|12 Months Ended|
Sep. 30, 2017
|Debt Disclosure [Abstract]|
The following table summarizes the scheduled maturities of long-term debt for 2018 through 2022:
On December 19, 2014, the Company entered into a Second Amendment (the “JPM Amendment”) to the Amended and Restated Credit Agreement, dated as of November 19, 2012, which governs our Facility, by and among the Company and certain of its affiliates, the lenders party thereto from time to time, and JPMorgan Chase Bank, N.A., as administrative agent. The JPM Amendment provides for revolving loans of up to $700.0 and a term loan in the amount of $180.0 and extends the maturity date of the Facility to December 19, 2019. The JPM Amendment also amends a financial covenant in the Facility to provide the Company and its subsidiaries greater flexibility to consummate acquisitions. The financial covenant amendment allows for an increase in the Company’s permitted maximum leverage ratio during the three quarters subsequent to an acquisition valued in excess of $75.0. We are allowed this increase up to two times during the term of the Facility (each, a “Leverage Holiday”). New deferred financing costs related to the JPM Amendment were $1.0, which along with existing costs of $2.0, are being amortized to interest expense over the term of the Facility.
Borrowings under the Facility bear interest at variable rates plus a margin amount based upon our leverage. There is also a facility fee based upon our leverage. All revolving amounts due under the Facility mature upon expiration. By its terms, the term loan amortizes such that 38% of the principal will be repaid over approximately a five-year term, with the balance due at maturity. The Company also has the ability, under certain circumstances and with the lenders’ approval, to increase the total borrowing capacity under the Facility by $300.0. These borrowings are classified as long-term, with the exception of the term loan, where payments due within the next 12 months are classified as current. The Facility is an unsubordinated obligation of Hillenbrand and ranks equally in right of payment with all our other existing and future unsubordinated obligations.
With respect to the Facility, as of September 30, 2017, we had $10.8 in outstanding letters of credit issued and $621.2 of maximum borrowing capacity. Of the maximum borrowing capacity, $554.4 is immediately available based on our leverage covenant at September 30, 2017, with additional amounts available in the event of a qualifying acquisition. The weighted-average interest rates on borrowings under the Facility were 1.40% and 1.48% for 2017 and 2016. The weighted average facility fee was 0.23% and 0.21% for 2017 and 2016. The weighted-average interest rate on the term loan was 2.27% and 1.76% for 2017 and 2016. We have interest rate swaps on $50.0 of outstanding borrowings under the Facility in order to manage exposure to our variable rate interest payments. We have cross currency swaps on $55.0 of outstanding borrowings under the revolving credit facility to manage currency and interest rate risk exposure on foreign currency denominated debt. The cross currency swaps are not designated as hedging instruments for accounting purposes.
In July 2010, we issued $150 of senior unsecured notes (“Notes”) due July 2020. The Notes bear interest at a fixed rate of 5.5% per year, payable semi-annually in arrears beginning January 2011. The Notes were issued at a discount of $1.6, resulting in an initial carrying value of $148.4. We are amortizing the discount to interest expense over the term of the Notes using the effective interest rate method, resulting in an annual interest rate of 5.65%. Deferred financing costs associated with the Notes of $2.1 are being amortized to interest expense on a straight-line basis over the term of the Notes. The Notes are unsubordinated obligations of Hillenbrand and rank equally in right of payment with all of our other existing and future unsubordinated obligations.
The indenture governing the Notes does not limit our ability to incur additional indebtedness. It does, however, contain certain covenants that restrict our ability to incur secured debt and to engage in certain sale and leaseback transactions. The indenture provides holders of debt securities with remedies if we fail to perform specific obligations. In the event of a “Change of Control Triggering Event” (as defined in the indenture), each holder of the Notes has the right to require the Company to purchase all or a portion of its Notes at a purchase price equal to 101% of the principal amount plus accrued and unpaid interest. The Notes are redeemable with prior notice at a price equal to par plus accrued interest and a make-whole amount.
On December 15, 2014, we issued $100.0 in 4.60% Series A unsecured notes (“Series A Notes”) pursuant to the Private Shelf Agreement, dated as of December 6, 2012 (as amended, the “Shelf Agreement”), among the Company, Prudential Investment Management, Inc. (“Prudential”) and each Prudential Affiliate (as defined therein) that became a purchaser thereunder. The Series A Notes are unsecured, mature on December 15, 2024, and bear interest at 4.60% payable semi-annually in arrears. The Company may at any time upon providing notice, prepay all or part of the Series A Notes at 100% of the principal amount prepaid plus a Make-Whole Amount (as defined therein). Deferred financing costs of $0.4 related to the Series A Notes are being amortized to interest expense over the term of the Series A Notes.
On December 15, 2014, December 19, 2014, and March 24, 2016, the Company and certain of the Company’s domestic subsidiaries entered into amendments (collectively, the “Prudential Amendments”) to the Shelf Agreement. The Prudential Amendments, among other things, amend a financial covenant contained in the Shelf Agreement to provide for Leverage Holidays similar to those discussed above regarding the Facility, extend the maturity date of the Shelf Agreement to March 24, 2019, and increase the aggregate principal amount available under the private shelf facility from $150 to $200, of which $100.0 has been drawn. The Shelf Agreement is an uncommitted facility, and the issuance of notes under the Shelf Agreement is subject to successful placement by Prudential. If a Leverage Holiday is elected, in addition to the interest accruing on the Series A Notes, the Company must pay to each holder of a Series A Note a fee equivalent to 0.75% per annum during the Leverage Holiday period.
On February 18, 2015, we entered into an Amendment Agreement (the “Amendment Agreement”), amending and restating our €150.0 Syndicated Letter of Guarantee Facility (as amended, “LG Facility”), dated as of June 3, 2013, under which unsecured letters of credit, bank guarantees, or other surety bonds may be issued. The Amendment Agreement extends the maturity date of the LG Facility until at least December 19, 2019, and, among other amendments, amends a financial covenant contained in the LG Facility to provide for Leverage Holidays similar to those discussed above regarding the Facility. The Company has the potential, under certain circumstances and with the lenders’ approval, to increase the total capacity under the LG facility by an additional €70.0. Guarantees provided under the LG Facility are priced at tiered rates based upon our leverage, and charges for unused capacity are assessed at 35% of the applicable guarantee rate (0.90% at September 30, 2017). Deferred financing costs of $1.3 are being amortized to interest expense over the term of the LG Facility. There were no direct borrowings under the LG Facility.
In the normal course of business, the Process Equipment Group provides to certain customers bank guarantees and other credit arrangements in support of performance, warranty, advance payment, and other contractual obligations. This form of trade finance is customary in the industry and, as a result, we are required to maintain adequate capacity to provide the guarantees. As of September 30, 2017, we had credit arrangements totaling $227.9, under which $174.6 was utilized for this purpose. These arrangements included the LG Facility and other ancillary credit facilities.
The availability of borrowings under the Facility, the Shelf Agreement, and the LG Facility is subject to our ability to meet certain conditions including compliance with covenants, absence of default, and continued accuracy of certain representations and warranties. Financial covenants include a maximum ratio of Indebtedness to EBITDA (as defined in the agreements) of 3.5 to 1.0 and a minimum ratio of EBITDA (as defined in the agreements) to interest expense of 3.5 to 1.0. As of September 30, 2017, we were in compliance with all covenants.
The Facility, Notes, Series A Notes, and LG Facility are fully and unconditionally guaranteed by certain of the Company’s domestic subsidiaries.
We had restricted cash of $0.8 included in other current assets in the Consolidated Balance Sheets at September 30, 2017 and 2016.
In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This standard became effective and was retrospectively adopted for our fiscal year beginning October 1, 2016. As of September 30, 2017 and 2016, there were $0.9 and $1.2 in debt issuance costs recorded as a reduction in the carrying value of the related debt liability under the senior unsecured notes and Series A Notes. The $0.9 in debt issuance costs as of September 30, 2017 will be amortized over the remaining terms of the senior unsecured Notes and Series A Notes.
The entire disclosure for long-term debt.
Reference 1: http://www.xbrl.org/2003/role/presentationRef