Debt | 9 Months Ended |
Sep. 30, 2013 |
Debt Disclosure [Abstract] | |
Debt | 5. Debt |
Loans payable and current portion of long-term debt consisted of the following: |
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| | September 30, | | | December 31, | |
2013 | 2012 |
| | (Dollars in thousands) | |
Loans payable to banks | | $ | 3,247 | | | $ | 2,477 | |
Domestic accounts receivable asset securitization program | | | 48,000 | | | | 40,000 | |
International accounts receivable sales programs | | | 5,554 | | | | 6,122 | |
Current portion of long-term debt | | | 2,864 | | | | 36,553 | |
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Loans payable and current portion of long-term debt | | $ | 59,665 | | | $ | 85,152 | |
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Long-term debt consisted of the following: |
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| | | | | | | | |
| | September 30, | | | December 31, | |
2013 | 2012 |
| | (Dollars in thousands) | |
7.875% Senior Notes | | $ | 250,000 | | | $ | 250,000 | |
6.50% Convertible Senior Notes, net of unamortized discounts | | | — | | | | 34,417 | |
Revolving credit facility | | | 19,509 | | | | 2,596 | |
Capital lease obligations | | | 6,053 | | | | 6,433 | |
Other notes | | | 5,421 | | | | 4,731 | |
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Total long-term debt | | | 280,983 | | | | 298,177 | |
Current portion of long-term debt | | | (2,864 | ) | | | (36,553 | ) |
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Long-term debt, less current portion | | $ | 278,119 | | | $ | 261,624 | |
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Receivable Sales Programs |
We have an asset securitization program for Ferro’s U.S. trade accounts receivable. We sell interests in our domestic receivables to various purchasers, and we may obtain up to $50.0 million in the form of cash or letters of credit. Advances received under this program are accounted for as borrowings secured by the receivables and included in net cash provided by financing activities. In the second quarter of 2013, we extended the maturity of this credit facility through May 2014. At September 30, 2013, advances received of $48.0 million were secured by $77.6 million of accounts receivable, and based on available and qualifying receivables, $2.0 million of additional borrowings were available under the program. During the third quarter of 2013 we amended the agreement. The interest rate under the amended agreement is the sum of (A) either (1) LIBOR rates or (2) the federal funds rate plus 0.5% or the prime rate and (B) a fixed margin. At September 30, 2013, the interest rate was 0.6%. |
We also have several international programs to sell with recourse trade accounts receivable to financial institutions. Advances received under these programs are accounted for as borrowings secured by the receivables and included in net cash provided by financing activities. At September 30, 2013, the commitments supporting these programs totaled $18.9 million, the advances received of $5.6 million were secured by $8.7 million of accounts receivable, and based on available and qualifying receivables, $0.2 million of additional borrowings were available under the programs. The interest rates under these programs are based on EURIBOR rates plus 1.75%. At September 30, 2013, the weighted-average interest rate was 1.9%. |
7.875% Senior Notes |
The 7.875% Senior Notes (the “Senior Notes”) were issued in 2010 at par, bear interest at a rate of 7.875% per year, payable semi-annually in arrears on February 15th and August 15th, and mature on August 15, 2018. We may also redeem some or all of the Senior Notes prior to August 15, 2014, at a price equal to the principal amount plus a defined applicable premium. The applicable premium on any redemption date is the greater of 1% of the principal amount of the note or the excess of (1) the present value at such redemption date of the redemption price of the note at August 15, 2014, plus all required interest payments due on the note through August 15, 2014, computed using a discount rate equal to the Treasury Rate as of the redemption date plus 50 basis points; over (2) the principal amount of the note. In addition, we may redeem some or all of the Senior Notes beginning August 15, 2014, at prices ranging from 100% to 103.938% of the principal amount. |
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The Senior Notes are unsecured obligations and rank equally in right of payment with any other unsecured, unsubordinated obligations. The Senior Notes contain certain affirmative and negative covenants customary for high-yield debt securities, including, but not limited to, restrictions on our ability to incur additional debt, create liens, pay dividends or make other distributions or repurchase our common stock and sell assets outside the ordinary course of business. At September 30, 2013, we were in compliance with the covenants under the Senior Notes’ indenture. |
6.50% Convertible Senior Notes |
The 6.50% Convertible Senior Notes (the “Convertible Notes”) were repaid at maturity on August 15, 2013. The principal amount outstanding at maturity was $35.1 million. |
Revolving Credit Facility |
In 2010, we entered into the Third Amended and Restated Credit Agreement with a group of lenders for a five-year, $350 million multi-currency senior revolving credit facility (the “2010 Credit Facility”). In March 2013, we amended the 2010 Credit Facility (the “2013 Amended Credit Facility”) to provide additional operating flexibility. The primary effects of the 2013 Amended Credit Facility were to: |
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| • | | Decrease the Revolving Loan Commitment Amount from $350.0 million to $250.0 million; | | | | | |
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| • | | Amend the calculation of EBITDA to provide for a restructuring expense add-back attributable to the Company’s restructuring programs of $30.0 million in 2013, $20.0 million in 2014 and $10.0 million in 2015, with no aggregate limit on restructuring expense; | | | | | |
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| • | | Increase the maximum permitted leverage ratio such that for (i) the first, second and third quarters of 2013, it shall increase from 3.50 to 4.25; (ii) the fourth quarter of 2013 and first quarter of 2014, it shall increase from 3.50 to 4.00; (iii) the second and third quarters of 2014, it shall increase from 3.50 to 3.75; and (iv) the fourth quarter of 2014 and thereafter, it will be 3.50; and | | | | | |
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| • | | Amend the requirements for Permitted Acquisitions such that for the Company to consummate a Permitted Acquisition the Company must have minimum liquidity of $100.0 million and the Company’s Secured Leverage Ratio must be less than 1.50. | | | | | |
The 2013 Amended Credit Facility matures on August 24, 2015, and is secured by substantially all of Ferro’s assets. After reductions for outstanding letters of credit, we had $225.0 million of additional borrowings available at September 30, 2013. The interest rate under the 2013 Amended Credit Facility is the sum of (A) either (1) LIBOR or (2) the higher of the Federal Funds Rate plus 0.5%, the Prime Rate, or LIBOR plus 1.0% and (B) a variable margin based on the Company’s leverage. At September 30, 2013, the interest rate was 3.4%. |
Under the 2013 Amended Credit Facility, we are subject to a number of financial covenants, including limitations on the payment of common stock dividends. At September 30, 2013, we were in compliance with the covenants of the 2013 Amended Credit Facility. |