Short-Term Borrowings and Long-Term Debt | 12 Months Ended |
Sep. 30, 2013 |
Short-Term Borrowings and Long-Term Debt | ' |
Short-Term Borrowings and Long-Term Debt | ' |
8. Short-Term Borrowings and Long-Term Debt |
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Short-term borrowings outstanding and the current portion of long-term debt and capital lease obligations at September 30, 2013 and September 30, 2012 are summarized below: |
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| | September 30, | | September 30, | |
2013 | 2012 |
Short-term borrowings under line of credit agreements available to Nexeo Plaschem | | $ | 52,004 | | $ | — | |
Current portion of long-term debt and capital lease obligations | | 5,036 | | 3,369 | |
Total short-term borrowings and current portion of long-term debt and capital lease obligations | | $ | 57,040 | | $ | 3,369 | |
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Long-term debt outstanding at September 30, 2013 and September 30, 2012 are summarized below: |
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| | September 30, | | September 30, | |
2013 | 2012 |
ABL Facility | | $ | — | | $ | 112,375 | |
Term Loan Facility | | 490,125 | | 320,125 | |
8.375% Senior Subordinated Notes | | 175,000 | | 175,000 | |
Capital lease obligations | | 173 | | 121 | |
Total long-term debt | | 665,298 | | 607,621 | |
Less: unamortized debt discount(1) | | (5,958 | ) | (3,619 | ) |
Less: current portion of long-term debt and capital lease obligations | | (5,036 | ) | (3,369 | ) |
Non-current portion of long-term debt | | $ | 654,304 | | $ | 600,633 | |
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(1) At September 30, 2013, includes $2,873 of unamortized debt discount related to the Term Loan Facility. The remainder of the unamortized debt discount, as well as the amount at September 30, 2012, relates to the Senior Subordinated Notes. |
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Nexeo Plaschem’s Short-Term Borrowings |
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During October 2012, Nexeo Plaschem entered into a line of credit agreement which is used to fund its working capital requirements. The current borrowing limit is approximately RMB 150,000, or approximately $23,800. The line of credit is secured by a standby letter of credit drawn on the ABL Facility covering 110% of the facility’s borrowing limit amount and bears interest at either the London interbank offered rate (“LIBOR”) plus 2.8% or 105% of the People’s Bank of China’s (“PBOC”) base rate. The weighted average interest rate was 4.56% at September 30, 2013. At September 30, 2013, the line of credit was drawn in full and there was no remaining availability. The line of credit contains certain customary representations and warranties, affirmative covenants and events of default, including among other things payment defaults, breach of representation of warranties, cross-defaults to certain indebtedness, certain events of bankruptcy, and change in legal status. If such an event of default occurs, the lenders under the line of credit would be entitled to take various actions, including acceleration of amounts due under the line of credit and all actions permitted to be taken by a secured creditor. Borrowings under the line of credit are payable in full within 12 months of the advance. |
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Additionally, during November 2012, Nexeo Plaschem entered into a line of credit agreement also used to fund its working capital requirements. The borrowing limit as of September 30, 2013 was RMB 190,000, or approximately $31,000. Subsequent to September 30, 2013, the credit agreement was renewed and the borrowing limit decreased to RMB 150,000, or approximately $24,500. The line of credit agreement is secured by a standby letter of credit drawn on the ABL Facility covering 100% up to RMB 140,000, or approximately $22,800, and bears interest at the applicable PBOC rate, depending on the length of time for which a specific amount is borrowed. The weighted average interest rate was 5.77% at September 30, 2013. At September 30, 2013, the outstanding balance under this line of credit was approximately $28,000 and remaining availability was approximately $753. Availability includes the impact of amounts related to letters of credit and bankers’ acceptance letters issued to suppliers. The line of credit contains certain customary representations and warranties, affirmative covenants and events of default, including among other things payment defaults, breach of representation of warranties, and change in legal status. Borrowings under the line of credit are payable in full within 12 months of the advance. |
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In connection with the consummation of the Ashland Distribution Acquisition, the Company entered into the following credit agreements and notes indenture: |
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Asset Based Loan Facility |
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The ABL Facility provides for revolving credit financing including a U.S. tranche of up to $500,000 (the “U.S. Tranche”) and a Canadian tranche (the “Canadian Tranche”) of up to U.S. dollar equivalent $40,000. At the closing of the Ashland Distribution Acquisition, Solutions borrowed $152,000 of the U.S. Tranche to finance a portion of the purchase price. The ABL Facility is unconditionally guaranteed, jointly and severally, by Holdings, and its wholly owned subsidiary, Nexeo Solutions Sub Holding Corp. (“Sub Holdings”). Obligations under the ABL Facility are also secured by a first-priority lien on inventory and accounts receivable held by Solutions and Nexeo Solutions Canada Corporation (approximately $742,563 as of September 30, 2013). The ABL Facility currently matures on July 11, 2017. The following summary of the ABL Facility terms reflects the impact of amendments that became effective October 16, 2012, May 8, 2013 and August 5, 2013, respectively, described further below. |
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The ABL Facility includes a letter of credit sub-facility, which permits up to $200,000 of letters of credit under the U.S. Tranche and up to the U.S. dollar equivalent $10,000 of letters of credit under the Canadian Tranche. An amount to be agreed upon of letters of credit under the U.S. Tranche may also be denominated in euros or other currencies. In addition, under the ABL Facility, up to $50,000 in the case of the U.S. Tranche, and CDN $10,000 in the case of the Canadian Tranche, may be short-term borrowings upon same-day notice, referred to as swingline loans. Provided no default or event of default then exists or would arise therefrom, the Company has the option to request that the ABL Facility be increased by an amount not to exceed $200,000 (less the U.S. dollar equivalent of any increase in CDN commitments) with respect to the U.S. Tranche and U.S. dollar equivalent $10,000 with respect to the Canadian Tranche (in the aggregate not to exceed US dollar equivalent $700,000) subject to certain rights of the administrative agent with respect to the lenders providing commitments for such increases. In addition, the Company may also establish one or more foreign facilities under the Amended ABL Credit Agreement in an aggregate principal amount not to exceed U.S. dollar equivalent $60,000. |
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The amount of available credit changes every month, depending on the amount of eligible receivable and inventory the Company has available to serve as collateral. In general, the facility is limited to the lesser of (i) the aggregate commitment and (ii) the sum of (a) 85% of eligible accounts receivable, as defined, and (b) 85% of the orderly liquidation of the eligible inventory. Available credit for each tranche is calculated separately, and the borrowing base components are subject to customary reserves and eligibility criteria. At September 30, 2013 and 2012, availability under the U.S. and Canadian Tranches was $419,341 and $346,380, respectively. |
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Borrowings under the ABL Facility bear interest, at Solutions’ option, at either an alternate base rate or Canadian prime rate, as applicable, plus an applicable margin (ranging from 0.50% and 1.00% pursuant to a grid based on average excess availability) or a London interbank offered rate or Canadian BA rate (as defined therein), as applicable, plus an applicable margin (ranging from 1.50% and 2.00% pursuant to a grid based on average excess availability). In addition to paying interest on outstanding principal under the ABL Facility, Solutions and Nexeo Solutions Canada Corporation will be required to pay a commitment fee, in respect of the unutilized commitments under the ABL Facility, which commitment fee ranges from 0.250% to 0.500% per annum and will be determined based on average utilization of the ABL Facility (increasing when utilization is low and decreasing when utilization is high). The Company is also required to pay customary letter of credit fees. The weighted average rate of interest on borrowings under the ABL Facility was 3.37% and 2.93% during the fiscal years ending September 30, 2013 and 2012, respectively. |
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The ABL Facility requires that if the excess availability as defined for both the U.S. and Canadian borrowers is less than the greater of the U.S. dollar equivalent of (i) $35,000 and (ii) 10.0% of the lesser of (x) the aggregate commitments under the ABL and (y) the then applicable combined borrowing base, Solutions shall comply with a minimum fixed charge coverage ratio of at least 1.00 to 1.00. In addition, the ABL Facility contains negative covenants that restrict the ability of Holdings and certain of Solutions’ subsidiaries, from, among other things, incurring additional debt, granting liens, entering into guarantees, entering into certain mergers, making certain loans and investments, disposing of assets, prepaying certain debt, declaring dividends, accounting changes, transactions with affiliates, modifying certain material agreements or organizational documents relating to, or changing the business it conducts. In addition, the Company is subject to limitations on its ability to engage in actions other than those of a holding company. |
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The ABL Facility also contains certain customary representations and warranties, affirmative covenants and events of default, including among other things payment defaults, breach of representations and warranties, covenant defaults, cross-defaults and cross-acceleration to certain indebtedness, certain events of bankruptcy, certain events under the Employee Retirement Income Security Act of 1974 as amended from time to time, material judgments, actual or asserted failure of any guaranty or security document supporting the ABL Facility to be in full force and effect, and change of control. If such an event of default occurs, the lenders under the ABL Facility would be entitled to take various actions, including the acceleration of amounts due under the ABL Facility and all actions permitted to be taken by a secured creditor. |
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At September 30, 2013 and 2012, the Company had US dollar equivalent of $83,635 and $32,864, respectively, in outstanding letters of credit under the ABL Facility. As of September 30, 2013, the Company was in compliance with the covenants of the ABL Facility. |
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The lenders and the agents (and each of their respective subsidiaries or affiliates) under the ABL Facility have in the past provided, and may in the future provide, investment banking, cash management, underwriting, lending, commercial banking, trust, leasing services, foreign exchange and other advisory services to, or engage in transactions with, the Company and its affiliates. These parties have received, and may in the future receive, customary compensation from the Company and its affiliates for such services. |
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Amendment No. 1 to ABL Facility |
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On October 16, 2012, the Company entered into Amendment No. 1 to Credit Agreement which amended the asset-based revolving credit agreement (the “ABL Credit Agreement” and, as amended, the “First Amended ABL Credit Agreement”), dated as of March 31, 2011. The First Amended ABL Credit Agreement, among other things, increased the aggregate principal amount permitted to be incurred under the Amended and Restated Term Loan Facility without restriction under the First Amended ABL Credit Agreement from $325,000 to $650,000 to permit the incurrence of the new $175,000 Term B-2 Loans and $150,000 of incremental term loans described below. Furthermore, the First Amended ABL Credit Agreement permits the incurrence of additional incremental indebtedness under the Amended and Restated Term Loan Facility in an aggregate principal not to exceed the amount that could be incurred without causing the Secured Net Leverage Ratio (as defined in the Amended and Restated Term Loan Credit Agreement), calculated on a pro forma basis, to be greater than 3.5 to 1.0. |
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The First Amended ABL Credit Agreement was accounted for as a modification in accordance with U.S. GAAP. Fees paid to the lenders in connection with the amendment totaled approximately $270 and were recorded as debt issuance costs to be amortized as interest expense over the remaining term of the ABL Facility. No gain or loss on the modification was recognized. |
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Amendment No. 2 to ABL Facility |
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On May 8, 2013, the Company entered into Amendment No. 2 to Credit Agreement (“Amendment No. 2”), which amended the First Amended ABL Credit Agreement (as further amended by Amendment No. 2, the “Second Amended ABL Credit Agreement”). The maturity date of the ABL Facility was extended from (x) March 31, 2016 to be (y) the first to occur of (a) May 8, 2018 and (b) the date that is sixty days prior to the earliest stated maturity date of the Company’s senior secured term loan facility (or any replacement facility) in effect at any time, which currently means the ABL Facility matures on July 11, 2017. |
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Pursuant to Amendment No. 2, among other things, the U.S. letter of credit sub-facility was increased by $100,000 to permit up to $200,000 of letters of credit in the aggregate under the U.S. Tranche. Under the Amended ABL Credit Agreement, subject to certain conditions precedent and consent rights of the administrative agent with respect to the lenders providing such commitments or foreign facilities, (a) the Company continues to have the option to request that the ABL Facility be increased by an aggregate principal amount not to exceed $200,000 (less the U.S. dollar equivalent of any increase in CDN commitments) with respect to the U.S. Tranche and U.S. dollar equivalent $10,000 with respect to the Canadian Tranche (so long as the aggregate amount of ABL Facility commitments, excluding foreign facilities described in the following clause (b), do not exceed U.S. dollar equivalent $700,000), and (b) after giving effect to Amendment No. 2, may now also establish one or more foreign facilities under the Amended ABL Credit Agreement in an aggregate principal amount not to exceed U.S. dollar equivalent $60,000. Pursuant to Amendment No. 2, the calculation of the eligible inventory component of the U.S. and Canadian borrowing bases was changed from (x) the lesser of (a) 75% of the value of eligible inventory and (b) 85% of the net orderly liquidation value of eligible inventory to be (y) 85% of the net orderly liquidation value of eligible inventory. |
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Under the Second Amended ABL Credit Agreement, borrowings under the ABL Facility bear interest, at the Company’s option, at either an alternative base rate or Canadian prime rate, as applicable, plus an applicable margin (ranging from 0.50% and 1.00% pursuant to a grid based on average excess availability) or a London interbank offered rate or Canadian BA rate (as defined therein), as applicable, plus an applicable margin (ranging from 1.50% and 2.00% pursuant to a grid based on average excess availability). In addition to paying interest on outstanding principal under the ABL Facility, the Company will be required to pay a commitment fee, in respect of the unutilized commitments under the ABL Facility, which commitment fee ranges from 0.250% to 0.500% per annum and will be determined based on average utilization of the ABL Facility (increasing when utilization is low and decreasing when utilization is high). |
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As amended by Amendment No. 2, the ABL Facility requires that if the excess availability under the ABL Facility, as defined therein, is less than the greater of (a) the U.S. dollar equivalent of $35,000 and (b) 10.0% of the lesser of (i) the aggregate commitments under the ABL Facility and (y) the then applicable combined borrowing base under the ABL Facility, then the Company shall comply with a minimum fixed charge coverage ratio of at least 1.00 to 1.00. Furthermore, Amendment No. 2 modified certain exceptions to the negative covenants under the ABL Facility to give the Company more flexibility to, among other things, make acquisitions and other investments, to make dividends and other distributions to equity holders, to prepay certain indebtedness, to engage in certain receivables financing transactions, and to incur certain additional indebtedness. |
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In connection with the Amendment No.2 to the ABL Facility, the Company incurred fees to the participating lenders and other costs of approximately $2,026, recorded as debt issuance costs. These costs will be amortized as interest expense over the remaining term of the credit facility. Also in connection with this amendment, the interests of two original lenders under the ABL Facility were paid off and re-allocated to other members in the syndicate. Accordingly, the Company wrote-off approximately $1,787 of unamortized debt issuance costs associated with these lenders. |
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Amendment No. 3 to ABL Facility |
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On August 5, 2013, the Company, entered into Amendment No. 3 to Credit Agreement (“Amendment No. 3”), which amended the Second Amended ABL Credit Agreement (as further amended by Amendment No. 3, the “Third Amended ABL Credit Agreement”). |
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Pursuant to Amendment No. 3, the Second Amended ABL Credit Agreement was amended to, among other things, (i) add the Company and Sub Holdings as co-borrowers, on a joint and several basis with Solutions, under a sub-facility under the Third Amended ABL Credit Agreement, with the proceeds of the loans made under such sub-facility permitted to be used for certain permitted investments, working capital requirements and debt service obligations of the Company, Sub Holdings and Solutions and (ii) modify the covenants restricting the ability of the Company and Sub Holdings to engage in certain business activities to permit the Company and Sub Holdings to own equity interests of entities acquired in connection with investments permitted under the Third Amended ABL Credit Agreement (so long as, as soon as practicable, after any such investment, the Company and Sub Holdings contribute all the equity interests so acquired, or substantially all the assets of the entity so acquired, in such investment to Solutions) and to incur obligations, make other investments and engage in certain other activities related to the foregoing. |
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In connection with ABL Amendment No. 3, the Company incurred fees to the participating lenders and other costs of approximately $563, recorded as debt issuance costs. These costs will be amortized as interest expense over the remaining term of the ABL Facility. |
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Term Loan Facility |
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In connection with the Ashland Distribution Acquisition, Solutions closed on the Term Loan Facility that provided debt financing in an aggregate principal amount of $325,000. Effective October 16, 2012, the Company amended certain terms of the Term Loan Facility and borrowed an additional $175,000 (see below). |
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The Term Loan Facility is fully and unconditionally guaranteed, jointly and severally, by Holdings, and its wholly owned subsidiary, Sub Holdings. In addition to the $325,000 borrowed at closing and the $175,000 borrowed on October 16, 2012, the Company has the right to request additional tranches of term loans in an aggregate principal amount of up to $150,000 plus an additional amount that could be incurred without causing the Secured Net Leverage Ratio (as defined in the Amended and Restated Term Loan Credit Agreement), calculated on a pro forma basis, to be greater than 3.5 to 1.0. Availability of such additional tranches of term loans will be subject to the absence of any default, and among other things, the receipt of commitments by existing or additional financial institutions. Borrowings under the Term Loan Facility bear interest at the borrowers option at either (a) a LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for the interest period relevant to such borrowing adjusted for certain additional costs, which shall be no less than 1.5%, plus an applicable margin of 3.5% or (b) a base rate determined by reference to the highest of (1) the prime commercial lending rate published by Bank of America, N.A. as its “prime rate,” (2) the federal funds effective rate plus 0.50% and (3) a one-month LIBOR rate plus 1.0%, plus an applicable margin of 2.5%. The average interest rate for the Term Loan Facility was 5.0% at September 30, 2013 and 2012. |
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The Term Loan Facility will mature on September 9, 2017 and will amortize in equal quarterly installments in an aggregate annual amount equal to 1.00% of the original principal amount of the Term Loans, with the balance payable on the final maturity date, subject to the amend and extend provisions applicable under the Amended and Restated Term Loan Credit Agreement. Additionally, The Term Loan Facility agreement requires the Company to make early principal payments on an annual basis, commencing with the fiscal year ended September 30, 2013, if cash flows for the year, as defined in the agreement, exceed certain levels specified in the agreement. The Company generally has the right to prepay loans in whole or in-part, without incurring any penalties for early payment. The Company will not be required to make an early principal payment for the fiscal year ended September 30, 2013. |
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The Term Loan Facility contains a number of covenants that, among other things and subject to certain exceptions, restrict the Company’s ability and the ability of its subsidiaries to incur additional indebtedness, pay dividends on its capital stock or redeem, repurchase or retire its capital stock or other indebtedness, make investments, loans and acquisitions, create restrictions on the payment of dividends or other amounts to the Company from its restricted subsidiaries, engage in transactions with its affiliates, sell assets, including capital stock of its subsidiaries, alter the business it conducts, consolidate or merge, incur liens and engage in sale-leaseback transactions. The credit agreement governing the Term Loan Facility does not require Solutions to comply with any financial maintenance covenants and contains certain customary representations and warranties, affirmative covenants and provisions relating to events of default. As of September 30, 2013, the Company was in compliance with the covenants of the Term Loan Facility. |
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Amended and Restated Term Loan Facility |
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On October 16, 2012, the Company entered into Amendment No. 1 to Credit Agreement (the “TLB Amendment”), which effectuated an amendment and restatement of the term loan credit agreement, dated as of March 9, 2011 (the “Original Term Loan Credit Agreement” and, as amended and restated, the “Amended and Restated Term Loan Credit Agreement”). The Amended and Restated Term Loan Credit Agreement provides for, among other things, new Term B-2 Loans (as defined in the Amended and Restated Term Loan Credit Agreement) in an aggregate principal amount of $175,000, which was fully drawn on October 16, 2012, in addition to the existing Term B-1 Loans (as defined in the Amended and Restated Term Loan Credit Agreement), which were drawn in an aggregate principal amount of $325,000 on March 31, 2011. The Company received net proceeds from Term B-2 Loans of $171,500, net of discount of $3,500, which were used to repay approximately $100,000 aggregate principal amount of loans outstanding under the ABL Facility on October 16, 2012, to pay fees and expenses related to this amendment, and for general corporate purposes. |
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Under the Amended and Restated Term Loan Credit Agreement, Solutions has the right, at Solutions’ option, to request additional tranches of term loans in an aggregate principal not to exceed (x) $150,000 in the aggregate pursuant to this clause (x) or (y) at the borrower’s option, the amount, in the case of this clause (y) only, that could be incurred without causing the Secured Net Leverage Ratio (as defined in the Amended and Restated Term Loan Credit Agreement), calculated on a pro forma basis, to be greater than 3.5 to 1.0. Availability of such additional tranches of term loans will be subject to, among other things, the receipt of commitments by existing or additional lenders. |
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The interest rate provisions for the Term B-2 Loans are the same as for the Term B-1 Loans; the Term B-2 Loans bear interest at a rate per annum equal to, at the borrower’s option, either (a) a LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for the interest period relevant to such borrowing adjusted for certain additional costs, which shall be no less than 1.5%, plus an applicable margin of 3.5% or (b) a base rate determined by reference to the highest of (1) the prime commercial lending rate published by Bank of America, N.A. as its “prime rate,” (2) the federal funds effective rate plus 0.50% and (3) a one-month LIBOR rate plus 1.0%, plus an applicable margin of 2.5%. Consistent with the Term B-1 Loans, the Term B-2 Loans will mature on September 9, 2017, and will amortize in equal quarterly installments in an aggregate annual amount equal to 1.00% of the original principal amount of the Term B-2 Loans, with the balance payable on the final maturity date, subject to the amend and extend provisions applicable under the Amended and Restated Term Loan Credit Agreement. |
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The Company may voluntarily prepay outstanding Term B-1 Loans and outstanding Term B-2 Loans without premium or penalty, other than customary “breakage” costs with respect to Eurodollar loans and a 1.0% premium on the outstanding amount of any Term B-1 Loans or Term B-2 Loans prepaid or refinanced in connection with certain repricing transactions occurring on or prior to October 16, 2013. |
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Furthermore, the TLB Amendment modified certain negative covenants under the Amended and Restated Term Loan Credit Agreement to give the Company and its subsidiaries more flexibility to, among other things, make acquisitions and other investments, and to incur certain additional indebtedness subject to meeting certain financial ratio incurrence tests. |
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The amendment was accounted for as a modification in accordance with U.S. GAAP. Fees paid to the lenders in connection with the amendment and related debt issuance, which totaled approximately $3,365, were recorded as debt issuance costs to be amortized as interest expense over the remaining term of the credit facility. There was no gain or loss recognized related to this modification. |
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Amendment No. 1 to the Amended and Restated Term Loan Credit Agreement |
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Effective November 29, 2012, the Company entered into Amendment No. 1 to Amended and Restated Credit Agreement (“TLB Amendment No. 1”) pursuant to which the Amended and Restated Term Loan Credit Agreement was revised such that the initial Excess Cash Flow (as such term is defined in the Amended and Restated Term Loan Credit Agreement as amended (the “First Amended Term Loan Credit Agreement”)) mandatory prepayment, if required, shall occur after the fiscal year ended September 30, 2013, in respect of the two-year period commencing October 1, 2011 and ending September 30, 2013. |
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This amendment was accounted for as a modification in accordance with U.S. GAAP. Fees paid to the lenders, which totaled approximately $1,188, were recorded as debt issuance costs to be amortized as interest expense over the remaining term of the credit facility. There was no gain or loss recognized related to this modification. |
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Amendment No. 2 to Amended and Restated Term Loan Credit Agreement |
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Effective August 5, 2013, the Company entered into Amendment No. 2 to Amended and Restated Credit Agreement (“TLB Amendment No. 2”) pursuant to which the First Amended Term Loan Credit Agreement was amended to, among other things (a) allow, at the Company’s option, the Company and Sub Holdings to be co-borrowers, on a joint and several basis with Solutions, of incremental term loans that may be incurred in the future under, and in accordance with the terms and conditions of, the Amended Term Loan Credit Agreement, (b) permit the Company and its restricted subsidiaries to enter into certain receivables financing arrangements and (c) modify the respective covenants restricting the ability of the Company and Sub Holdings to engage in certain business activities to permit the Company and Sub Holdings (1) to own equity interests of entities acquired in connection with investments permitted under the Second Amended Term Loan Credit Agreement (as defined below) and the Third Amended ABL Credit Agreement, as applicable, so long as, in each case, as soon as practicable after any such investment, the Company and Sub Holdings contribute all of the equity interests so acquired, or substantially all of the assets of the entity so acquired, in such investment to Solutions, and (2) to incur obligations, make other investments and engage in certain other activities related to the foregoing. (as so amended, the “Second Amended Term Loan Credit Agreement”). |
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The TLB Amendment No, 2 was accounted for as a modification in accordance with U.S. GAAP and the Company incurred fees (paid to the participating lenders) and other costs of approximately $628, recorded as debt issuance costs. These costs will be amortized as interest expense over the remaining term of the Term Loan Facility. No gain or loss on the modification was recognized. |
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8.375% Senior Subordinated Notes |
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In connection with the Ashland Distribution Acquisition, on March 9, 2011, Solutions and its wholly owned subsidiary, Nexeo Solutions Finance Corporation (the “Co-Issuer,” and together with Solution, the “Issuers”), closed a placement of $175,000 in aggregate principal amount of notes. The Notes are fully and unconditionally guaranteed, jointly and severally, by Holdings, and its wholly owned subsidiary, Sub Holdings. The Notes are general unsecured, subordinated obligations of the Issuers and mature on March 1, 2018. Interest on the Notes is paid semi-annually in arrears and accrues at the rate of 8.375% per annum. On or after March 1, 2014, the Issuers may redeem all, or from time-to-time, a part of the Notes at redemption prices (expressed as a percentage of principal amount) ranging from 104.2% to 100.0% plus accrued and unpaid interest on the Notes. Prior to March 1, 2014, the Issuers may on any one or more occasions redeem up to 35.0% of the original principal amount of the Notes using the proceeds of certain equity offerings at a redemption price equal to 108.4% of the aggregate principal amount thereof, plus any accrued and unpaid interest. In addition, prior to March 1, 2014, the Issuers may redeem all or part of the Notes at a redemption price equal to 100% of the aggregate principal amount of the Notes to be redeemed, plus a make-whole premium and accrued and unpaid interest. |
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On June 15, 2012, the Issuers completed the exchange of the outstanding principal amount of the senior subordinated notes with new notes registered under the Securities Act with 100% of the outstanding principle amount of notes being tendered for exchange. The terms of the new notes are identical to the terms of the old notes that were issued on March 9, 2011, except that the new notes are now registered under the Securities Act and do not contain restrictions on transfer, registration rights or provisions for additional interest. |
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The notes restrict the Company’s ability to incur indebtedness outside of the ABL Facility and Term Loan Facility, unless the consolidated fixed charge coverage ratio is at least 2:1 or other financial and operational requirements are met. Additionally, the terms of the Notes restrict the Company’s ability to make certain payments to affiliated entities. |
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The Company received net proceeds on the Notes of $170,625, net of discount of $4,375. The discount is being amortized to interest expense over the life of the Notes using the effective interest rate method. |
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Second Supplemental Indenture to Senior Subordinated Notes Indenture |
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On August 7, 2013, the Company entered into the Second Supplemental Indenture (the “Second Supplemental Indenture”), among Nexeo Solutions, LLC, as Issuer, Nexeo Solutions Finance Corporation, as the Co-Issuer, the Company and Sub Holdings, as Guarantors, and Wells Fargo Bank, National Association, as Trustee (the “Trustee”), relating to the Company’s 8.375% Senior Subordinated Notes due 2018 (the “Notes”), which amends the Senior Subordinated Notes Indenture, dated March 9, 2011, among the Issuer, the Co-Issuer, the Guarantors party thereto from time to time and the Trustee (together with the First Supplemental Indenture, dated March 31, 2011, the “Indenture”). |
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The Second Supplemental Indenture amends the Indenture to provide that, in connection with a merger of the Company or Sub Holdings into, or a sale of substantially all of the assets of the Company or Sub Holdings to, the Issuer or a Subsidiary Guarantor (as defined in the Indenture), the Issuer or any Subsidiary Guarantor will not be required to (i) assume the obligations of the Company or Sub Holdings or (ii) succeed to, and be substituted for, the Company or Sub Holdings under the Indenture and any guarantee by any Guarantor of the Issuer’s obligations under the Indenture and the Notes. |
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Third Supplemental Indenture to Senior Subordinated Notes Indenture |
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On December 4, 2013, and in connection with the purchase of 100% of the outstanding shares of Chemical Specialists and Development, Inc. (“CSD”), CSD and its subsidiaries entered into a third supplemental indenture pursuant to which CSD and its subsidiaries became guarantors under the Indenture. See Note 18. |
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Debt obligations—the following table sets forth future debt payment obligations at September 30, 2013: |
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Maturities of long-term debt | | | | | | |
2014 | | $ | 5,036 | | | | |
2015 | | 5,036 | | | | |
2016 | | 5,038 | | | | |
2017 | | 475,165 | | | | |
2018 | | 175,023 | | | | |
Thereafter | | — | | | | |
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Total | | $ | 665,298 | | | | |