Debt

6 Months Ended

Jun. 30, 2011

Debt

Debt

Note 6.  Debt

Long-term debt consisted of the following:

	June 30, 2011		December 31, 2010
Senior Notes (7.375% fixed rate) due November 2014	$	158.0	$	223.0
Revolving bank credit facility (variable rates) due November 2015	19.4		—
Neenah Germany project financing (3.8% fixed rate) due in 16 equal semi-annual installments ending December 2016	9.9		10.0
Neenah Germany revolving lines of credit (variable rates)	18.9		11.9
Total debt	206.2		244.9
Less: Debt payable within one year	20.7		13.6
Long-term debt	$	185.5	$	231.3

Senior Unsecured Notes

On November 30, 2004, the Company completed an underwritten offering of ten-year senior unsecured notes (the “Senior Notes”) at an aggregate face amount of $225 million. Interest on the Senior Notes is payable May 15 and November 15 of each year. The Senior Notes are fully and unconditionally guaranteed by substantially all of the Company’s subsidiaries, with the exception of our non-Canadian international subsidiaries.

On March 10, 2011, the Company completed an early redemption of $65 million in aggregate principal amount of the Senior Notes (the “Early Redemption”).  As of the Early Redemption date, the call premium on the Senior Notes was 2.458 percent.  The Early Redemption was financed with approximately $34 million of cash on hand, with the remainder provided by borrowings under the Company’s revolving credit facility.  For the six months ended June 30, 2011, the Company recognized a pre-tax loss of approximately $2.4 million in connection with the Early Redemption, including the write-off of related unamortized debt issuance costs.  As of June 30, 2011, $158 million in Senior Notes are outstanding.

Amended and Restated Secured Revolving Credit Facility

On March 31, 2011, the Company entered into the first amendment to its amended and restated credit agreement, dated as of November 5, 2009 (as amended, the “Credit Agreement”).  As of June 30, 2011, the Credit Agreement consists of a $95 million senior, secured revolving credit facility (the “Revolver”).  The Company’s ability to borrow under the Revolver is limited to the lowest of (a) $95 million; (b) the Company’s borrowing base (as determined in accordance with the Credit Agreement) and (c) the applicable cap on the amount of “credit facilities” under the indenture for the Senior Notes.  In addition, under certain conditions, the Company has the ability to increase the size of the Revolver to $150 million. The total commitment under the Credit Agreement cannot exceed $150 million. The Credit Agreement will terminate on November 30, 2015 or on August 31, 2014 if the Senior Notes have not been repurchased, defeased, refinanced or extended as of such date. The Credit Agreement is secured by substantially all of the assets of the Company and the subsidiary borrowers. 

The Revolver bears interest at either (1) a prime rate-based index plus a percentage ranging from 0.75% to 1.00%, or (2) LIBOR plus a percentage ranging from 2.25% to 2.50%, depending upon the amount of availability under the Revolver.  The Company is also required to pay a monthly facility fee on the unused amount of the Revolver commitment at a per annum rate ranging between 0.375% and 0.50%, depending upon usage under the Revolver.

As of June 30, 2011, the weighted-average interest rate on outstanding Revolver borrowings was 3.0 percent per annum. Interest on amounts borrowed under the Revolver is paid monthly. Amounts outstanding under the Revolver may be repaid, in whole or in part, at any time without premium or penalty except for specified make-whole payments on LIBOR-based loans.  All principal amounts outstanding under the Revolver are due and payable on the date of termination of the Credit Agreement. Borrowing availability under the Revolver varies over time depending on the value of the Company’s inventory, receivables and various capital assets.  Borrowing availability under the Revolver is reduced by outstanding letters of credit and reserves for certain other items as defined in the Credit Agreement. As of June 30, 2011, the Company had $19.4 million of Revolver borrowings outstanding, approximately $0.8 million of outstanding letters of credit and other items, and $65.7 million of available credit under the Revolver.

The Credit Agreement contains events of default customary for financings of this type, including failure to pay principal or interest, materially false representations or warranties, failure to observe covenants and other terms of the Credit Agreement, cross-defaults to certain other indebtedness, bankruptcy, insolvency, various ERISA violations, the incurrence of material judgments and changes in control.

The Credit Agreement contains covenants with which the Company must comply during the term of the agreement.  Among other things, such covenants restrict the Company’s ability to incur certain additional debt, make specified restricted payments, authorize or issue capital stock, enter into transactions with affiliates, consolidate or merge with or acquire another business, sell certain of its assets, or dissolve or wind up.  In addition, if borrowing availability under the Restated Credit Agreement is less than $20 million, the Company would be required to achieve a fixed charge coverage ratio (as defined in the Restated Credit Agreement) of not less than 1.1 to 1.0 for the preceding 12-month period, tested as of the end of such quarter.  As of June 30, 2011, borrowing availability under the Restated Credit Agreement was $65.7 million and the Company was not required to comply with the fixed charge coverage ratio.

The Company’s ability to pay cash dividends on its common stock is limited under the terms of both the Credit Agreement and the Senior Notes. At June 30, 2011, under the most restrictive terms of these agreements, the Company’s ability to pay cash dividends on its common stock is limited to a total of $8 million in a 12-month period.

Other Debt

In December 2006, Neenah Germany entered into a 10-year agreement with HypoVereinsbank and IKB Deutsche Industriebank AG to provide €10.0 million of project financing for the construction of a saturator (the “German Loan Agreement”). As of June 30, 2011, €6.9 million ($9.9 million, based on exchange rates at June 30, 2011) was outstanding under the German Loan Agreement.

Neenah Germany has a revolving line of credit with HypoVereinsbank (the “HypoVereinsbank Line of Credit”) that provides for borrowings of up to €15 million for general corporate purposes. The German Line of Credit is secured by the domestic accounts receivable of Neenah Germany. As of June 30, 2011 and December 31, 2010, the weighted-average interest rate on outstanding HypoVereinsbank Line of Credit borrowings was 4.3 percent per annum and 3.8 percent per annum, respectively. As of June 30, 2011, €10.4 million ($15.0 million, based on exchange rates at June 30, 2011) was outstanding under the Line of Credit and €4.6 million ($6.6 million, based on exchanges rates at June 30, 2011) of credit was available.

In January 2011, Neenah Germany entered into an agreement with Commerzbank AG (“Commerzbank”) to provide up to €3.0 million of unsecured revolving credit borrowings for general corporate purposes (the “Commerzbank Line of Credit”).  The Commerzbank Line of Credit may be terminated by either the Company or Commerzbank upon giving proper notice.  Commerzbank Line of Credit borrowings are denominated in Euros.  As of June 30, 2011, the weighted average interest rate on Commerzbank Line of Credit borrowings is 3.6 percent per annum.  The interest rate on Commerzbank Line of Credit borrowings cannot exceed five percent per annum and is payable monthly.  Principal may be repaid at any time without penalty. As of June 30, 2011, €2.7 million ($3.9 million, based on exchange rates at June 30, 2011) was outstanding under the Line of Credit and €0.3 million ($0.4 million, based on exchanges rates at June 30, 2011) of credit was available.

Neenah Germany’s ability to pay dividends or transfer funds to the Company is limited under the terms of both the HypoVereinsbank and Commerzbank lines of credit, to not exceed certain limits defined in the agreements without lenders approval or repayment of the amount outstanding under the lines, which was €13.1 million ($18.9 million, based on exchange rates at June 30, 2011) at June 30, 2011.  In addition, the terms of the HypoVereinsbank Line of Credit and the Commerzbank Line of Credit require Neenah Germany to maintain a ratio of stockholder’s equity to total assets equal to or greater than 45 percent.  The Company was in compliance with all provisions of the HypoVereinsbank Line of Credit and the Commerzbank Line of Credit as of June 30, 2011.