Quarterly report pursuant to Section 13 or 15(d)

Financing Agreements

v3.22.2
Financing Agreements
9 Months Ended
Jun. 30, 2022
Debt Disclosure [Abstract]  
Financing Agreements Financing Agreements
The following table summarizes Hillenbrand’s current and long-term debt as of:
June 30,
2022
September 30,
2021
$400 senior unsecured notes (1)
$ 396.7  $ 395.8 
$375 senior unsecured notes, net of discount (2)
372.0  371.5 
$350 senior unsecured notes (3)
346.1  345.8 
$100 Series A Notes (4)
99.8  99.8 
$1,000 revolving credit facility (excluding outstanding letters of credit) —  — 
Total debt 1,214.6  1,212.9 
Less: current portion —  — 
Total long-term debt $ 1,214.6  $ 1,212.9 
(1)Includes unamortized debt issuance costs of $3.3 and $4.2 at June 30, 2022 and September 30, 2021, respectively.
(2)Includes unamortized debt issuance costs of $2.6 and $3.1 at June 30, 2022 and September 30, 2021, respectively.
(3)Includes unamortized debt issuance costs of $3.9 and $4.2 at June 30, 2022 and September 30, 2021, respectively.
(4)Includes unamortized debt issuance costs of $0.2 and $0.2 at June 30, 2022 and September 30, 2021, respectively.

On June 8, 2022, the Company entered into a Fourth Amended and Restated Credit Agreement (the “Credit Agreement”), which governs our multi-currency revolving credit facility (the “Facility”), by and among Hillenbrand and certain of its affiliates, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent. The Credit Agreement amends and restates the Company’s former credit agreement which provided for a maximum principal amount available for borrowing under the Facility of up to $900 and a term loan in an original principal amount of $500. The Credit Agreement increases the maximum principal amount available for borrowing under the Facility from $900 to $1,000. The Credit Agreement further provides for a delayed-draw term loan facility in an aggregate principal amount of up to $200. The term loan commitments will be subject to ticking fees if not drawn within 60 days of closing, and the term loan commitments will expire 180 days after closing. The term loans, if drawn, will be subject to quarterly amortization payments equal to 1.25% of the funded term loans for the first twelve calendar quarters following the funding date, and quarterly amortization payments equal to 1.875% of the funded term loans thereafter until the maturity date. The aggregate principal amount available for borrowing under the Credit Agreement may be expanded, subject to the approval of the lenders, by an additional $600. The Credit Agreement extends the maturity date of the Facility to June 8, 2027.

The Credit Agreement fully transitions interest rate benchmarks from LIBOR-based interest rates to SOFR-based interest rates for U.S. dollar borrowings. Borrowings under the Credit Agreement may bear interest (A) if denominated in US Dollars, at the Term SOFR Rate or the Alternate Base Rate (each 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, margin based on the Company’s leverage ratio, ranging from 0.00% to 0.525% for borrowings bearing interest at the Alternate Base Rate and from 0.90% to 1.525% for all other borrowings. The delayed-draw term loan facility will, once borrowed, accrue interest, at the Company’s option, at the Term SOFR Rate or the Alternate Base Rate plus a margin based on the Company’s leverage ratio, ranging from 1.00% to 1.75% for term loans bearing interest at the Term SOFR Rate and 0.00% to 0.75% for term loans bearing interest at the Alternate Base Rate. New deferred financing costs related to the Credit Agreement were $3.0, which along with existing costs of $1.9, are being amortized to interest expense over the term of the Facility.

There were no outstanding balances as of June 30, 2022 or September 30, 2021 under the Facility, other than $15.4 in outstanding letters of credit issued under the Facility. Under the Credit Agreement, the Company had $1,184.6 of available borrowing capacity as of June 30, 2022, of which $933.3 was immediately available based on our most restrictive covenant. There were no borrowings under the Facility during the three and nine months ended June 30, 2022 and the three months ended June 30, 2021. The weighted average interest rate on borrowing under the Facility was 2.28% for the nine months ended June 30, 2021. The weighted average facility fee was 0.15% for the three and nine months ended June 30, 2022, and 0.17% and 0.24% for the three and nine months ended June 30, 2021, respectively.

On June 9, 2022, Hillenbrand and certain of its domestic subsidiaries entered into the eighth amendment to the private shelf agreement (as amended, the “Shelf Agreement”), which amends the private shelf agreement dated December 6, 2012, among Hillenbrand, the subsidiary guarantors, PGIM, Inc. (f/k/a Prudential Investment Management, Inc.) and each Prudential Affiliate (as defined therein), pursuant to which the Company issued $100, 4.60% Series A unsecured notes maturing December
15, 2024 (the “Series A Notes”). The amendment conforms certain terms of the Shelf Agreement with those contained in the Credit Agreement.

On June 21, 2022, Hillenbrand and certain of its subsidiaries entered into a Syndicated L/G Facility Agreement (the “L/G Facility Agreement”) with Commerzbank Aktiengesellschaft, as coordinator, mandated lead arranger, and bookrunner, the other financial institutions party thereto as lenders and issuing banks, and Commerzbank Finance & Covered Bond S.A., as agent. The L/G Facility Agreement replaced the Company’s Syndicated L/G Facility Agreement dated March 8, 2018, as amended (the “Prior L/G Facility Agreement”), and permits Hillenbrand and certain of its subsidiaries (collectively, the “Participants”) to request that one or more of the lenders issue, on the Participants’ behalf, up to an aggregate of €225, in unsecured letters of credit, bank guarantees, or other surety bonds (collectively, the “Guarantees”), an increase from €175 under the Prior L/G Facility Agreement. New deferred financing costs related to the L/G Facility Agreement were $1.0, which along with existing costs of $0.2, are being amortized to interest expense over the term of the L/G Facility Agreement.

Letters of credit, guarantees and surety bonds such as the Guarantees are routinely required by customers of the Company’s industrial businesses. The Guarantees may be issued in euros or certain other agreed-upon currencies. Specified sublimits apply, based on the specific lender and currency. The Guarantees carry an annual fee that varies based on the Company’s leverage ratio. The L/G Facility Agreement also provides for a leverage-based commitment fee assessed on the undrawn portion of the facility. The L/G Facility Agreement matures on the earlier of (i) June 21, 2027 and (ii) the date of the termination of the Credit Agreement (as such agreement may be from time to time extended or refinanced). The L/G Facility Agreement contains representations, warranties and covenants that are customary for agreements of this type and also contains specified customary events of default. The Participants’ obligations under the L/G Facility Agreement are guaranteed by Hillenbrand and certain of its domestic subsidiaries named therein.

Other credit arrangements

In the normal course of business, certain operating companies within the Advanced Process Solutions and Molding Technology Solutions reportable operating 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 June 30, 2022 and September 30, 2021, the Company had credit arrangements totaling $387.7 and $411.5, respectively, under which $229.4 and $254.0, respectively, were used for guarantees. These arrangements include the Company’s L/G Facility Agreement and other ancillary credit facilities.

Covenants related to current financing agreements

The Credit Agreement, L/G Facility Agreement and Shelf Agreement contain the following financial covenants: a maximum leverage ratio (as defined in the agreements) of 3.50 to 1.00 and a minimum ratio of earnings before interest, income tax, depreciation, and amortization (“EBITDA”) (as defined in the agreements) to interest expense of 3.00 to 1.00. The Company may elect to increase the maximum permitted leverage ratio to 4.00 to 1.00 following certain acquisitions for four full fiscal quarters (plus the fiscal quarter in which the acquisition takes place). The Credit Agreement, L/G Facility Agreement, and the Shelf Agreement contain substantially the same customary affirmative and negative covenants, representations, warranties and events of default as those in their predecessor agreements. The obligations under the Credit Agreement, L/G Facility Agreement and the Shelf Agreement are unsecured.

All obligations of the Company arising under the Credit Agreement, the L/G Facility Agreement, the $100 of Series A unsecured notes, the $400 of senior unsecured notes due June 2025 (the “2020 Notes”), the $375 of senior unsecured notes due September 2026 (the “2019 Notes”), and the $350 of senior unsecured notes due March 2031 (the “2021 Notes”), are fully and unconditionally, jointly and severally, guaranteed by certain of the Company’s domestic subsidiaries.

As of June 30, 2022, Hillenbrand was in compliance with all covenants and there were no events of default.