Debt

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Debt

Debt

Long-term debt consisted of the following:

	September 30, 2022		December 31, 2021
	(In thousands)
Term loan	$	449,223	$	782,435
Euro senior notes	—		395,552
2026 notes	—		297,906
TEU amortizing notes	—		6,501
Revolving credit facilities and other	—		603,932
Total debt	449,223		2,086,326
Less: current portion	(449,223)		(7,701)
Long-term debt	$	—	$	2,078,625

Debt Redemptions

In conjunction with the Separation which occurred on April 4, 2022, the Company repaid all obligations under its previous credit agreement and entered into a new credit agreement (the “Enovis Credit Agreement”) with certain of its existing bank lenders. Additionally, on April 7, 2022 after the completion of the Separation, the Company completed the redemptions of its 3.25% Euro Senior Notes due 2025 and its 6.375% Senior Notes due 2026. As a result of these changes, the Company recorded Debt extinguishment charges of $20.1 million in the second quarter of 2022, comprised of $12.7 million in redemption premiums and $7.4 million in noncash write-offs of original issue discount and deferred financing fees.

Enovis Term Loan and Revolving Credit Facility

The new Enovis Credit Agreement became effective on April 4, 2022 and consists of a $900 million revolving credit facility (the “Revolver”) with an April 4, 2027 maturity date and a term loan with an initial aggregate principal amount of $450 million and an April 4, 2023 maturity date (the “Enovis Term Loan”). The Revolver contains a $50 million swing line loan sub-facility. Certain U.S. subsidiaries of the Company guarantee the obligations under the Credit Facility.

The Enovis Credit Agreement contains customary covenants limiting the ability of the Company and its subsidiaries to, among other things, incur debt or liens, merge or consolidate with others, dispose of assets, make investments or pay dividends. In addition, the Enovis Credit Agreement contains financial covenants requiring the Company to maintain (i) a maximum total leverage ratio of not more than 4.50:1.00, with a step-down to, on the date on which the Company and its subsidiaries have transferred any retained shares of ESAB common stock to one or more unaffiliated third parties, 4.00:1.00, commencing with the fiscal quarter ending June 30, 2023, 3.75:1.00 and commencing with the fiscal quarter ending June 30, 2024, 3.50:1.00, and (ii) a minimum interest coverage ratio of 3.00:1:00. The Enovis Credit Agreement contains various events of default (including failure to comply with the covenants under the Enovis Credit Agreement and related agreements) and upon an event of default the lenders may, subject to various customary cure rights, require the immediate payment of all amounts outstanding under the Enovis Term Loan and the Enovis Revolver. As of September 30, 2022, the Company was in compliance with the covenants under the Enovis Credit Agreement.

As of September 30, 2022, the weighted-average interest rate of borrowings under the Enovis Credit Agreement was 3.98%, excluding accretion of original issue discount and deferred financing fees, and there was $900 million available on the Revolver.

Euro Senior Notes

The Company had senior unsecured notes with an aggregate principal amount of €350 million due in May 2025, with an interest rate of 3.25%. The Euro Senior Notes were redeemed on April 7, 2022 at a 100.813% redemption premium after the completion of the Separation.

TEU Amortizing Notes

The Company previously had 6.50% TEU amortizing notes at an initial principal amount of $15.6099 per note with equal quarterly cash installments of $1.4375 per note representing a payment of interest and partial payment of principal. The Company paid $6.5 million and $18.6 million of principal on the TEU amortizing notes in the nine months ended September 30, 2022 and October 1, 2021, respectively. The final installment payment was made on January 15, 2022.

2026 Notes

The Company had senior notes with a remaining principal amount of $300 million, which were due on February 15, 2026 and had an interest rate of 6.375%. The 2026 Notes were redeemed on April 7, 2022 at a 103.188% redemption premium after the completion of the Separation.

Other Indebtedness

In addition to the debt agreements discussed above, the Company is party to overdraft facilities with a borrowing capacity of $30.0 million.

The Company is party to a letter of credit facility with a capacity of $15.0 million. Total letters of credit of $6.6 million were outstanding as of September 30, 2022.

Deferred Financing Fees

In total, the Company had deferred financing fees of $5.6 million included in its Condensed Consolidated Balance Sheet as of September 30, 2022, which will be charged to Interest expense, net, primarily using the effective interest method, over the life of the applicable debt agreements. In conjunction with the Separation-related debt redemptions and extinguishment of its prior credit facility in the second quarter of 2022, the Company recorded $7.4 million of noncash write-offs of original issue discounts and deferred financing fees. Additionally, the Company deferred $2.9 million of financing costs in the second quarter of 2022 in connection with the new Enovis Credit Facility.