Annual report pursuant to Section 13 and 15(d)

Financing Agreements

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Financing Agreements
12 Months Ended
Sep. 30, 2014
Financing Agreements  
Financing Agreements

4.Financing Agreements

 

 

 

September 30,

 

 

 

2014

 

2013

 

$700 revolving credit facility (excluded outstanding letters of credit)

 

$

229.6 

 

$

325.5 

 

$200 term loan

 

180.0 

 

190.0 

 

$150 senior unsecured notes, net of discount

 

148.9 

 

148.8 

 

Total debt

 

558.5 

 

664.3 

 

Less: current portion

 

15.0 

 

10.0 

 

Total long-term debt

 

$

543.5 

 

$

654.3 

 

 

The following table summarizes the scheduled maturities of long-term debt for 2015 through 2019:

 

 

 

Amount

 

2015

 

$

15.0 

 

2016

 

20.0 

 

2017

 

374.6 

 

2018

 

 

2019

 

 

 

The Company has a senior unsecured credit facility (the “Facility”) which matures in July 2017.  The Facility provides for revolving loans of up to $700.0, plus a term loan in the amount of $200.0.  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 amounts due under the Facility mature upon expiration.  The term loan will amortize so that 35% 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.  Deferred financing costs of $3.8 are being amortized to interest expense over the term of the Facility.  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.

 

With respect to the Facility, as of September 30, 2014, we had $14.5 in outstanding letters of credit issued and $455.9 of maximum borrowing capacity.  $380.6 of borrowing capacity is immediately available based on our leverage covenant at September 30, 2014, with additional amounts available in the event of a qualifying acquisition.  The weighted-average interest rates on borrowings under the Facility were 1.33% and 1.37% for 2014 and 2013.  The weighted-average interest rate on the term loan was 1.61% for 2014.

 

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, 2014, we had credit arrangements totaling $246.1, under which $188.1 was utilized for this purpose.  These arrangements included a €150.0 Syndicated Letter of Guarantee Facility (“LG Facility”) entered into in June 2013, under which unsecured letters of credit, bank guarantees, or other surety bonds may be issued.  The LG Facility matures in June 2018, or earlier, should we elect to discontinue or fail to replace our primary credit facility, which expires in July 2017.  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 0.35% of the applicable guarantee rate (1.00% at September 30, 2014).  Deferred financing costs of $1.9 are being amortized to interest expense over the term of the LG Facility.  There were no direct borrowings associated with the LG Facility.

 

The availability of borrowings under the Facility 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, 2014, we were in compliance with all covenants.

 

We had restricted cash of $0.4 and $1.3 at September 30, 2014 and 2013.

 

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,” each holder of the Notes has the right to require us to purchase all or a portion of their Notes at a purchase price equal to 101% of the principal amount plus accrued and unpaid interest.  The Notes are redeemable with prior notice.