Long-Term Debt

6 Months Ended

Jun. 30, 2011

Long-Term Debt [Abstract]

LONG-TERM DEBT

NOTE 4 — LONG-TERM DEBT

The significant components of our long-term debt are as follows (in thousands):

	June 30,		December 31,
	2011		2010
9.50% senior secured notes due 2016, net of discount	$	1,029,790	$	1,027,938
North American asset based credit facility		343,957		—
Asset based revolving credit facility		—		286,398
Midfield revolving credit facility		—		1,297
Midfield term loan facility		—		14,415
MRC Transmark revolving credit facility		58,832		23,214
MRC Transmark factoring facility		8,040		6,979
MRC SPF facility		19,990		—
Other		1,759		—
		1,462,368		1,360,241
Less current portion		—		—
	$	1,462,368	$	1,360,241

At June 30, 2011, availability under our revolving credit facilities was as follows (in thousands):

			Eligible
			Collateral (up
	Commitment		to Commitment		Amount		Letters of
	Amount		Amount)		Outstanding		Credit		Availability
North American asset-based revolving credit facility	$	1,053,615	$	828,704	$	343,957	$	4,809	$	479,938
MRC Transmark revolving credit facility		98,578		98,578		58,832		19,727		20,019
MRC SPF facility		28,132		20,520		19,990		—		530
	$	1,180,325	$	947,802	$	422,779	$	24,536	$	500,487
							Cash on hand:			39,437
					Liquidity at June 30, 2011:				$	539,924

We were in compliance with the covenants contained in our indenture and each of our credit facilities as of and for the three and six months ended June 30, 2011.

North American ABL Credit Facility: On June 14, 2011, MRC and certain of its North American subsidiaries entered into an asset based revolving credit facility (“North American ABL”). The North American ABL consists of a U.S. tranche which provides for borrowings of up to $900 million, and a Canadian tranche which provides for borrowings of up to CDN $150 million (USD $154 million). Up to $80 million of the U.S. tranche may be used for letters of credit and up to $75 million may be used for swingline loans. Up to CDN $20 million (USD $20 million) of the Canadian tranche may be used for letters of credit and up to CDN $25 million (USD $26 million) may be used for swingline loans. The North American ABL matures on June 14, 2016.

Availability under the U.S. and Canadian tranches is subject to a borrowing base. The borrowing bases for the U.S. and Canadian tranches, which are calculated separately, are each equal to 85% of the book value of eligible accounts receivable; plus the lesser of (i) 70% of the net book value of eligible inventory and (ii) net orderly liquidation value of eligible inventory multiplied by the advance rate of 85%; minus certain reserves.

Obligations under the U.S. tranche are guaranteed by the U.S. Borrowers. Obligations under the Canadian tranche are guaranteed by the U.S. Borrowers and the Canadian Borrowers. Obligations under the U.S. tranche are secured, subject to certain exceptions, by a first-priority security interest in the accounts receivable and inventory of the U.S. Borrowers. Obligations under the Canadian tranche are secured, subject to certain exceptions, by a first-priority security interest in the accounts receivable and inventory of the U.S. Borrowers and the Canadian Borrowers and pledges of indebtedness owing to the Canadian Borrowers and the capital stock of their wholly-owned subsidiaries. The security interest in accounts receivable and inventory of the U.S. Borrowers ranks prior to the security interest in this collateral which secures the Company’s existing senior secured notes due 2016.

Borrowings under the U.S. tranche bear interest at a rate per annum equal to, at our option, either the adjusted LIBOR rate plus an applicable margin or a U.S. base rate plus an applicable margin. Borrowings under the Canadian tranche bear interest at a rate per annum equal to, at our option, either the adjusted Canadian BA Rate plus an applicable margin, a Canadian base rate plus an applicable margin or a Canadian prime rate plus an applicable margin. The applicable margin is initially 2.00% for LIBOR and Canadian BA Rate borrowings and 1.00% for U.S. base rate, Canadian base rate and Canadian prime rate borrowings, in each case subject to a 0.25% step-up or step-down based on a consolidated fixed charge coverage ratio as of the end of the most recent fiscal quarter. The applicable margin for U.S. base rate, Canadian base rate and Canadian prime rate borrowings is 100 basis points lower than the applicable margin for LIBOR and Canadian BA Rate borrowings. In addition to paying interest on outstanding principal under the North American ABL, we are required to pay a commitment fee in respect of unutilized commitments which is equal to 0.375% per annum.

The North American ABL contains customary covenants which require us to maintain a consolidated fixed charge coverage ratio (defined as the ratio of adjusted EBITDA to the sum of cash interest, principal payments on indebtedness, unfinanced capital expenditures and accrued income taxes) of at least 1.0 to 1.0 when excess availability is less than or equal to the greater of 10% of the total commitments under the North American ABL and $75 million.

The North American ABL also contains customary restrictive covenants (in each case, subject to exclusions) that limit the ability of the Borrowers and their restricted subsidiaries to: create any liens; incur any additional indebtedness; engage in consolidations, mergers or sales of assets; dispose of any subsidiary interests; make certain restricted payments; make investments; alter the terms of documents related to certain subordinated indebtedness; enter into transactions with affiliates; and prepay certain subordinated indebtedness. The facility also contains other customary restrictive covenants. The covenants are subject to various baskets and materiality thresholds, with various restrictions on the repayment of subordinated indebtedness, restricted payments and investments not being applicable when the Borrowers’ excess availability exceeds a certain threshold. The restriction on incurring unsecured indebtedness is not applicable when the Borrowers’ and their restricted subsidiaries’ total debt to adjusted EBITDA ratio is less than or equal to 5.5:1.0 and the restriction on incurring secured indebtedness is not applicable when the debt to adjusted EBITDA ratio of the Borrowers and their restricted subsidiaries is less than or equal to 5.0:1.0.

The North American ABL contains certain customary representations and warranties, affirmative covenants and events of default, including, among other things, payment defaults, breach of representations and warranties, covenant defaults, cross-defaults to certain indebtedness, certain events of bankruptcy, certain events under ERISA, judgment defaults, actual or asserted failure of any material guaranty or security document supporting the facility to be in force and effect, and change of control. If such an event of default occurs, the Agent under the facility shall be entitled to take various actions, including the acceleration of amounts due under the facility, the termination of all revolver commitments and all other actions permitted to be taken by a secured creditor.

In connection with the closing of the North American ABL, the existing $900 million asset based revolving credit facility, the CDN $80 million Midfield Revolving Credit Facility, and the CDN $15 million Midfield Term Loan Facility were terminated. Associated deferred financing costs of $9.5 million were written off and expensed concurrent with the termination of these lines.

SPF Credit Facility: In conjunction with our acquisition of MRC SPF on June 9, 2011, MRC SPF entered into a credit facility consisting of Australian Dollar (AUD) sub-facilities which provide for aggregate borrowings of AUD $20.5 million (USD $21.7 million) and one British Pound (GBP) facility which provides for aggregate borrowing of £4.0 million (USD $6.4 million). In addition, the facility provides bank guarantee lines totaling AUD $6.4 million (USD $6.8 million). The facility is secured by substantially all of the assets of MRC SPF and its wholly owned subsidiaries.

This facility contains customary restrictive covenants which require MRC SPF to maintain an interest coverage ratio of 2.5x in 2011, beginning September 30, 2011, and 3.5x thereafter; a tangible net worth of at least AUD $20 million (USD $21 million) in 2011 and AUD $25 million (USD $26 million) thereafter; a current ratio of not less than 1.3x to be measured quarterly beginning September 30, 2011; and a borrowing base ratio of no more than 80% of inventory value less retention of title. Capital expenditure funding, asset transfers and cash flow assistance to non-borrowing MRC SPF entities must be no more than 110% of the approved budget to be measured quarterly. From the date of acquisition no new intercompany loans may be made to members of MRC SPF with certain exceptions and no distribution of dividends may occur for the first six months following the acquisition of MRC SPF.

MRC Transmark Overdraft Facility: On June 30, 2011, MRC Transmark entered into an overdraft facility associated with an existing revolving credit facility. This facility consists of two components, a Collective Sterling Net Overdraft Facility and a Multi Currency Overdraft Facility. These facilities provide for aggregate borrowings of €10.0 million (USD $14 million). The interest rate on the Collective Sterling Net Overdraft Facility is based on the Bank of England Base Rate plus 2.00% per annum and the lending rate on the Multi Currency Overdraft Facility is based on the lending rate of HSBC as established on the HSBC website plus 2.00% per annum. The facility is secured by substantially all of the assets of MRC Transmark and its wholly owned subsidiaries.

Interest on Borrowings: Our weighted-average effective interest rates on borrowings outstanding at June 30, 2011 and December 31, 2010 were as follows:

	June 30,			December 31,
	2011			2010
9.50% senior secured notes due 2016, net of discount		9.88	%		9.88	%
North American ABL		2.93	%		—
Asset-based revolving credit facility		—			3.34	%
Midfield revolving credit facility		—			5.00	%
Midfield term loan facility		—			5.86	%
MRC Transmark revolving credit facility		5.14	%		2.61	%
MRC Transmark factoring facility		1.98	%		1.46	%
MRC SPF facility		8.44	%		—
		7.99	%		8.29	%

Interest Rate Swaps and Forward Foreign Exchange Contracts: We use derivative financial instruments to help manage our exposure to interest rate risk and fluctuations in foreign currencies.

Effective March 31, 2009, we entered into a freestanding $500 million interest rate swap derivative to pay interest at a fixed rate of approximately 1.77% and receive 1-month LIBOR variable interest rate payments monthly through March 31, 2012. We have several additional interest rate swap derivatives, with notional amounts approximating $19.2 million in the aggregate. All of our derivative instruments are freestanding and, accordingly, changes in their fair market value are recorded in earnings.

We did not have any derivatives designated as hedging instruments at June 30, 2011 or December 31, 2010. The table below provides data about the fair value of our derivative instruments that are recorded in our condensed consolidated balance sheets (in thousands):

	June 30, 2011				December 31, 2010
	Assets		Liabilities		Assets		Liabilities
Derivatives not designated as hedging instruments:
Forward foreign exchange contracts (1)	$	256	$	—	$	—	$	209
Interest rate contracts (1)		—		6,000		—		8,975

(1) Included in “Accrued expenses and other current liabilities” in our condensed consolidated balance sheets. The total notional amount of our interest rate swaps was approximately $0.5 billion at June 30, 2011 and December 31, 2010. The total notional amount of our forward foreign exchange contracts was approximately $27 million and $8 million at June 30, 2011 and December 31, 2010.

The table below provides data about the amount of gains and (losses) recognized in our condensed consolidated statements of operations on our derivative instruments (in thousands):

	Three Months Ended					Six Months Ended
	June 30,		June 30,			June 30,		June 30,
	2011		2010			2011		2010
Derivatives not designated as hedging instruments:
Forward foreign exchange contracts	$	200	$	768		$	477	$	954
Interest rate contracts		1,424		(2,326	)		3,015		(6,575	)