|6 Months Ended|
Mar. 31, 2020
|Debt Disclosure [Abstract]|
The following table summarizes Hillenbrand’s current and long-term debt as of the dates reported in the Consolidated Balance Sheets:
The following table summarizes the scheduled maturities of long-term debt for 2020 through 2024:
Financing for Milacron Acquisition
Upon completing the acquisition of Milacron on November 21, 2019, Hillenbrand incurred borrowings under its two term loans in aggregate principal amounts of $500.0 and $225.0 (the “Term Loan Facilities”), which are provided for under the Company’s Third Amended and Restated Credit Agreement dated August 28, 2019 and subsequently amended on October 8, 2019 and January 10, 2020 (the “Credit Agreement”). The $500.0 term loan matures on the fifth anniversary of the date on which it was borrowed, subject to quarterly amortization payments (equal to 5% of the original principal amount of the term loan in each of years 1 and 2, 7.5% in each of years 3 and 4, and 10% in year 5) and the $225.0 term loan matures on the third anniversary of the date on which it was borrowed, subject to quarterly amortization payments (equal to 5% of the original principal amount of the term loan in each of years 1 and 2, and 7.5% in year 3). The $500.0 term loan accrues interest, at the Company’s option, at the LIBO Rate or the Alternate Base Rate (each as defined in the Credit Agreement) plus a margin based on the Company’s leverage ratio, ranging from 1.00% to 1.875% for term loans bearing interest at the LIBO Rate and 0.0% to 0.875% for term loans bearing interest at the Alternate Base Rate. The $225.0 term loan accrues interest, at the Company’s option, at the LIBO Rate or the Alternate Base Rate plus a margin based on the Company’s leverage ratio, ranging from 0.875% to 1.75% for term loans bearing interest at the LIBO Rate and 0.0% to 0.75% for term loans bearing interest at the Alternate Base Rate. For the three and six months ended March 31, 2020, the weighted average interest rates were 3.36% and 3.40%, respectively, for the $500.0 term loan and 3.23% and 3.27%, respectively, for the $225.0 term loan. Deferred financing costs of $2.0 are being amortized to interest expense over the respective terms of the Term Loan Facilities.
In addition to the Term Loan Facilities, Hillenbrand incurred $650.0 of additional borrowings from its revolving credit facility under the Credit Agreement (the “Revolver”) at the closing of the Milacron acquisition. The additional borrowings under the Term Loan Facilities and the Revolver, in addition to the $375.0 of senior unsecured notes issued during the quarter ended September 30, 2019, were used to pay a portion of the cash consideration in connection with the acquisition of Milacron, fees and expenses related to the acquisition, and to repay certain indebtedness of Milacron and its subsidiaries upon closing the acquisition.
With respect to the Revolver, the Company has made net repayments since the closing date of the acquisition of Milacron, resulting in an outstanding balance of $537.6 as of March 31, 2020. As of March 31, 2020, the Company had $8.3 in outstanding letters of credit issued and $354.1 of maximum borrowing capacity under the Revolver. $159.7 of this borrowing capacity was immediately available based on the Company’s most restrictive covenant at March 31, 2020. The weighted-average interest rates on borrowings under the Revolver were 2.84% and 2.88% for the three and six months ended March 31, 2020, respectively, and 2.73% and 2.57% for the same periods in the prior year, respectively. The weighted average facility fee was 0.25% and 0.21% for the three and six months ended March 31, 2020, respectively, and 0.12% and 0.11% for the same periods in the prior year, respectively.
Other credit arrangements
In the normal course of business, operating companies within the Process Equipment Group and Milacron reportable segments provide 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, the Company maintains adequate capacity to provide the guarantees. As of March 31, 2020, the Company had credit arrangements totaling $379.7, under which $277.0 was used for this purpose. These arrangements include the Company’s Syndicated Letter of Guarantee Facility (as amended, the “L/G Facility Agreement”) and other ancillary credit facilities. On January 10, 2020, the L/G Facility Agreement was amended to expand the size of the existing €150.0 facility by an additional €25.0.
Covenants related to current financing agreements
The Credit Agreement, the L/G Facility Agreement, and the Series A Notes pursuant to the Private Shelf Agreement, dated as of December 6, 2012 (as amended, the “Shelf Agreement”), contain the following financial covenants: a maximum ratio of Indebtedness (as defined in the agreements) to EBITDA (as further defined in the agreements, the “Leverage Ratio”) of 3.5 to 1.0 including the application of cash as a reduction of Indebtedness (subject to certain limitations); a maximum Leverage Ratio resulting from an acquisition in excess of $75.0 of 4.0 to 1.0 for a period of three consecutive quarters following such acquisition; and a minimum ratio of EBITDA (as defined in the agreements) to interest expense of 3.0 to 1.0.
On January 10, 2020, with a retroactive effective date of December 31, 2019, the Company amended the Credit Agreement, the L/G Facility Agreement, and the Shelf Agreement to, among other things, (i) increase the maximum permitted leverage ratio to (A) 4.50 to 1.00 for the quarters ending December 31, 2019 and March 31, 2020, (B) 4.25 to 1.00 for the quarter ending June 30, 2020, (C) 4.00 to 1.00 for the quarter ending September 30, 2020, (D) 3.75 to 1.00 for the quarter ending December 31, 2020, and (E) 3.50 to 1.00 for the quarter ending March 31, 2021 and each quarter ending thereafter and (ii) add additional pricing levels to compensate for the increase in permitted leverage ratios.
As of March 31, 2020, Hillenbrand was in compliance with all covenants under these agreements. Additionally, the Credit Agreement, the L/G Facility Agreement, and the Shelf Agreement provide the Company with the ability to sell assets and to incur debt at its international subsidiaries under certain conditions.
All obligations of the Company arising under the Credit Agreement, the $375.0 and $150.0 senior unsecured notes, the Series A Notes, and the L/G Facility Agreement are fully and unconditionally, and jointly and severally, guaranteed by certain of the Company’s domestic subsidiaries.
The Credit Agreement, the L/G Facility Agreement, and the Shelf Agreement each contain certain other customary covenants, representations and warranties and events of default. The indentures governing both the $375.0 and $150.0 senior unsecured notes do not limit the Company’s ability to incur additional indebtedness. They do, however, contain certain covenants that restrict the Company’s ability to incur secured debt and to engage in certain sale and leaseback transactions. The indentures also contain customary events of default. The indentures provide holders of the senior unsecured notes with remedies if the Company fails to perform specific obligations. As of March 31, 2020, Hillenbrand was in compliance with all covenants and there were no events of default.
The entire disclosure for long-term debt.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef