Long-Term Debt

6 Months Ended

Jun. 30, 2020

Long-term debt consisted of the following (in millions):



	June 30, 2020			December 31, 2019
Borrowings under third amended and restated senior secured revolving credit agreement with third-party lenders, interest payments quarterly, borrowings due February 2023, weighted average interest rates of 2.8% and 4.3% for the six months ended June 30, 2020 and the year ended December 31, 2019, respectively	$	110.3		$	—
Borrowings under 2022 Notes, interest at a fixed rate of 7.625%, interest payments semiannually, borrowings due January 2022, effective interest rate of 8.1% for the six months ended June 30, 2020 and the year ended December 31, 2019, respectively. ⁽¹⁾	350.9			351.1
Borrowings under 2023 Notes, interest at a fixed rate of 7.75%, interest payments semiannually, borrowings due April 2023, effective interest rate of 8.1% for the six months ended June 30, 2020 and the year ended December 31, 2019, respectively.	325.0			325.0
Borrowings under 2025 Notes, interest at a fixed rate of 11.0%, interest payments semiannually, borrowings due April 2025, effective interest rate of 11.3% and 11.2% for the six months ended June 30, 2020 and the year ended December 31, 2019, respectively.	550.0			550.0
Other	3.0			3.8
Finance lease obligations, at various interest rates, interest and monthly principal payments	3.9			2.7
Less unamortized debt issuance costs ⁽²⁾	(16.0		)	(18.4		)
Less unamortized discounts	(2.3		)	(2.9		)
Total debt	$	1,324.8		$	1,211.3
Less current portion of long-term debt	2.1			1.8
Total long-term debt	$	1,322.7		$	1,209.5


⁽¹⁾	The balance includes a fair value interest rate hedge adjustment, which increased the debt balance by $0.9 million and $1.1 million as of June 30, 2020 and December 31, 2019, respectively.


⁽²⁾	Deferred debt issuance costs are being amortized by the effective interest rate method over the lives of the related debt instruments. These amounts are net of accumulated amortization of $18.1 million and $15.7 million at June 30, 2020 and December 31, 2019, respectively.

Senior Notes

In accordance with SEC Rule 3-10 of Regulation S-X, consolidated financial statements of non-guarantors are not required. The Company has no material assets or operations independent of its subsidiaries. Obligations under its 7.625% Senior Notes due 2022 (the “2022 Notes”), 7.75% Senior Notes due 2023 (the “2023 Notes”) and 11.00% Senior Notes due 2025 (the “2025 Notes” and, together with the 2022 Notes and the 2023 Notes, the “Senior Notes”) are fully and unconditionally and jointly and severally guaranteed on a senior unsecured basis by the Company’s current 100%-owned operating subsidiaries and certain of the Company’s future operating subsidiaries, with the exception of the Company’s “minor” subsidiaries (as defined by Rule 3-10 of Regulation S-X), including Calumet Finance Corp. (100%-owned Delaware corporation that was organized for the sole purpose of being a co-issuer of certain of the Company’s indebtedness, including the Senior Notes). There are no significant restrictions on the ability of the Company or subsidiary guarantors for the Company to obtain funds from its subsidiary guarantors by dividend or loan. None of the subsidiary guarantors’ assets represent restricted assets pursuant to SEC Rule 4-08(e)(3) of Regulation S-X.

The Senior Notes are subject to certain automatic customary releases, including the sale, disposition, or transfer of capital stock or substantially all of the assets of a subsidiary guarantor, designation of a subsidiary guarantor as unrestricted in accordance with the applicable indenture, exercise of legal defeasance option or covenant defeasance option, liquidation or dissolution of the subsidiary guarantor and a subsidiary guarantor ceases to both guarantee other Company debt and to be an obligor under the revolving credit facility. The Company’s operating subsidiaries may not sell or otherwise dispose of all or substantially all of their properties or assets to, or consolidate with or merge into, another company if such a sale would cause a default under the indentures governing the Senior Notes.

The indentures governing the Senior Notes contain covenants that, among other things, restrict the Company’s ability and the ability of certain of the Company’s subsidiaries to: (i) sell assets; (ii) pay distributions on, redeem or repurchase the Company’s common units or redeem or repurchase its subordinated debt; (iii) make investments; (iv) incur or guarantee additional indebtedness or issue preferred units; (v) create or incur certain liens; (vi) enter into agreements that restrict distributions or other payments from the Company’s restricted subsidiaries to the Company; (vii) consolidate, merge or transfer all or substantially all of the Company’s assets; (viii) engage in transactions with affiliates; and (ix) create unrestricted subsidiaries. These covenants are subject to important exceptions and qualifications. At any time when the Senior Notes are rated investment grade by either Moody’s Investors Service, Inc. (“Moody’s”) or S&P Global Ratings (“S&P”) and no Default or Event of Default, each as defined in the indentures governing the Senior Notes, has occurred and is continuing, many of these covenants will be suspended. As of June 30, 2020, the Company’s Fixed Charge Coverage Ratio (as defined in the indentures governing the Senior Notes) was 1.9. As of June 30, 2020, the Company was in compliance with all covenants under the indentures governing the Senior Notes.

Paycheck Protection Program Notes

In April 2020, the Company entered into several Paycheck Protection Program Notes (the “Term Notes”) with BMO Harris Bank National Association and Star Financial Bank as the lenders (“Lenders”) in an aggregate principal amount of $31.4 million pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The Company subsequently repaid the Term Notes in full on May 18, 2020.

Third Amended and Restated Senior Secured Revolving Credit Facility

On February 23, 2018, the Company entered into the Third Amended and Restated Credit Agreement (the “Credit Agreement”) governing its senior secured revolving credit facility maturing in February 2023, which provides maximum availability of credit under the revolving credit facility of $600.0 million, subject to borrowing base limitations, and includes a $500.0 million incremental uncommitted expansion feature. The revolving credit facility includes a $25.0 million senior secured first loaned in and last to be repaid out (“FILO”) revolving credit facility limited by a FILO borrowing base calculation. The FILO commitment reduces ratably each quarter starting in November 2019 and ending in August 2020. The reductions in FILO commitments convert to revolving credit facility base commitments over the same period. Lenders under the revolving credit facility have a first priority lien on, among other things, the Company’s accounts receivable and inventory and substantially all of its cash.

On September 4, 2019, the Company entered into the First Amendment to the Credit Agreement (the “First Amendment”). The amendment expanded the borrowing base by $99.6 million effective October 11, 2019, by adding the fixed assets of the Company’s Great Falls, MT refinery as collateral to the borrowing base. The $99.6 million expansion amortizes to zero on a straight-line basis over ten quarters starting in the first quarter of 2020. Additionally, while the fixed assets of the Great Falls, MT

refinery are included in the borrowing base, the First Amendment provides for a 25 basis points increase in the applicable margin for loans, as well as increases in the minimum availability under the revolving credit facility required for the Company to be able to perform certain actions, including to make restricted payments of other distributions, sell or dispose of certain assets, make acquisitions or investments, or prepay other indebtedness.

The revolving credit facility, which is the Company’s primary source of liquidity for cash needs in excess of cash generated from operations, bears interest at a rate equal to prime plus a basis points margin or LIBOR plus a basis points margin, at the Company’s option.

The margin can fluctuate quarterly based on the Company’s average availability for additional borrowings under the revolving credit facility in the preceding calendar quarter as follows:



	Base Loans		FILO Loans
Quarterly Average Availability Percentage	Prime Rate Margin	LIBOR Rate Margin	Prime Rate Margin	LIBOR Rate Margin
≥ 66%	0.50%	1.50%	1.50%	2.50%
≥ 33% and < 66%	0.75%	1.75%	1.75%	2.75%
< 33%	1.00%	2.00%	2.00%	3.00%

The Credit Agreement provides for a 25 basis point reduction in the applicable margin rates beginning in the quarter after our Leverage Ratio (as defined in the Credit Agreement) is less than 5.5 to 1.0. As of June 30, 2020, the interest has been determined based on a margin of 50 basis points for prime rate based revolver loans, 150 basis points for LIBOR based rate revolver loans, 150 basis points for prime rate based FILO loans and 250 basis points for LIBOR based FILO loans. The margin can fluctuate quarterly based on our average availability for additional borrowings under the revolving credit facility in the preceding calendar quarter. Following the October 11, 2019 effective date of the First Amendment, the applicable margin rates are increased by 25 basis points for as long as the Great Falls, MT refinery assets are contributing to the borrowing base. Letters of credit issued under the revolving credit facility accrue fees at a rate equal to the margin (measured in basis points) applicable to LIBOR revolver loans.

In addition to paying interest quarterly on outstanding borrowings under the revolving credit facility, the Company is required to pay a commitment fee to the lenders under the revolving credit facility with respect to the unutilized commitments thereunder at a rate equal to 0.250% or 0.375% per annum depending on the average daily available unused borrowing capacity for the preceding month. The Company also pays a customary letter of credit fee, including a fronting fee of 0.125% per annum of the stated amount of each outstanding letter of credit, and customary agency fees.

The borrowing base under the revolving credit facility at June 30, 2020 was approximately $279.2 million. As of June 30, 2020, the Company had $110.3 million of outstanding borrowings under the revolving credit facility and outstanding standby letters of credit of $25.3 million, leaving approximately $143.6 million available for additional borrowings based on specified availability limitations. Lenders under the revolving credit facility have a first priority lien on the Company’s accounts receivable, inventory and substantially all of its cash.

The revolving credit facility contains various covenants that limit, among other things, the Company’s ability to: incur indebtedness; grant liens; dispose of certain assets; make certain acquisitions and investments; redeem or prepay other debt or make other restricted payments such as distributions to unitholders; enter into transactions with affiliates; and enter into a merger, consolidation or sale of assets. Further, the revolving credit facility contains one springing financial covenant which provides that only if the Company’s availability to borrow loans under the revolving credit facility falls below the sum of the greater of (i) 10% of the borrowing base then in effect, or 15% while the Great Falls, MT refinery is included in the borrowing base, and (ii) $35.0 million (which amount is subject to increase in proportion to revolving commitment increases), plus the amount of FILO loans outstanding, then the Company will be required to maintain as of the end of each fiscal quarter a Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of at least 1.0 to 1.0. As of June 30, 2020, the Company was in compliance with all covenants under the revolving credit facility.

Maturities of Long-Term Debt

As of June 30, 2020, principal payments on debt obligations and future minimum rentals on finance lease obligations are as follows (in millions):



Year	Maturity
2020	$	1.0
2021	2.9
2022	350.6
2023	436.0
2024	0.7
Thereafter	551.0
Total	$	1,342.2