FLOWSERVE CORP - 10-Q filing on 2015-04-30

Debt

3 Months Ended

Mar. 31, 2015

Debt, including capital lease obligations, consisted of:



	March 31,		December 31,
(Amounts in thousands, except percentages)	2015		2014
1.25% EUR Senior Notes due March 17, 2022, net of unamortized discount	$	532,957	$	—
4.00% USD Senior Notes due November 15, 2023, net of unamortized discount	298,761		298,731
3.50% USD Senior Notes due September 15, 2022, net of unamortized discount	498,503		498,460
Term Loan Facility, interest rate of 1.52% at March 31, 2015 and 1.51% at December 31, 2014	320,000		330,000
Capital lease obligations and other borrowings	29,300		27,731
Debt and capital lease obligations	1,679,521		1,154,922
Less amounts due within one year	58,739		53,131
Total debt due after one year	$	1,620,782	$	1,101,791

Senior Notes

On March 17, 2015, we completed a public offering of €500.0 million of Euro senior notes in aggregate principal amount due March 17, 2022 ("2022 EUR Senior Notes"). The 2022 EUR Senior Notes bear an interest rate of 1.25% per year, payable each year on March 17, commencing on March 17, 2016. The 2022 EUR Senior Notes were priced at 99.336% of par value, reflecting a discount to the aggregate principal amount. The net proceeds of the offering were €494.0 million ($523.4 million based on exchange rates in effect at the time the offering closed). We used a portion of the net proceeds of the 2022 EUR Senior Notes to ultimately fund the acquisition of SIHI described in Note 2 and anticipate utilizing the remaining portion for other general corporate purposes.

Senior Credit Facility

As discussed in Note 10 to our consolidated financial statements included in our 2014 Annual Report, on October 4, 2013 we amended our existing credit agreement that provided for a $400.0 million term loan (“Term Loan Facility”) and a $1.0 billion revolving credit facility (“Revolving Credit Facility” and, together with the Term Loan Facility, the “Senior Credit Facility”) with a maturity date of October 4, 2018. As of March 31, 2015 and December 31, 2014, we had no amounts outstanding under the Revolving Credit Facility. We had outstanding letters of credit of $78.9 million and $76.8 million at March 31, 2015 and December 31, 2014, respectively, which reduced our borrowing capacity to $921.1 million and $923.2 million, respectively. Our compliance with applicable financial covenants under the Senior Credit Facility is tested quarterly, and we complied with all covenants at March 31, 2015.

We may prepay loans under our Senior Credit Facility in whole or in part, without premium or penalty, at any time. A commitment fee, which is payable quarterly on the daily unused portions of the Senior Credit Facility, was 0.175% (per annum) during the period ended March 31, 2015. During the three months ended March 31, 2015, we made scheduled repayments of $10.0 million under our Term Loan Facility. We have scheduled repayments of $10.0 million due in the next two quarters, $15.0 million in the fourth quarter of 2015 and $15.0 million in the first quarter of 2016 on our Senior Credit Facility. Our Senior Credit Facility bears a floating rate of interest, and we have $25.0 million of notional amount of interest rate swaps at March 31, 2015 to hedge exposure to floating interest rates.

Our Senior Notes and Senior Credit Facility were fully and unconditionally and jointly and severally guaranteed by certain of our 100% owned domestic subsidiaries. Pursuant to the terms of the indentures governing the Senior Notes any guarantees on such debt were subject to release if the Company satisfactorily achieved and met the following guaranty release conditions: (a) obtains a ratings of BBB (stable outlook) or better from S&P and Baa2 (stable outlook) or better from Moody’s and (b) our domestic subsidiaries do not guarantee any material indebtedness. On February 27, 2015 Standard & Poor's Ratings Services raised its corporate credit and senior unsecured debt ratings rating on the Company to BBB from BBB-, with a stable outlook. As of March 11, 2015 Moody’s Investors Services' corporate credit and senior unsecured debt ratings rating on the Company was Baa2, with a stable outlook. As a result, the guarantees of the Senior Notes and Senior Credit Facility were released as of March 26, 2015 upon the discharge of the terms of the note indentures and Senior Credit Facility agreement; therefore, the Company is exempt from disclosing supplemental guarantor financial information in accordance with Rule 3-10 of Regulation S-X, promulgated under the Securities Act of 1933.