SPX FLOW, Inc. - 10-Q filing on 2016-11-02

INDEBTEDNESS

9 Months Ended

Oct. 01, 2016

Debt at October 1, 2016 and December 31, 2015 comprised the following:



	October 1, 2016			December 31, 2015
Domestic revolving loan facility	$	73.0		$	—
Term loan⁽¹⁾	395.0			400.0
5.625% senior notes, due in August 2024	300.0			—
5.875% senior notes, due in August 2026	300.0			—
6.875% senior notes⁽²⁾	—			600.0
Trade receivables financing arrangement	26.2			—
Other indebtedness⁽³⁾	32.9			37.3
Less: deferred financing fees⁽⁴⁾	(12.8		)	(5.2		)
Total debt	1,114.3			1,032.1
Less: short-term debt	116.2			28.0
Less: current maturities of long-term debt	20.3			10.3
Total long-term debt	$	977.8		$	993.8


(1)	The term loan, which had an initial principal balance of $400.0, is repayable in quarterly installments of 5.0% annually which began with our third quarter of 2016, with the remaining balance repayable in full on September 24, 2020.

(2)

On August 10, 2016, we completed the redemption of all of our 6.875% senior notes due in August 2017 for a total redemption price of $636.4. As a result of the redemption, we recorded a charge of $38.9 to "Loss on early extinguishment of debt" during the third quarter of 2016, which related to premiums paid to redeem the senior notes of $36.4, the write-off of unamortized deferred financing fees of $1.9, and other costs associated with the extinguishment of the senior notes of $0.6.

(3)

Primarily includes capital lease obligations of $15.9 and $9.3 and balances under a purchase card program of $16.6 and $23.6 as of October 1, 2016 and December 31, 2015, respectively. The purchase card program allows for payment beyond customary payment terms for goods and services acquired under the program. As this arrangement extends the payment of these purchases beyond their normal payment terms through third-party lending institutions, we have classified these amounts as short-term debt.


(4)	Deferred financing fees were comprised of fees related to the term loan and senior notes.

A detailed description of our senior credit facilities is included in our consolidated and combined financial statements included in our 2015 Annual Report on Form 10-K. Our senior notes are discussed further below.

The weighted-average interest rate of outstanding borrowings under our senior credit facilities was approximately 2.6% at October 1, 2016.

At October 1, 2016, we had $367.5 of available borrowing capacity under our revolving credit facilities after giving effect to borrowings of $73.0 under the domestic revolving loan facility and $9.5 reserved for outstanding letters of credit. At October 1, 2016, we had no available borrowing capacity under our trade receivables financing arrangement after giving effect to borrowings of $26.2. Our trade receivables financing arrangement provides for a total commitment of $50.0 from associated lenders, depending upon our trade receivables balance and other factors. In addition, at October 1, 2016, we had $245.6 of available issuance capacity under our foreign credit instrument facilities after giving effect to $254.4 reserved for outstanding letters of credit.

At October 1, 2016, in addition to the revolving lines of credit described above, we had approximately $5.4 of letters of credit outstanding under separate arrangements in China and India.

At October 1, 2016, we were in compliance with all covenants of our senior credit facilities and our senior notes.

Amendment of Senior Credit Facilities

On July 11, 2016, the Company and certain of its subsidiaries entered into an amendment (the “First Amendment”) to the Company’s existing senior credit facilities, dated as of September 1, 2015 (the “Existing Senior Credit Facilities” and, as amended by the First Amendment, the “Senior Credit Facilities”), by and among the Company, the foreign subsidiary borrowers party thereto, the lenders party thereto, Deutsche Bank AG Deutschlandgeschäft Branch, as foreign trade facility agent, and Bank of America, N.A., as administrative agent (the “Administrative Agent”). The First Amendment amended the Existing Senior Credit Facilities to, among other things:


•	increase the maximum consolidated leverage ratio that must be maintained by the Company from 3.25:1.00 (or 3.50:1.00 for the four fiscal quarters after certain permitted acquisitions) to 4.00:1.00;

•

require that the Company and the domestic subsidiary guarantors grant to the Administrative Agent valid and perfected first priority security interests in substantially all personal property assets of the Company and the domestic subsidiary guarantors (subject to certain exceptions) and valid first priority mortgages on all domestic real property owned by the Company and the domestic subsidiary guarantors having a fair market value in excess of $10.0; and


•	include an additional pricing tier of per annum fees charged and amend the interest rate margins applicable to Eurodollar and alternate base rate loans.

The Senior Credit Facilities continue to provide that, if the Company’s corporate credit rating is “Baa3” or better by Moody’s or “BBB-” or better by S&P and no defaults would exist, then all collateral security will be released and the obligations under the Senior Credit Facilities will be unsecured.

New Senior Notes

On August 10, 2016, the Company completed its issuance of $600.0 in aggregate principal amount of senior unsecured notes comprised of one tranche of $300.0 aggregate principal amount of 5.625% senior notes due in August 2024 (the “2024 Notes”) and one tranche of $300.0 aggregate principal amount of 5.875% senior notes due in August 2026 (the “2026 Notes” and, together with the 2024 Notes, the “Notes”). The proceeds of the Notes, together with borrowings under our domestic revolving loan facility, were used to complete the tender offer and repurchase/redemption of the $600.0 outstanding principal amount of our 6.875% senior notes due in August 2017, including $36.4 of premiums paid. The Notes were issued pursuant to indentures, each dated August 10, 2016, among the Company, the subsidiary guarantors named therein and U.S. Bank National Association, as trustee (the “Indentures”). The interest payment dates for the Notes are February 15 and August 15 of each year, with interest payable in arrears. The Notes were offered in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, and to certain non-U.S. persons in transactions outside of the United States in reliance on Regulation S under the Securities Act.

The Notes are redeemable, in whole or in part, at any time prior to maturity at a price equal to 100% of the principal amount thereof plus an applicable premium, plus accrued and unpaid interest. If we experience certain types of change of control transactions, we must offer to repurchase the Notes at 101% of the aggregate principal amount of the Notes repurchased, plus accrued and unpaid interest.

The Notes are unsecured and rank equally with all our existing and future unsubordinated unsecured senior indebtedness, and are effectively junior to our senior credit facilities and trade receivables financing arrangement. The Notes are guaranteed by all of our existing and future domestic subsidiaries that guarantee our senior credit facilities, subject to certain exceptions. The likelihood of our domestic subsidiaries having to make payments under the guarantee is considered remote.

Each of the Indentures contains covenants that limit the Company’s (and its subsidiaries’) ability to, among other things: (i) grant liens on its assets; (ii) enter into sale and leaseback transactions; and (iii) consummate mergers or transfer certain of its assets.