Note 11 - Financing Agreements

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Debt and Capital Leases Disclosures [Text Block]

Note 11. Financing Agreements

Long-term debt at —

	Interest Rate		March 31, 2020			December 31, 2019
Senior Notes due December 15, 2024	5.500%		$	425		$	425
Senior Notes due April 15, 2025	5.750%	*		400			400
Senior Notes due June 1, 2026	6.500%	*		375			375
Senior Notes due November 15, 2027	5.375%			300			300
Term Facility A				474			474
Term Facility B				349			349
Other indebtedness				66			61
Debt issuance costs				(26	)		(28	)
				2,363			2,356
Less: Current portion of long-term debt				28			20
Long-term debt, less debt issuance costs			$	2,335		$	2,336

* In conjunction with the issuance of the April 2025 Notes we entered into 8-year fixed-to-fixed cross-currency swaps which have the effect of economically converting the April 2025 Notes to euro-denominated debt at a fixed rate of 3.850%. In conjunction with the issuance of the June 2026 Notes we entered into 10-year fixed-to-fixed cross-currency swaps which have the effect of economically converting the June 2026 Notes to euro-denominated debt at a fixed rate of 5.140%. See Note 12 for additional information.

Interest on the senior notes is payable semi-annually and interest on the Term Facilities is payable quarterly. Other indebtedness includes the note payable to SME, borrowings from various financial institutions, finance lease obligations and the unamortized fair value adjustment related to a terminated interest rate swap. See Note 2 for additional information on the note payable to SME and Note 12 for additional information on the terminated interest rate swap.

Credit agreement — On February 28, 2019, we entered into an amended credit and guaranty agreement comprised of a $500 term facility (the Term A Facility), a $450 term facility (the Term B Facility and, together with the Term A Facility, the Term Facilities) and a $750 revolving credit facility (the Revolving Facility). The Term A Facility and the Revolving Facility were expansions of our existing facilities. On February 28, 2019, we drew the $225 available under the Term A Facility and the $450 available under the Term B Facility. The proceeds from the Term Facilities were used to acquire the Oerlikon Drive Systems segment of the Oerlikon Group and pay for related integration activities. We were required to make equal quarterly installments on the Term A Facility on the last day of each fiscal quarter of $8 beginning March 31, 2019 and 0.25% of the aggregate principal advances of the Term B Facility quarterly commencing on June 30, 2019. On August 30, 2019, we amended our credit and guaranty agreement, increasing the Revolving Facility to $1,000 and extending the maturities and reducing the interest rates of both the Revolving Facility and the Term A Facility. On August 30, 2019, we borrowed $100 on the Revolving Facility and paid down a similar amount of the Term B Facility. We are now required to make quarterly installments on the Term A Facility on the last day of each fiscal quarter of $7 beginning on September 30, 2020 and are no longer required to make quarterly installments on the Term B Facility. We may prepay some or all of the amounts under the Term Facilities without penalty. We recorded deferred fees of $13 and $4 related to the amendments to the Term Facilities and the Revolving Facility, respectively. The deferred fees are being amortized over the life of the applicable facilities. Deferred financing costs on our Revolving Facility are included in other noncurrent assets. The Revolving Facility and the Term A Facility mature on August 17, 2024. The Term B Facility matures on February 28, 2026.

The Term Facilities and the Revolving Facility are guaranteed by all of our wholly-owned domestic subsidiaries subject to certain exceptions (the guarantors) and are secured by a first-priority lien on substantially all of the assets of Dana and the guarantors, subject to certain exceptions.

Advances under the Term A Facility and the Revolving Facility bear interest at a floating rate based on, at our option, the base rate or Eurodollar rate (each as described in the credit agreement) plus a margin as set forth below:

	Margin
Total Net Leverage Ratio	Base Rate			Eurodollar Rate
Less than or equal to 1.00:1.00		0.25	%		1.25	%
Greater than 1.00:1.00 but less than or equal to 2.00:1.00		0.50	%		1.50	%
Greater than 2.00:1.00		0.75	%		1.75	%

The Term B Facility bears interest based on, at our option, the Base Rate plus 1.25% or the Eurodollar rate plus 2.25%. We have elected to pay interest on our advances under the Term Facilities at the Eurodollar Rate. The interest rate on the Term A Facility was 2.490% and the Term B Facility was 3.240%, inclusive of the applicable margins, as of March 31, 2020.

Commitment fees are applied based on the average daily unused portion of the available amounts under the Revolving Facility as set forth below:

Total Net Leverage Ratio	Commitment Fee
Less than or equal to 1.00:1.00		0.250	%
Greater than 1.00:1.00 but less than or equal to 2.00:1.00		0.375	%
Greater than 2.00:1.00		0.500	%

Up to $275 of the Revolving Facility may be applied to letters of credit, which reduces availability. We pay a fee for issued and undrawn letters of credit in an amount per annum equal to the applicable margin for Eurodollar rate advances based on a quarterly average availability under issued and undrawn letters of credit under the Revolving Facility and a per annum fronting fee of 0.125%, payable quarterly.

At  March 31, 2020, we had outstanding borrowings of $300 under the Revolving Facility and had utilized $21 for letters of credit. Outstanding borrowings on the Revolving Facility are included in short-term debt. We had availability at March 31, 2020 under the Revolving Facility of $679 after deducting the outstanding borrowings and letters of credit.

Debt covenants — At March 31, 2020, we were in compliance with the covenants of our financing agreements. Under the Term Facilities, Revolving Facility and the senior notes, we are required to comply with certain incurrence-based covenants customary for facilities of these types and, in the case of the Term A Facility and Revolving Facility, a maintenance covenant tested on the last day of each fiscal quarter requiring us to maintain a first lien net leverage ratio not to exceed 2.00 to 1.00.

Subsequent event — On April 16, 2020, we entered into a $500 bridge facility (the Bridge Facility). We recorded deferred fees of $5 related to the Bridge Facility. The deferred fees are included in other current assets and are being amortized over the life of the Bridge Facility. The Bridge Facility matures on April 15, 2021. The Bridge Facility is guaranteed by all of our wholly-owned domestic subsidiaries subject to certain exceptions (the guarantors) and is secured by a first-priority lien on substantially all of the assets of Dana and the guarantors, subject to certain exceptions. Advances under the Bridge Facility incur a one-time funding fee when drawn and bear interest at a floating rate based on, at our option, the Eurodollar rate plus an initial margin equal to 4.50% or a base rate plus an initial margin equal to 3.50% (each as described in the credit agreement). The initial margin increases by 0.50% every 90 days. A duration fee of 0.50% is paid every 90 days on the full $500 commitment. A commitment fee of 0.50% is applied based on the average daily unused portion of the available amount under the Bridge Facility. Under the Bridge Facility we are required to comply with certain incurrence-based covenants customary for facilities of this type and a maintenance covenant requiring us to maintain a first lien net leverage ratio not to exceed 2.50 to 1.00 for the quarter ending June 30, 2020, 3.00 to 1.00 for the quarter ending September 30, 2020 and 4.00 to 1.00 thereafter. In addition, on April 16, 2020, we amended certain provisions of our credit and guaranty agreement including increasing the first lien net leverage ratio to a maximum of 4.00 to 1.00 for the quarter ending December 31, 2020 and then, starting with the quarter ending December 31, 2021, decrease the ratio quarterly until it returns to its prior level of 2.00 to 1.00 for and after the quarter ending September 30, 2022, unless Dana in its sole discretion elects to return the first lien net leverage ratio to its prior level earlier than such date. We also amended certain restrictive covenants to provide additional limitations that are consistent with the Bridge Facility until such time as the earlier of (x) December 31, 2021 and (y) any date that we elect after the expiration of the Bridge Facility. Additionally, the amendment provides that certain mandatory prepayments required under the credit and guaranty agreement for the incurrence of debt and asset sale proceeds will not be paid to the Term Facilities' lenders while the Bridge Facility is outstanding.