Holdings I, LLC (“Term Loan Holdco”), Tower Automotive Holdings II(a), LLC, Tower Automotive Holdings II(b), LLC, the subsidiary guarantors named therein, the Lenders from time to time party thereto and Citibank, N.A., as administrative agent for the Lenders (the credit facility evidenced by the Term Loan Credit Agreement and related documentation, the “Term Loan Credit Facility”). |
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The Term Loan Credit Agreement provided for an initial term loan of $420 million and permitted the Term Loan Borrower to request, subject to the satisfaction of certain conditions set forth in the Term Loan Credit Agreement (including the agreement of one or more lenders to make incremental loans, which agreement may be granted or withheld in the sole discretion of any lender), future disbursements of incremental term loans in the aggregate principal amount of up to the greater of (i) $100 million and (ii) such other amount so long as Term Loan Holdco’s pro forma Total Net Leverage Ratio (as defined in the Term Loan Credit Agreement) does not exceed 2.00:1.00. The maturity date for the initial term loan disbursed under the Term Loan Credit Agreement was April 23, 2020. |
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The proceeds of the initial term loan disbursed under the Term Loan Credit Agreement were used upon the closing of the Term Loan Credit Facility to redeem all of the outstanding 10.625% Senior Secured Notes due 2017 (the “10.625% Senior Secured Notes” or the “notes”) previously issued pursuant to that certain Indenture, dated as of August 24, 2010, by and among the Term Loan Borrower and TA Holdings Finance, Inc., as issuers, the Company and certain of its direct and indirect subsidiaries as guarantors, and Wilmington Trust FSB as trustee, and to pay all accrued and unpaid interest thereon and related fees and expenses, including a tender premium, in connection with the tender offer described below. |
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The initial term loans made under the Term Loan Credit Agreement bore interest at (i) an alternate base rate (“the Alternate Base Rate”) (which is the highest of the Prime Rate, the Federal Funds Effective Rate plus 1/2% and the Adjusted LIBO Rate (as each such term is defined in the Term Loan Credit Agreement) for a one month interest period plus 1%) plus a margin of 3.50% or (ii) the Adjusted LIBO Rate (calculated by multiplying the applicable LIBOR by a statutory reserve rate, with a floor of 1.25%) plus a margin of 4.50%. |
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On July 29, 2013, the Company amended the Term Loan and Credit Agreement, by entering into the First Refinancing Term Loan Amendment to Term Loan Credit Agreement, dated as of July 29, 2013, by and among Tower Automotive Holdings USA, LLC, as borrower, the Company, Tower Automotive Holdings I, LLC, Tower Automotive Holdings II(a), LLC, Tower Automotive Holdings II(b), LLC and the subsidiary guarantors named therein, as Guarantors, each of the financial institutions from time to time party thereto as lenders, and Citibank, N.A., as administrative agent for the lenders (the “Amendment”). |
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The purpose of the Amendment was to re-price the Term Loan Credit Facility. The maturity date of the Term Loan Credit Facility remains April 23, 2020. The Term Loan Credit Facility will bear interest at (i) the Alternate Base Rate plus a margin of 2.75% or (ii) the Adjusted LIBO Rate (calculated by multiplying the applicable LIBOR rate by a statutory reserve rate, with a floor of 1.00%) plus a margin of 3.75%. |
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In connection with the re-pricing described above, the Company incurred charges of approximately $4.5 million in the third quarter of 2013 that was recognized as other expense. These charges relate to a premium paid by the Company and expenses associated with the re-pricing. |
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The Term Loan Borrower’s obligations under the Term Loan Credit Facility are guaranteed by the Company, on an unsecured basis, and Term Loan Holdco and certain of the Company's other direct and indirect domestic subsidiaries, on a secured basis (the “Subsidiary Guarantors”). The Term Loan Credit Facility is secured by (i) a first priority security interest in certain assets of the Term Loan Borrower and the Subsidiary Guarantors, other than, inter alia, accounts, chattel paper, inventory, cash deposit accounts, securities accounts, machinery, equipment and real property and all contract rights, and records and proceeds relating to the foregoing and (ii) on a second priority basis to all other assets of the Term Loan Borrower and the Subsidiary Guarantor which have been pledged on a first priority bases to the agent for the benefit of the lenders under the amended ABL Revolver described below. |
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The Term Loan Credit Agreement includes customary events of default and amounts due there under may be accelerated upon the occurrence of an event of default. |
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During the third quarter of 2013, the Company made principal payments of $1 million on the Term Loan Credit Facility. As of September 30, 2013, the outstanding principal balance of the Term Loan Credit Facility was $417 million (net of a remaining $2 million original issue discount) and the interest rate was 4.75% per annum. |
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Senior Secured Notes |
On August 24, 2010, the Company’s subsidiaries, Tower Automotive Holdings USA, LLC and TA Holdings Finance, Inc. (collectively, the “Issuers”), issued $430 million of 10.625% Senior Secured Notes (the “notes offering”). The notes were issued at an original issue discount of $12.8 million and bore an annual interest rate of 10.625%. The original issue discount was being amortized on a straight-line basis, which approximated the effective interest method, through interest expense over the term of the notes, which increased the effective annual interest rate to 11.25%. The notes were scheduled to mature on September 1, 2017. |
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On April 23, 2013, the Company completed a cash tender offer (the “Tender Offer”) to purchase up to $276 million of the outstanding notes. An aggregate principal amount of $362 million of the notes was validly tendered in the Tender Offer and not validly withdrawn. The Company accepted for purchase $276 million in aggregate principal amount of the notes at an aggregate purchase price of 113.58% of the principal amount thereof plus accrued and unpaid interest, which resulted in a premium paid of $37.5 million and a tender fee of $0.7 million that were recognized as other expense. Because the maximum aggregate principal amount of $276 million for the notes was exceeded, the Company did not accept all of the notes tendered for purchase. The notes that were tendered but not accepted were promptly returned to the tendering parties. In connection with such repurchase, the Company accelerated the amortization of the original issue discount by $5.2 million and associated debt issue costs by $3.1 million in the second quarter of 2013. The accelerated amortization of the original issue discount and associated debt issue costs are recorded in the Condensed Consolidated Statements of Operations as interest expense. |
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On May 24, 2013, the Company redeemed $43 million of the notes at 105% of the principal amount thereof, plus accrued and unpaid interest, which resulted in a premium paid of $2.2 million that was recognized as other expense. In connection with the redemption, the Company accelerated the amortization of the original issue discount by $0.8 million and associated debt issue costs by $0.5 million in the second quarter of 2013. |
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On August 26, 2013, the Company redeemed the remaining $43 million of the notes at 105% of the principal amount thereof, plus accrued and unpaid interest, which resulted in a premium paid of $2.2 million that was recognized as other expense. In connection with the redemption, the Company accelerated the amortization of the original issue discount by $0.8 million and associated debt issue costs by $0.5 million in the third quarter of 2013. Per the Term Loan Credit Agreement, the Company used the $45.2 million that was being held in an escrow account to cover this redemption and associated premium. As of September 30, 2013, the notes have been repaid in full and no balance remains outstanding. |
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Amended Revolving Credit Facility |
On June 19, 2013, the Company entered into a Second Amended and Restated Revolving Credit and Guaranty Agreement (the “Amended Revolving Credit Facility Agreement”) by and among Tower Automotive Holdings USA, LLC (the “Borrower”), the Company, Tower Automotive Holdings I, LLC (“Holdco”), Tower Automotive Holdings II(a), LLC, Tower Automotive Holdings II(b), LLC, the subsidiary guarantors named therein, JPMorgan Chase Bank, N.A., Wells Fargo Capital Finance, LLC and each of the other financial institutions from time to time party thereto, as Lenders and JPMorgan Chase Bank, N.A., as Issuing Lender, as Swing Line Lender and as Administrative Agent (in such capacity, the “Agent”) for the Lenders. |
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The Amended Revolving Credit Facility Agreement amended and restated, in its entirety, the Amended and Restated Revolving Credit and Guaranty Agreement, dated as of June 13, 2011, by and among the Borrower, its domestic affiliate, and domestic subsidiary guarantors, named therein, and the lenders party thereto, and the Agent. The Amended Revolving Credit Facility Agreement provides for an asset-based revolving credit facility (the “Amended ABL Revolver”) in the aggregate amount of up to $150 million, subject to a borrowing base limitation. The Amended Revolving Credit Facility Agreement also provides for the issuance of letters of credit in an aggregate amount not to exceed $50 million, provided that the total amount of credit (inclusive of revolving loans and letters of credit) extended under the Amended Revolving Credit Facility Agreement is subject to an overall cap, on any date, equal to the lesser of $150 million or the amount of the borrowing base on such date. The maturity date for the Amended ABL Revolver is June 19, 2018. |
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Advances under the Amended ABL Revolver bear interest at the Alternate Base Rate plus a base rate margin or LIBOR plus a Eurodollar margin. The applicable margins are determined by the average availability under the Amended ABL Revolver over the preceding three consecutive full calendar months and as of the date of the Amended Revolving Credit Facility Agreement were 1.00% per annum and 2.00% per annum for base rate and LIBOR based borrowings, respectively. |
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The Amended Revolving Credit Facility is guaranteed by the Company, on an unsecured basis, and certain of the Company’s direct and indirect domestic subsidiaries, on a secured basis. The Amended Revolving Credit Facility is secured by the same assets of the Borrower and the subsidiary guarantors that secured the obligations under the prior ABL revolving facility. The Borrower’s and each subsidiary guarantor’s pledge of such assets as security for the obligations under the Amended Revolving Credit Facility is evidenced by a Second Amended and Restated ABL Security Agreement dated as of June 19, 2013 among the Borrower, the guarantors party thereto and the Agent. |
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The Amended Revolving Credit Facility Agreement contains customary covenants applicable to certain of the Company’s subsidiaries and includes customary events of default and amounts due thereunder may be accelerated upon the occurrence of an event of default. |
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In connection with the Amended Revolving Credit Facility Agreement, the Company paid debt issue costs of $1.7 million and accelerated the amortization of the debt issue costs associated with the Amended and Restated Revolving Credit and Guaranty Agreement by $0.3 million in the second quarter of 2013. These costs are recorded in the Condensed Consolidated Statements of Operations as interest expense. |
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As of September 30, 2013, there was $148.6 million of borrowing availability under the Amended ABL Revolver, based on the value of the Company’s assets at August 31, 2013, of which $15 million of borrowings were outstanding and $11.5 million of letters of credit were outstanding. As of September 30, 2013, the applicable margins were 1% per annum and 2% per annum for base rate and LIBOR based borrowings, respectively, resulting in a weighted average interest rate of 2.19% per annum. |
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Letter of Credit Facility |
On June 13, 2011, the Company entered into a Letter of Credit Facility Agreement dated as of June 13, 2011 (the “Letter of Credit Facility Agreement”) by and among Tower Automotive Holdings USA, LLC (the “L/C Borrower”), the Company, JPMorgan Chase Bank, N.A., in its capacity as participant in respect of letters of credit issued thereunder, and JPMorgan Chase Bank, N.A., as Administrative Agent and Issuing Lender. |
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The Letter of Credit Facility Agreement originally provided for a letter of credit facility (the “Letter of Credit Facility”) for the issuance of up to $38 million of letters of credit with a sublimit for Euro dominated letters of credit (with an option to increase the Letter of Credit Facility to $44.5 million in the future). Upon a third party drawing on letters of credit issued under the Letter of Credit Facility, the L/C Borrower will become obligated to pay to the lenders the amounts so drawn. The maturity date of the Letter of Credit Facility is June 13, 2014. |
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The Company has amended the Letter of Credit Facility Agreement to reduce the Letter of Credit Facility on multiple occasions. In addition, on April 22, 2013, the Company amended the Letter of Credit Facility Agreement to, among other things, permit the incurrence of up to $430 million of indebtedness under the Term Loan Credit Agreement and the granting of liens to secure such indebtedness. On June 20, 2013, the Company amended the Letter of Credit Facility Agreement to reduce the Letter of Credit Facility from $22.5 million to $8.5 million (with an option to increase the Letter of Credit Facility to $44.5 million in the future). In connection with the reduction of the Letter of Credit Facility, the Company incurred a breakage fee of $0.6 million in the second quarter of 2013. This fee is recorded in the Condensed Consolidated Statements of Operations as other expense. The remaining terms of the Letter of Credit Facility Agreement have remained the same. |
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As of September 30, 2013, the outstanding letters of credit under the Letter of Credit Facility were $8.4 million. As of September 30, 2013, an 8.5% per annum fee is due on the total amount of the facility. This fee is subject to change in the future based upon then current market conditions. |
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The Letter of Credit Facility is guaranteed by the Company and certain of the Company’s direct and indirect domestic subsidiaries on an unsecured basis pursuant to a Guaranty entered into and made on June 13, 2011. |
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The Letter of Credit Facility is unsecured and the Letter of Credit Facility Agreement contains customary covenants applicable to certain of the Company's subsidiaries. The Letter of Credit Facility Agreement also includes customary events of default and amounts due thereunder may be accelerated upon the occurrence of an event of default. |
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Detroit Investment Fund |
The Company assumed an unsecured debt instrument of $1 million owed to the Detroit Investment Fund, L.P. upon the acquisition of substantially all of the assets of W Industries, Inc. in April 2011. The debt instrument required monthly principal and interest payments at an annual interest rate of 8.5%. During the second quarter of 2013, the remaining balance on the debt instrument was repaid in full. As of September 30, 2013, no balance remained outstanding. |
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Debt Issue Costs |
The Company incurred interest expense related to the amortization of debt issue costs of $0.9 million and $6 million during the three and nine months ended September 30, 2013, respectively. The Company incurred interest expense related to the amortization of debt issue costs of $0.4 million and $1.4 million during the three and nine months ended September 30, 2012, respectively. |
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Foreign Subsidiary Indebtedness |
As of September 30, 2013, the Company had foreign subsidiary indebtedness of $88 million, which consisted primarily of borrowings in Europe of $31.9 million, receivables factoring in Europe of $21.8 million, borrowings in Brazil of $19 million, and borrowings in China of $15.3 million. |
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The change in foreign subsidiary indebtedness from December 31, 2012 to September 30, 2013 is explained by the following (in thousands): |
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| | Europe | | Brazil | | China | |
Balance as of December 31, 2012 | | $ | 43,422 | | $ | 30,426 | | $ | 16,380 | |
Maturities of indebtedness | | | -5,072 | | | -19,439 | | | -7,516 | |
New / renewed indebtedness | | | 6,763 | | | 10,373 | | | 7,516 | |
Change in borrowings on credit facilities | | | 7,488 | | | - | | | -1,377 | |
Foreign exchange impact | | | 1,089 | | | -2,315 | | | 298 | |
Balance as of September 30, 2013 | | $ | 53,690 | | $ | 19,045 | | $ | 15,301 | |
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Generally, borrowings of foreign subsidiaries are made under credit agreements with commercial lenders and are used to fund working capital and other operating requirements. |
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Europe |
As of September 30, 2013, the secured lines of credit balance available to the Company was $39.3 million (€29.1 million), of which $31.9 million (€23.6 million) was outstanding. The facilities bear an interest rate based on the EURIBOR plus a spread ranging from 2.9% to 4.0% and have maturity dates ranging from October 2013 to April 2015. The effective annual interest rate as of September 30, 2013 was 4.11% per annum. The facilities are secured by certain accounts receivable related to customer funded tooling, mortgages over the land, certain buildings, and other assets and are subject to negotiated prepayments upon the receipt of funds from completed customer projects. |
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As of September 30, 2013, the receivables factoring facilities balance available to the Company was $22.9 million (€16.9 million), of which $21.8 million (€16.1 million) was drawn. The facilities are uncommitted, demand facilities which are subject to termination at the discretion of the banks and bear interest rates based on the average three month EURIBOR plus a spread ranging from 2.15% to 3.75%. The effective annual interest rates as of September 30, 2013 ranged from 2.37% to 3.97%, with a weighted average interest rate of 3.18% per annum. Any receivables factoring under these facilities is with recourse and is secured by the accounts receivable factored. The receivables factoring transactions are recorded in the Company’s Condensed Consolidated Balance Sheets in short-term debt and current maturities of capital lease obligations. |
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Brazil |
As of September 30, 2013, the Company’s Brazilian subsidiary had borrowings of $19 million (R$42.2 million) which have annual interest rates ranging from 3.00% to 13.41% and maturity dates ranging from October 2013 to July 2022. As of September 30, 2013, the weighted average interest rate on the borrowings in Brazil was 10.52% per annum. The loans are provided through bilateral agreements with three local banks and are secured by certain fixed and current assets. Periodic interest and principal payments are required. |
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China |
As of September 30, 2013, the fixed rate secured lines of credit balance available to the Company was $9.6 million (Rmb 58.7 million), of which the entire amount was outstanding. The credit lines have maturity dates ranging from October 2013 to December 2017 and bear interest rates ranging from 5.99% to 7.68%. As of September 30, 2013, the variable rate secured line of credit balance available to the Company was $5.7 million (Rmb 35 million), of which the entire amount was outstanding. The credit line matures in June 2015. The fixed rate and variable rate secured lines of credit facilities are secured by machinery, equipment, and land rights. |
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During the third quarter of 2013, the Company renewed $1.6 million (Rmb 10 million) of maturing unsecured indebtedness for an additional year and obtained an additional fixed rate secured line of credit of $3.3 million (Rmb 20 million), of which the entire amount was outstanding. The credit line has a maturity date of March 2014 and bears an interest rate of 5.99%. |
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The effective annual interest rate for all the credit lines in China as of September 30, 2013 was 7.08%. |
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Covenants |
As of September 30, 2013, the Company was in compliance with all financial covenants that govern its credit agreements. |
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Capital Leases |
The Company had capital lease obligations of $11.4 million and $12.5 million as of September 30, 2013 and December 31, 2012, respectively. As of September 30, 2013, the Company’s capital lease obligations are scheduled to expire in March 2018. |
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