Debt

3 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

Debt

DEBT

The following table summarizes Valvoline’s total debt as of:

(In millions)	December 31 2022		September 30  2022
2031 Notes	$	535.0	$	535.0
2030 Notes	600.0		600.0
Term Loan	445.6		460.0
Revolver (a)	145.0		—
Trade Receivables Facility (b)	167.0		105.0
Debt issuance costs and discounts	(12.0)		(12.4)
Total debt	1,880.6		1,687.6
Current portion of long-term debt	224.5		162.5
Long-term debt	$	1,656.1	$	1,525.1

(a)As of December 31, 2022, the total borrowing capacity remaining under the $475.0 million revolving credit facility was $324.6 million due to a reduction of $145.0 million for borrowings and $5.4 million for letters of credit outstanding.

(b)These outstanding accounts receivable substantially relate to the Global Products business and were reported in Current assets held for sale, with a smaller portion reported within Receivables, net in the Company’s Condensed Consolidated Balance Sheets. The Trade Receivables Facility had $8.0 million of borrowing capacity remaining and the wholly-owned financing subsidiary owned $357.6 million of outstanding accounts receivable as of December 31, 2022.

As of December 31, 2022, Valvoline was in compliance with all existing covenants under its long-term borrowings.

Senior Credit Agreement

Key terms and conditions

In December 2022, Valvoline amended the Senior Credit Agreement (the “2022 Credit Agreement”), which will be effective upon the sale of the Global Products business. The 2022 Credit Agreement will provide an aggregate principal amount of $950.0 million in senior secured credit facilities comprised of (i) a five-year $475.0 million term loan facility (the “Term Loan”) and (ii) a five-year $475.0 million revolving credit facility (the “Revolver”), including a $100.0 million letter of credit sublimit.

The principal amount of the Term Loan under the 2022 Credit Agreement will be required to be repaid in quarterly installments of approximately $5.9 million beginning with the first fiscal quarter after the sale of Global Products, with the remainder due at maturity and prepayment required in the amount of the net cash proceeds from certain events. Amounts outstanding under the 2022 Credit Agreement may be prepaid at any time, and from time to time, in whole or part, without premium or penalty. At Valvoline’s option, amounts outstanding under the 2022 Credit Agreement will bear interest at either SOFR or an alternative base rate, in each case plus the applicable interest rate margin. The interest rate will fluctuate between SOFR plus 1.375% per year and SOFR plus 2.250% per year (or between the alternative base rate plus 0.375% per year and the alternative base rate plus 1.250% per year), based upon Valvoline’s consolidated total net leverage ratio.

Effective upon completion of the sale of the Global Products business, proceeds from the borrowings under the 2022 Credit Agreement are expected to be used to pay in full the principal amounts of the current Term Loan and Revolver borrowings under the existing Credit Agreement, in addition to accrued and unpaid interest and fees, as well as expenses related to the amendment. The remaining proceeds from the 2022 Credit Agreement, including the capacity under its Revolver, are expected to fund general corporate purposes and working capital needs.

Covenants and guarantees

The 2022 Credit Agreement contains covenants and provisions that will be effective upon the sale of Global Products. These terms and conditions are consistent with the existing Credit Agreement, including the maintenance of financial covenants as of the end of each fiscal quarter and guarantees from certain of Valvoline’s existing and future subsidiaries.