|9 Months Ended|
Jun. 30, 2021
|Debt Disclosure [Abstract]|
|Financing Agreements||Financing Agreements
The following table summarizes Hillenbrand’s current and long-term debt as of the dates reported in the Consolidated Balance Sheets:
(1)Includes unamortized debt issuance costs of $1.3 at September 30, 2020. This term loan was repaid in March 2021.
(2)Includes unamortized debt issuance costs of $4.4 and $5.2 at June 30, 2021 and September 30, 2020, respectively.
(3)Includes unamortized debt issuance costs of $3.3 and $3.7 at June 30, 2021 and September 30, 2020, respectively.
(4)Includes unamortized debt issuance costs of $4.4 at June 30, 2021.
(5)Includes unamortized debt issuance costs of $0.3 at September 30, 2020. This term loan was repaid in December 2020.
(6)Includes unamortized debt issuance costs of $0.2 and $0.3 at June 30, 2021 and September 30, 2020, respectively.
$350.0 senior unsecured notes
On March 3, 2021, the Company issued $350.0 of senior unsecured notes due March 2031 (the “2021 Notes”). The 2021 Notes were issued at par value and bear interest at a fixed rate of 3.75% per year, payable semi-annually in arrears beginning September 2021. Deferred financing costs associated with the 2021 Notes of $4.5 are being amortized to interest expense on a straight-line basis (which approximates the effective interest method) over the term of the 2021 Notes. The 2021 Notes are unsecured unsubordinated obligations of the Company and rank equally in right of payment with all other existing and future unsubordinated obligations.
Subject to certain limitations, in the event of a change of control repurchase event (as defined in the 2021 Notes), the Company will be required to make an offer to purchase the 2021 Notes at a price equal to 101% of the principal amount of the 2021 Notes, plus any accrued and unpaid interest to, but excluding, the date of repurchase. The Company may redeem the 2021 Notes at any time in whole, or from time to time in part, prior to March 1, 2026, at its option at the “make-whole” redemption price, as described in the Indenture. The Company may also redeem the 2021 Notes at any time in whole, or from time to time in part, on or after March 1 of the relevant year listed, as follows: 2026 at a redemption price of 101.875%; 2027 at a redemption price of 101.250%; 2028 at a redemption price of 100.625%; and 2029 and thereafter at a redemption price of 100.000%. At any time prior to March 1, 2024, the Company may redeem up to 40% of the aggregate principal amount of the 2021 Notes with the proceeds of one or more Equity Offerings (as defined in the Indenture) at a redemption price of 103.750% of the principal amount of the 2021 Notes being redeemed. In each of the above cases, the Company will also pay any accrued and unpaid interest to, but excluding, the applicable redemption date.
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, January 10, 2020, May 29, 2020, February 2, 2021, and June 14, 2021 (as amended, the “Credit Agreement”). During the nine months ended June 30, 2021, the Company repaid the $225.0 and $500.0 term loans in full with a combination of cash on hand and borrowings from its revolving credit facility.
For the nine months ended June 30, 2021, the weighted average interest rate was 2.65% for the $500.0 term loan. For the nine months ended June 30, 2021, the weighted average interest rate was 2.63% for the $225.0 term loan. For the three and nine months ended June 30, 2020, the weighted average interest rates were 2.59% and 3.07%, respectively, for the $500.0 term loan and 2.46% and 2.94%, respectively, for the $225.0 term loan.
In addition to the Term Loan Facilities, Hillenbrand incurred $650.0 of borrowings from its revolving credit facility under the Credit Agreement (the “Revolver”) at the closing of the Milacron acquisition. These borrowings along with the $375.0 of senior unsecured notes issued during the year ended September 30, 2019, were used to pay a portion of the cash consideration in connection with the acquisition of Milacron and 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 no outstanding balance as of June 30, 2021 and September 30, 2020. As of June 30, 2021, the Company had $16.5 in outstanding letters of credit issued and $883.5 of maximum borrowing capacity under the Revolver. All of this borrowing capacity was immediately available based on the Company’s most restrictive covenant at June 30, 2021. The weighted-average interest rate on borrowings under the Revolver was 2.28% for the nine months ended June 30, 2021, and 2.59% and 2.78% for the three and mine month periods in the prior year, respectively. There were no borrowings under the Revolver during the three months ended June 30, 2021. The weighted average facility fee was 0.17% and 0.24% for the three and nine months ended June 30, 2021, respectively, and 0.30% and 0.24% for the same periods in the prior year, respectively.
Other credit arrangements
In the normal course of business, operating companies within the Advanced Process Solutions reportable operating segment 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 June 30, 2021 and September 30, 2020, the Company had credit arrangements totaling $423.3 and $417.2, respectively, under which $260.2 and $261.4, respectively, was used for guarantees. These arrangements include the Company’s Syndicated Letter of Guarantee Facility (as amended, the “L/G Facility Agreement”) and other ancillary credit facilities.
Amendments to current financing agreements
The Company’s June 14, 2021 amendment to the Credit Agreement, among other things, amended certain provisions implemented in May 2020 in response to the COVID-19 pandemic, namely to: (i) decrease the maximum permitted leverage ratio to 3.50 to 1.00 but permit the Company to increase the maximum permitted leverage ratio to 4.00 to 1.00 for 3 consecutive fiscal quarters following certain acquisitions; (ii) decrease the applicable margin (the “Applicable Rate”) paid on revolving loans at certain pricing levels; (iii) remove additional pricing levels previously added to the Applicable Rate under certain circumstances; (iv) decrease the interest rate floor for the Alternate Base Rate (as defined in the Credit Agreement) to 1.00% and for the CDOR Screen Rate and the LIBO Screen Rate (each as defined in the Credit Agreement) to 0.00%; (v) remove the condition to each borrowing under the Revolver that, subject to certain exceptions, the amount of cash or cash equivalents on the Consolidated Balance Sheet not exceed $350.0; and (vi) remove certain restrictions on the Company’s ability to make restricted payments and grant liens on the Company’s assets that would have otherwise been in effect through January 1, 2022.
The amendment also amends the Credit Agreement to include customary benchmark replacement language relating to future unavailability of certain interest rates, including the LIBO Rate (as defined in the Credit Agreement). The amendment also provides that borrowings under the Credit Agreement may bear interest (A) if denominated in US Dollars, at the LIBO Rate or the Alternate Base Rate (as defined in the Credit Agreement) at the Company’s option, (B) if denominated in Japanese Yen, Canadian Dollars or Euros, at rates based on the rates offered for deposits in the applicable interbank markets for such currencies and (C) if denominated in Pounds Sterling or Swiss Francs, at SONIA and SARON, respectively (each as defined in the Credit Agreement), plus, in each case, the Applicable Rate; and includes provisions governing erroneous payments made by the Agent to lenders part to the Credit Agreement.
Covenants related to current financing agreements
The Credit Agreement and the Private Shelf Agreement dated as of December 16, 2012 (as amended, the “Shelf Agreement”) among the Company, Prudential Investment Management, Inc. and each Prudential Affiliate (as defined therein) that became a purchaser thereunder, contain the following financial covenants for the current quarter: a maximum leverage ratio (as defined in the agreements) of 3.50 to 1.00 and a minimum ratio of EBITDA (as defined in the agreements) to interest expense of 3.00 to 1.00. The L/G Facility Agreement contains a maximum leverage ratio of 4.25 to 1.00 for the current quarter and a minimum ratio of EBITDA to interest expense of 3.00 to 1.00 (both as defined in such agreement). 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 $400.0 of senior unsecured notes due June 2025 (the “2020 Notes”), the $375.0 of senior unsecured notes due September 2026 (the “2019 Notes”), and the 2021 Notes, the $100.0 of 4.60% Series A unsecured notes (“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 the 2019 Notes, 2020 Notes, and 2021 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 June 30, 2021, 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