Borrowings | Borrowings On April 9, 2014, we completed the refinancing of substantially all of the existing indebtedness of our wholly-owned subsidiaries Libbey Glass and Libbey Europe B.V. The refinancing included: • the entry into an amended and restated credit agreement with respect to our ABL Facility; • the issuance of $440.0 million in aggregate principal amount of Senior Secured Term Loan B facility of Libbey Glass due 2021 (Term Loan B); and • the repurchase and cancellation of all Libbey Glass's then outstanding $405.0 million in aggregate principal amount Senior Secured Notes ( $360.0 million on April 9, 2014 and $45.0 million on May 9, 2014). We used the proceeds of the Term Loan B, together with cash on hand and borrowings under the ABL Facility, to repurchase $360.0 million of the Senior Secured Notes, redeem the remaining $45.0 million of the Senior Secured Notes, and pay certain related fees and expenses. The above transactions included charges of $37.3 million for an early call premium and $9.1 million for the write off of the remaining financing fees from the Senior Secured Notes. These charges were considered in the computation of the loss on redemption of debt in the second quarter of 2014. Borrowings consist of the following: (dollars in thousands) Interest Rate Maturity Date June 30, December 31, Borrowings under ABL Facility floating April 9, 2019 $ 14,000 $ — Term Loan B floating April 9, 2021 435,600 437,800 RMB Working Capital Loan 6.78% July, 2015 — 3,258 AICEP Loan 0.00% January, 2016 to July 30, 2018 3,512 3,846 Total borrowings 453,112 444,904 Less — unamortized discount 902 982 Total borrowings — net 452,210 443,922 Less — long term debt due within one year 4,577 7,658 Total long-term portion of borrowings — net $ 447,633 $ 436,264 Amended and Restated ABL Credit Agreement Libbey Glass and Libbey Europe entered into an Amended and Restated Credit Agreement, dated as of February 8, 2010 and amended as of April 29, 2011, May 18, 2012 and April 9, 2014 (as amended, the ABL Facility), with a group of four financial institutions. The ABL Facility provides for borrowings of up to $100.0 million , subject to certain borrowing base limitations, reserves and outstanding letters of credit. All borrowings under the ABL Facility are secured by: • a first-priority security interest in substantially all of the existing and future personal property of Libbey Glass and its domestic subsidiaries (ABL Priority Collateral); • a first-priority security interest in: • 100 percent of the stock of Libbey Glass and 100 percent of the stock of substantially all of Libbey Glass’s present and future direct and indirect domestic subsidiaries; • 100 percent of the non-voting stock of substantially all of Libbey Glass’s first-tier present and future foreign subsidiaries; and • 65 percent of the voting stock of substantially all of Libbey Glass’s first-tier present and future foreign subsidiaries • a first priority security interest in substantially all proceeds and products of the property and assets described above; and • a second-priority security interest in substantially all of the owned real property, equipment and fixtures in the United States of Libbey Glass and its domestic subsidiaries, subject to certain exceptions and permitted liens (Term Priority Collateral). Additionally, borrowings by Libbey Europe under the ABL Facility are secured by: • a first-priority lien on substantially all of the existing and future real and personal property of Libbey Europe and its Dutch subsidiaries; and • a first-priority security interest in: • 100 percent of the stock of Libbey Europe and 100 percent of the stock of substantially all of the Dutch subsidiaries; and • 100 percent (or a lesser percentage in certain circumstances) of the outstanding stock issued by the first-tier foreign subsidiaries of Libbey Europe and its Dutch subsidiaries. Swingline borrowings are limited to $15.0 million , with swingline borrowings for Libbey Europe being limited to the U.S. equivalent of $7.5 million . Loans comprising each CBFR (CB Floating Rate) Borrowing, including each Swingline Loan, bear interest at the CB Floating Rate plus the Applicable Rate, and euro-denominated swingline borrowings (Eurocurrency Loans) bear interest calculated at the Netherlands swingline rate, as defined in the ABL Facility. The Applicable Rates for CBFR Loans and Eurocurrency Loans vary depending on our aggregate remaining availability. The Applicable Rates for CBFR Loans and Eurocurrency Loans were 0.50 percent and 1.50 percent , respectively, at June 30, 2015 . Libbey pays a quarterly Commitment Fee, as defined by the ABL Facility, on the total credit provided under the ABL Facility. The Commitment Fee was 0.25 percent at June 30, 2015 . No compensating balances are required by the ABL Facility. The ABL Facility does not require compliance with a fixed charge coverage ratio covenant unless aggregate unused availability falls below $10.0 million . If our aggregate unused ABL Facility availability were to fall below $10.0 million , the fixed charge coverage ratio requirement would be 1 :00 to 1:00. Libbey Glass and Libbey Europe have the option to increase the ABL Facility by $25.0 million . There were borrowings of $14.0 million under the ABL Facility at June 30, 2015 . There were no Libbey Glass or Libbey Europe borrowings under the ABL Facility at December 31, 2014 . Interest is payable on the last day of the interest period, which can range from one month to six months depending on the maturity of each individual borrowing on the ABL Facility. The borrowing base under the ABL Facility is determined by a monthly analysis of the eligible accounts receivable and inventory. The borrowing base is the sum of (a) 85 percent of eligible accounts receivable and (b) the lesser of (i) 85 percent of the net orderly liquidation value (NOLV) of eligible inventory, (ii) 65 percent of eligible inventory, or (iii) $75.0 million . At June 30, 2015 , the available total borrowing base is offset by a $0.3 million rent reserve and a $2.2 million mark-to-market reserve for natural gas contracts. The ABL Facility also provides for the issuance of up to $30.0 million of letters of credit, which are applied against the $100.0 million limit; at June 30, 2015 , $6.6 million in letters of credit were outstanding. Remaining unused availability under the ABL Facility was $76.9 million at June 30, 2015 , compared to $82.3 million at December 31, 2014 . Term Loan B and Senior Secured Notes On April 9, 2014, Libbey Glass consummated its $440.0 million Term Loan B. The net proceeds of the Term Loan B were $438.9 million , after the 0.25 percent original issue discount of $1.1 million . The Term Loan B had related fees of approximately $6.7 million that will be amortized to interest expense over the life of the loan. The Term Loan B is evidenced by a Senior Secured Credit Agreement, dated April 9, 2014 (Credit Agreement), between Libbey Glass, the Company, the domestic subsidiaries of Libbey Glass listed as guarantors therein (Subsidiary Guarantors and together with the Company, Guarantors), and the lenders. Under the terms of the Credit Agreement, aggregate principal of $1.1 million is due on the last business day of each quarter. The Term Loan B bears interest at the rate of LIBOR plus 3.0 percent , subject to a LIBOR "floor" of 0.75 percent . The interest rate was 3.75 percent per year at June 30, 2015 , and will mature on April 9, 2021 . We may voluntarily prepay, in whole or in part, the Term Loan B without premium or penalty but with accrued interest. Although the Credit Agreement does not contain financial covenants, the Credit Agreement contains other covenants that restrict the ability of Libbey Glass and the Guarantors to, among other things: • incur, assume or guarantee additional indebtedness; • pay dividends, make certain investments or other restricted payments; • create liens; • enter into affiliate transactions; • merge or consolidate, or otherwise dispose of all or substantially all the assets of Libbey Glass and the Guarantors; and • transfer or sell assets. The Credit Agreement provides for customary events of default. In the case of an event of default as defined in the Credit Agreement, all of the outstanding Term Loan B will become due and payable immediately without further action or notice. The Term Loan B and the related guarantees under the Credit Agreement are secured by (i) first priority liens on the Term Priority Collateral and (ii) second priority liens on the ABL Collateral. We had an Interest Rate Agreement in place through May 9, 2014 with respect to $45.0 million of our Senior Secured Notes as a means to manage our fixed to variable interest rate ratio. The Interest Rate Agreement effectively converted this portion of our long-term borrowings from fixed rate debt to variable rate debt. The variable interest rate for our borrowings related to the Interest Rate Agreement at May 9, 2014, excluding applicable fees, was 5.5 percent . Total remaining Senior Secured Notes not covered by the Interest Rate Agreement had a fixed interest rate of 6.875 percent per year. We settled the swap at fair value, resulting in a payment of $1.1 million on May 13, 2014. Upon the redemption of the Senior Secured Notes in the second quarter of 2014, the unamortized balance of $0.8 million of the carrying value adjustment on debt related to the Interest Rate Agreement was recognized as expense in loss on redemption of debt on the Condensed Consolidated Statements of Operations. See note 9 for further discussion and the net impact recorded on the Condensed Consolidated Statements of Operations. On April 1, 2015, we executed an interest rate swap on our Term Loan B as part of our risk management strategy to mitigate the risks involved with fluctuating interest rates. The interest rate swap will effectively convert $220.0 million of our Term Loan B debt from a variable interest rate to a 4.85 percent fixed interest rate, thus reducing the impact of interest rate changes on future income. The fixed rate swap will be effective January 2016 through January 2020. The interest rate swap is designated as a cash flow hedge and is accounted for under FASB ASC 815 "Derivatives and Hedging". See note 9 for further discussion on the interest rate swap. RMB Working Capital Loan On July 24, 2014, Libbey China entered into a RMB 20.0 million (approximately $3.3 million ) working capital loan with China Construction Bank to cover seasonal working capital needs. The working capital loan was set to mature on July 23, 2015, and had a fixed interest rate of 6.78 percent , which was paid monthly. On March 4, 2015, Libbey China prepaid the working capital loan along with accrued and unpaid interest. This obligation was secured by a mortgage lien on the Libbey China facility. AICEP Loan In July 2012, Libbey Portugal entered into a loan agreement with Agencia para Investmento Comercio Externo de Portugal, EPE (AICEP), the Portuguese Agency for investment and external trade. The amount of the loan is €3.2 million (approximately $3.5 million ) at June 30, 2015 , and has an interest rate of 0.0 percent . Semi-annual installments of principal are due beginning in January 2016 through the maturity date in July 2018. Notes Payable We have an overdraft line of credit for a maximum of €1.0 million . At June 30, 2015 , there were no borrowings under the facility, which has an interest rate of 5.80 percent . Interest with respect to the note is paid monthly. Fair Value of Borrowings The fair value of our debt has been calculated based on quoted market prices (Level 2 in the fair value hierarchy) for the same or similar issues. The $435.6 million outstanding on the Term Loan B had an estimated fair value of $435.1 million at June 30, 2015 and $430.1 million at December 31, 2014 . The fair value of the remainder of our debt at June 30, 2015 approximates carrying value due to variable rate on the borrowings under the ABL facility and other immaterial debt. The fair value of the remainder of our debt at December 31, 2014 approximates carrying value due to the short term nature of the RMB Working Capital Loan and other immaterial debt. Capital Resources and Liquidity Historically, cash flows generated from operations, cash on hand and our borrowing capacity under our ABL Facility have enabled us to meet our cash requirements, including capital expenditures and working capital requirements. At June 30, 2015 , we had $14.0 million borrowings under our ABL Facility and $6.6 million in letters of credit issued under that facility. As a result, we had $76.9 million of unused availability remaining under the ABL Facility at June 30, 2015 , as well as, $31.4 million of cash on hand. |