Financing

12 Months Ended

Dec. 31, 2020

NOTE 11. FINANCING

The Company had the following debt outstanding as of December 31:


($ in millions)	2020		2019
Short-term borrowings:
India Credit Facility	$	10.9	$	12.6

Other short-term borrowings and bank overdrafts	—		4.2
Total short-term borrowings	$	10.9	$	16.8

Long-term debt:
Related-party loans with Former Parent	$	—	$	24.6
Two-Year Term Loans	1,000.0		—
Three-Year Term Loans	800.0		—
Total long-term debt	1,800.0		24.6
Less: debt issuance costs	(4.7)		—
Total long-term debt, net	$	1,795.3	$	24.6

Debt issuance costs that have been netted against the aggregate principal amounts of the components of debt in the short-term borrowings section above are immaterial. Given the nature of the short-term borrowings, the carrying value approximates fair value at both December 31, 2020 and 2019.

As of December 31, 2020, the contractual maturities of the Company’s long-term debt were as follows:


($ in millions)	Term Loans
2021	$	—
2022	1,000.0
2023	800.0
2024	—
2025	—
Thereafter	—
Total principal payments	$	1,800.0

Credit Facilities

On September 29, 2020, we entered into a credit agreement (the “Credit Agreement”) with a syndicate of banks, consisting of a three-year, $800.0 million senior unsecured delayed draw term loan facility (the “Three-Year Term Loans”), a two-year, $1.0 billion senior unsecured delayed draw term loan facility (the “Two-Year Term Loans” and together with the Three-Year Term Loans, the “Term Loans”) and a three-year, $750.0 million senior unsecured multi-currency revolving credit facility, including a $25.0 million sublimit for swingline loans and a $75.0 million sublimit for the issuance of letters of credit (the “Revolving Credit Facility” and, together with the Term Loans, the “Credit Facilities”). We incurred $7.7 million in debt issuance costs which were paid by Fortive and are a non-cash activity with respect to the Consolidated and Combined Statements of Cash Flows.

At the closing of the Credit Agreement, the Company did not borrow any funds under the Credit Agreement. On October 9, 2020, we drew down the full $1.8 billion available under the Term Loans. The Company used the proceeds from the Term Loans to make payments to Fortive, with $1.6 billion used as part of the consideration for the contribution of certain assets and liabilities to the Company by Fortive in connection with the Separation and with $200.0 million used as a preliminary adjustment for excess cash balances remaining with the Company.

The Credit Agreement contains various affirmative and negative covenants, including financial reporting requirements and limitations on indebtedness, liens, mergers, consolidations, liquidations and dissolutions, sales of assets, dividends and other restricted payments, investments (including acquisitions) and transactions with affiliates. Certain affirmative covenants, including certain reporting requirements and requirements to establish cash dominion accounts with the administrative agent, are triggered by failing to maintain availability under the credit facility at or above specified thresholds or by the existence of an event of default under the facility.

The Credit Agreement contains covenants which require a maximum consolidated leverage ratio of 3.75 to 1.0 and a minimum consolidated interest coverage ratio of 3.50 to 1.0.

The Credit Agreement contains events of default customary for facilities of this nature, including, but not limited, to: (i) events of default resulting from the Borrowers’ failure or the failure of any credit party to comply with covenants (including the above-referenced financial covenants during periods in which the financial covenants are tested); (ii) the occurrence of a change of control; (iii) the institution of insolvency or similar proceedings against the Borrowers or any credit party; and (iv) the occurrence of a default under any other material indebtedness the Borrowers or any guarantor may have. Upon the occurrence and during the continuation of an event of default, subject to the terms and conditions of the Credit Agreement, the lenders will be able to declare any outstanding principal balance of our Credit Facility, together with accrued and unpaid interest, to be immediately due and payable and exercise other remedies, including remedies against the collateral, as more particularly specified in the Credit Agreement. As of December 31, 2020, the Company was in compliance with its debt covenants.

We made interest payments of $5.9 million during 2020 related to the Credit Facilities.

Three-Year Term Loans

The Three-Year Term Loans bear interest at a variable rate equal to the London Inter-bank Offered Rate (“LIBOR”) plus a leverage-based margin which was 175.0 basis points as of December 31, 2020. The interest rate on the Three-Year Term Loans outstanding as of December 31, 2020, was 1.90% per annum and $800.0 million was outstanding and recorded as Long-term debt as of December 31, 2020. The Three-Year Term Loans mature on October 6, 2023 and we are not obligated to make repayments prior to the maturity date. We are not permitted to re-borrow once the Three-Year Term Loans are repaid and there is no further ability to draw on the facility. No repayments were made during the year ended December 31, 2020. The was no material difference between the carrying value and the estimated fair value of the debt outstanding.

Two-Year Term Loans

The Two-Year Term Loans bear interest at a variable rate equal to LIBOR plus a leverage-based margin which was 162.5 basis points as of December 31, 2020. The interest rate on the Two-Year Term Loans outstanding as of December 31, 2020, was 1.77% per annum and $1.0 billion was outstanding and recorded as Long-term debt as of December 31, 2020. The Two-Year Term Loans mature on October 7, 2022 and we are not obligated to make repayments prior to the maturity date. We are not permitted to re-borrow once the Two-Year Term Loans are repaid and there is no further ability to draw on the facility. No repayments were made during the year ended December 31, 2020. The was no material difference between the carrying value and the estimated fair value of the debt outstanding.

Revolving Credit Facility

The Revolving Credit Facility requires the Company to pay lenders a commitment fee for unused commitments of 0.15% to 0.325% based on the consolidated leverage ratio. As of December 31, 2020 there were no amounts outstanding under the Revolving Credit Facility. The Revolving Credit Facility bears interest at a variable rate equal to LIBOR plus a leverage-based margin which was 152.5 basis points as of December 31, 2020.

Related-party Loans with Former Parent

As part of Fortive, we engaged in intercompany financing transactions. Transactions between Fortive and the Company have been included in Long-term debt on the Combined Balance Sheets as of December 31, 2019. As of December 31, 2019, these loans had an average interest rate of approximately 1.0%. These transactions were settled during the year ended December 31, 2020.

Refer to Note 20. Related-Party Transactions for additional information regarding the related-party loans with Fortive entities.

Short-term Borrowings

India Credit Facility

The Company has a credit facility with Citibank, N.A. with borrowing capacity of up to 850.0 million Indian Rupees (or approximately $11.6 million as of December 31, 2020) to facilitate working capital needs for certain businesses in India. As of December 31, 2020, the Company had less than $1 million borrowing capacity remaining. The effective interest rate associated with outstanding borrowings was 5.75% as of December 31, 2020.

Other

We have entered into short-term borrowing arrangements with various banks to facilitate short-term cash flow in certain countries. Additionally, prior to separation, certain of our businesses participated in Former Parent’s cash pooling arrangements. As of December 31, 2019, certain of our businesses were in a cash overdraft position, and such overdrafts are included in Short-term borrowings on the Combined Balance Sheets.

Third party debt held by Fortive and the related interest expense was not allocated to us and is not reflected in the financial statements for periods prior to the Separation. The interest rate associated with the Company’s other short-term borrowings and bank overdrafts as of December 31, 2019 was 9.0%.

Interest payments associated with the above short-term borrowings were immaterial for the years ended December 31, 2020, 2019 and 2018.