Debt

9 Months Ended

Sep. 30, 2015

Debt Disclosure [Abstract]

Debt

4. Debt

On September 30, 2011, HWC Wire & Cable Company, as borrower, entered into the Third Amended and Restated Loan and Security Agreement (“2011 Loan Agreement”), with certain lenders and Bank of America, N.A., as agent, and the Company, as guarantor, executed a Second Amended and Restated Guaranty of the borrower’s obligations thereunder. Until it was replaced by a new loan agreement on October 1, 2015 (see Note 8), the 2011 Loan Agreement provided for a $100 million revolving credit facility, bore interest at the agent’s base rate, with a London Interbank Offered Rate (“LIBOR”) option and expired on September 30, 2016. The 2011 Loan Agreement was secured by a lien on substantially all the property of the Company, other than real estate. Availability under the 2011 Loan Agreement was limited to a borrowing base equal to 85% of the value of eligible accounts receivable, plus 65% of the value of eligible inventory, less certain reserves.

Portions of the loan were convertible to LIBOR loans in minimum amounts of $1,000 and integral multiples of $100. LIBOR loans bore interest at the British Bankers Association LIBOR Rate plus 125 to 200 basis points based on availability, and loans not converted to LIBOR loans bore interest at a fluctuating rate equal to the greatest of the agent’s prime rate, the federal funds rate plus 50 basis points, or 30-day LIBOR plus 150 basis points. Unused commitment fees were 25 or 30 basis points, depending on the amount of the unused commitment. 

The 2011 Loan Agreement included, among other things, covenants that required the Company to maintain a specified minimum fixed charge coverage ratio and availability levels. Additionally, the 2011 Loan Agreement allowed for the unlimited payment of dividends and repurchases of stock, subject to the absence of events of default and maintenance of a fixed charge coverage ratio and minimum level of availability. The 2011 Loan Agreement contained certain provisions that might have caused the debt to be classified as a current liability, in accordance with GAAP, if availability falls below certain thresholds, even though the ultimate maturity date under the Loan Agreement remained as September 30, 2016. Availability remained above these thresholds. On November 3, 2014, the Company entered into a Second Amendment to the 2011 Loan Agreement, which added an availability-based covenant as an alternative to the existing fixed charge coverage ratio. At September 30, 2015, the Company was in compliance with the availability-based covenants governing its indebtedness. 

The carrying amount of long term debt approximates fair value as it bears interest at variable rates. The fair value is a Level 2 measurement as defined in ASC Topic 820, “Fair Value Measurement.”