Quarterly report pursuant to Section 13 or 15(d)

Debt

v3.21.2
Debt
9 Months Ended
Sep. 30, 2021
Debt Disclosure [Abstract]  
DEBT DEBT
The Company’s debt obligations consisted of the following:
 (dollars in millions) Maturity Date Interest Rate September 30, 2021 December 31, 2020
Term Loans (1)
2026
LIBOR plus 2.00%
$ 1,115.1  $ 727.5 
Senior Notes - $800 million (2)
2028 3.875% 789.1  788.0 
Other 6.1  — 
Total debt 1,910.3  1,515.5 
Less: current installments of long-term debt 12.9  7.4 
Total long-term debt $ 1,897.4  $ 1,508.1 

(1) Term loans, net of unamortized discounts and debt issuance costs of $13.4 million and $7.6 million at September 30, 2021 and December 31, 2020, respectively. The effective interest rate was 2.1% and 2.4% at September 30, 2021 and December 31, 2020, respectively, including the effects of interest rate swaps and net investment hedges. See Note 7, Financial Instruments, for further information regarding the Company's interest rate swaps and net investment hedges.
(2) Senior notes, net of unamortized debt issuance costs of $10.9 million and $12.0 million at September 30, 2021 and December 31, 2020, respectively. The effective interest rate was 4.1% at September 30, 2021 and December 31, 2020.
Credit Agreement
On September 1, 2021, the Company entered into an incremental amendment to the Credit Agreement and borrowed incremental term loans in an aggregate principal amount of $400 million through a corresponding increase to its existing senior secured term loans B (the "Add-on"). The new term loans have identical terms as the existing term loans, including a maturity date of January 31, 2026. Proceeds of the Add-on were used to finance a portion of the Coventya Acquisition.
The Credit Agreement, as amended by the incremental amendment, provides for senior secured credit facilities in an aggregate initial principal amount of $1.48 billion, consisting of a revolving credit facility in an aggregate principal amount of $330 million maturing in 2024 and term loans B in an aggregate initial principal amount of $1.15 billion maturing in 2026.
The applicable interest rate for the term loans under the Credit Agreement was not amended by the incremental amendment and remains at a per annum rate equal to a Base Rate, as defined in the Credit Agreement, plus, in each case, an applicable interest rate equal to a spread of 1.00% with respect to Base Rate Loans and a spread of 2.00% with respect to Eurocurrency Rate Loans (LIBOR or its equivalent). The Company is required to pay a commitment fee in respect of any undrawn portion of the revolving credit facility of 0.50% per annum, subject to a step-down to 0.375% based on the Company’s first lien net leverage ratio which condition is currently satisfied.
The Company's obligations under the Credit Agreement are guaranteed, jointly and severally, by certain of the Company’s domestic subsidiaries and secured by a first-priority security interest in substantially all of the assets of the Company and MacDermid, as borrowers, as well as the assets of the guarantors, including mortgages on material real property, subject to certain exceptions.
Covenants, Events of Default and Provisions
The Credit Agreement contains customary representations and warranties, and affirmative and negative covenants, including limitations on additional indebtedness, dividends, and other distributions, entry into new lines of business, use of loan proceeds, capital expenditures, restricted payments, restrictions on liens on the assets of the borrowers or any guarantor, transactions with affiliates, amendments to organizational documents, accounting changes, sale and leaseback transactions and dispositions. To the extent the borrowers have total outstanding borrowings under the revolving credit facility (subject to certain exceptions) greater than 30% of the commitment amount under the revolving credit facility, the Company's first lien net leverage ratio should not exceed 5.0 to 1.0, subject to a right to cure.
The Credit Agreement requires the borrowers to make mandatory prepayments of borrowings, subject to certain exceptions, as described in the Credit Agreement. In addition, the Credit Agreement contains customary events of default that include, among others, non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties, failure to make payment on, or defaults with respect to, certain other material indebtedness, bankruptcy and insolvency events, material judgments and change of control provisions. Upon the occurrence of an event of default, and after the expiration of any applicable grace period, payment of any outstanding loans under the Credit Agreement may be accelerated and the lenders could foreclose on their security interests in the assets of the borrowers and the guarantors.
At September 30, 2021, the Company was in compliance with the debt covenants contained in the Credit Agreement and had full availability of its unused borrowing capacity of $325 million, net of letters of credit, under the revolving credit facility.
3.875% USD Notes due 2028
The 3.875% USD Notes due 2028 are governed by an indenture which provides, among other things, for customary affirmative and negative covenants, events of default and other customary provisions. Pursuant to the indenture, the Company has the option to redeem the 3.875% USD Notes due 2028 prior to their maturity, subject to, in certain cases, the payment of an applicable make-whole premium. The 3.875% USD Notes due 2028 are fully and unconditionally guaranteed on a senior unsecured basis by generally all of the Company’s domestic subsidiaries that guarantee the obligations of the borrowers under the Credit Agreement.
Lines of Credit and Other Debt Facilities
The Company has access to various revolving lines of credit, short-term debt facilities and overdraft facilities worldwide which are used to fund short-term cash needs. There were no amounts outstanding under such facilities at September 30, 2021 or December 31, 2020. The Company had letters of credit outstanding of $5.9 million and $6.2 million at September 30, 2021 and December 31, 2020, respectively, of which $5.5 million at September 30, 2021 and December 31, 2020, respectively, reduced the borrowings available under the various facilities. At September 30, 2021 and December 31, 2020, the availability under these facilities totaled approximately $352 million and $349 million, respectively, net of outstanding letters of credit.