Debt | 9 Months Ended |
Sep. 30, 2014 |
Debt [Abstract] | ' |
Debt | ' |
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5. Debt |
Loans payable and current portion of long-term debt consisted of the following: |
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| | September 30, | | December 31, |
| | 2014 | | 2013 |
| | (Dollars in thousands) |
Loans payable | | $ | 4,221 | | $ | 2,561 |
Domestic accounts receivable asset securitization program | | | — | | | 41,000 |
Current portion of long-term debt | | | 4,181 | | | 1,168 |
Loans payable and current portion of long-term debt | | $ | 8,402 | | $ | 44,729 |
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Long-term debt consisted of the following: |
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| | September 30, | | December 31, |
| | 2014 | | 2013 |
| | (Dollars in thousands) |
7.875% Senior Notes | | $ | — | | $ | 250,000 |
Revolving credit facility | | | — | | | 9,204 |
Term loan facility | | | 300,000 | | | — |
Capital lease obligations | | | 4,453 | | | 5,816 |
Other notes | | | 500 | | | 3,617 |
Total long-term debt | | | 304,953 | | | 268,637 |
Current portion of long-term debt | | | -4,181 | | | -1,168 |
Long-term debt, less current portion | | $ | 300,772 | | $ | 267,469 |
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Receivable Sales Programs |
We had an asset securitization program for Ferro’s U.S. trade accounts receivable where we sold undivided variable percentage interests in our domestic receivables to various purchasers, and could obtain up to $50 million in the form of cash or letters of credit. Advances received under this program were accounted for as borrowings secured by the receivables and are included in net cash provided by financing activities. The purchasers had no recourse to Ferro’s other assets for failure of payment of the receivables as a result of the lack of creditworthiness, or financial inability to pay, of the related obligor. In May 2014, the program expired and amounts outstanding were repaid at that time. |
In 2011, we entered into 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. During the fourth quarter of 2013, the international factoring programs expired and were not renewed. |
New Credit Facility |
On July 31, 2014, the Company entered into a new credit facility (the “New Credit Facility”) with a group of lenders to refinance the majority of its then outstanding debt. The New Credit Facility consists of a $200 million secured revolving line of credit with a term of five years and a $300 million secured term loan facility with a term of seven years. The New Credit Facility replaces the prior $250 million revolving credit facility (described below) and provided funding to repurchase the 7.875% Senior Notes (described below). Subject to certain conditions, the Company can request up to $200 million of additional commitments under the New Credit Facility, though the lenders are not required to provide such additional commitments. In addition, up to $100 million of the revolving line of credit will be available to certain of the Company’s subsidiaries in the form of revolving loans denominated in Euros. |
Certain of the Company’s U.S. subsidiaries have guaranteed the Company’s obligations under the New Credit Facility and such obligations are secured by (a) substantially all of the personal property of the Company and the U.S. subsidiary guarantors and (b) a pledge of 100% of the stock of most of the Company’s U.S. subsidiaries and 65% of most of the stock of the Company’s first tier foreign subsidiaries. |
Interest Rate – Term Loan: The interest rates applicable to the term loans will be, at the Company’s option, equal to either a base rate or a London Interbank Offered Rate (“LIBOR”) rate plus, in both cases, an applicable margin. |
| · | | The base rate will be the highest of (i) the federal funds rate plus 0.50%, (ii) PNC’s prime rate or (iii) the daily LIBOR rate plus 1.00%. | | | |
| · | | The applicable margin for base rate loans is 2.25%. | | | |
| · | | The LIBOR rate will be set as quoted by Bloomberg and shall not be less than 0.75%. | | | |
| · | | The applicable margin for LIBOR rate loans is 3.25%. | | | |
| · | | For LIBOR rate loans, the Company may choose to set the duration on individual borrowings for periods of one, two, three or six months, with the interest rate based on the applicable LIBOR rate for the corresponding duration. | | | |
At September 30, 2014, the Company had borrowed $300 million under the term loan facility at an annual rate of 4.0%. There were no additional borrowings available under the term loan facility. |
Interest Rate – Revolving Credit Line: The interest rates applicable to loans under the revolving credit line will be, at the Company’s option, equal to either a base rate or a LIBOR rate plus an applicable variable margin. The variable margin will be based on the ratio of (a) the Company’s total consolidated debt outstanding at such time to (b) the Company’s consolidated EBITDA computed for the period of four consecutive fiscal quarters most recently ended. |
| · | | The base rate will be the highest of (i) the federal funds rate plus 0.50%, (ii) PNC’s prime rate or (iii) the daily LIBOR rate plus 1.00%. | | | |
| · | | The applicable margin for base rate loans will vary between 1.50% and 2.00%. | | | |
| · | | The LIBOR rate will be set as quoted by Bloomberg for U.S. Dollars. | | | |
| · | | The applicable margin for LIBOR Rate Loans will vary between 2.50% and 3.00%. | | | |
| · | | For LIBOR rate loans, the Company may choose to set the duration on individual borrowings for periods of one, two, three or six months, with the interest rate based on the applicable LIBOR rate for the corresponding duration. | | | |
At September 30, 2014, there were no borrowings under the revolving credit line. After reductions for outstanding letters of credit secured by these facilities, we had $194.7 million of additional borrowings available at September 30, 2014. |
The New Credit Facility contains customary restrictive covenants including, but not limited to, limitations on use of loan proceeds, limitations on the Company’s ability to pay dividends and repurchase stock, limitations on acquisitions and dispositions and limitations on certain types of investments. The New Credit Facility also contains standard provisions relating to conditions of borrowing and customary events of default, including the non-payment of obligations by the Company and the bankruptcy of the Company. |
Specific to the revolving credit facility, the Company is subject to financial covenants regarding the Company’s outstanding net indebtedness and interest coverage ratios. |
If an event of default occurs, all amounts outstanding under the New Credit Facility may be accelerated and become immediately due and payable. At September 30, 2014, we were in compliance with the covenants of the New Credit Facility. |
7.875% Senior Notes |
In 2010, we issued $250 million of 7.875% Senior Notes due 2018 (the “Senior Notes”). The Senior Notes were issued at par and bore interest at a rate of 7.875% per year, payable semi-annually in arrears on February 15 and August 15 of each year. In July 2014, the Company commenced a tender offer for any and all of its outstanding Senior Notes at a price of $1,043 per $1,000 principal amount of Senior Notes. Approximately $143 million of the Senior Notes were purchased through the tender offer and the remaining $107 million were redeemed in the third quarter of 2014, at prices ranging from 100% to 103.938% of the principal amount, in accordance with the debt agreement. The redemption utilized proceeds from our new credit facility, as discussed above, and the proceeds from the sale of the Specialty Plastics business, as discussed in Note 4. |
In conjunction with the redemption of the Senior Notes, we recorded a charge of $13.5 million, which is comprised of a repurchase premium of $10.5 million and the write-off of unamortized issuance costs of $3.0 million. This charge is included within loss on extinguishment of debt in the condensed consolidated statements of operations for the three and nine months ended September 30, 2014, respectively. |
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”), which was amended in March of 2013 (the "2013 Amended Credit Facility") to provide additional operating flexibility. In August 2014, the 2013 Amended Credit Facility was terminated and repaid, using proceeds from the new credit facility, as discussed above. In conjunction with the termination, the Company recorded a charge of $0.9 million related to the write-off of unamortized issuance costs, which is included within loss on extinguishment of debt in our condensed consolidated statements of operations for the three and nine months ended September 30, 2014, respectively. |
Other Financing Arrangements |
We maintain other lines of credit to provide global flexibility for our short-term liquidity requirements. These facilities are uncommitted lines for our international operations and totaled $12.6 million and $17.1 million at September 30, 2014 and December 31, 2013, respectively. The unused portions of these lines provided additional liquidity of $10.6 million at September 30, 2014, and $10.1 million at December 31, 2013. |
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