DEBT

12 Months Ended

Dec. 31, 2019

DEBT

DEBT

8. DEBT

At December 31, 2019 and 2018, the Company’s debt consisted of the following:

	As of December 31,
(In millions)	2019		2018
Private Placement Term Loans:
5.79 %, payable through 2020	$	3.5	$	10.5
3.66 %, payable through 2023		31.9		41.0
4.16 %, payable through 2027		39.3		44.5
3.37 %, payable through 2027		75.0		75.0
3.14 %, payable through 2031		188.0		200.0
4.31 %, payable through 2032		30.3		32.7
4.35 %, payable through 2044		100.0		100.0
3.92 %, payable through 2045		69.5		71.4
Title XI Debt:
5.34 %, payable through 2028		19.8		22.0
5.27 %, payable through 2029		22.0		24.2
Revolving credit facility, maturity date of June 29, 2022		379.1		235.0
Capital leases		—		0.1
Total Debt		958.4		856.4
Less: Current portion		(48.4)		(42.1)
Total Long-term Debt	$	910.0	$	814.3

The following is a description of the Company’s debt:

Private Placement Term Loans: The 5.79 percent notes payable through 2020 are amortized by semi-annual principal payments of $3.5 million plus interest.

During the second quarter of 2012, the Company issued $170.0 million of unsecured notes, which funded in three tranches, $77.5 million at an interest rate of 3.66 percent, $55.0 million at an interest rate of 4.16 percent, and $37.5 million at an interest rate of 4.31 percent (the “2012 Notes”). Principal and interest are payable semi-annually. The 2012 Notes began to amortize in 2015 with aggregate semi-annual payments of $4.6 million which continued through 2016, followed by $8.4 million in 2017 through mid-year 2023, $3.8 million through mid-year 2027, and $1.2 million thereafter.

In January 2014, the Company issued $100.0 million of 30-year senior unsecured notes at an interest rate of 4.35 percent, payable semi-annually (the “2014 Notes”). The 2014 Notes will begin to amortize in 2021, with annual principal payments of $5.0 million in 2021, $7.5 million in 2022 and 2023, $10.0 million from 2024 to 2027, and $8.0 million in 2028. Starting in 2029, and in each year thereafter until 2044, annual principal payments will be $2.0 million.

In July 2015, the Company issued $75.0 million of 30-year senior unsecured notes at an interest rate of 3.92 percent, payable semi-annually (the “2015 Notes”). The 2015 Notes began to amortize in 2017, with annual principal payments of approximately $1.8 million through 2019. During the years 2020 to 2026, the annual principal payments will range between approximately $1.3 million and $8.0 million. Starting in 2027, and in each year thereafter, the annual principal payments will be approximately $1.5 million.

In September 2016, the Company issued $200.0 million of 15-year senior unsecured notes (the “Series D Notes”) at an interest rate of 3.14 percent, payable semi-annually. The Series D Notes began to amortize in 2019, with semi-annual principal payments of $6.0 million. During the years 2020 through 2023, semi-annual principal payments will be $9.2 million. Starting in 2024, and in each year thereafter through maturity in 2031, the semi-annual principal payments will be $7.15 million.

In December 2016, the Company issued $75 million of 11-year senior unsecured notes at an interest rate of 3.37 percent, payable semi-annually (the "Series A Notes"). The Series A Notes will begin to amortize in 2021, with principal payments of $5.8 million in 2021 and $11.5 million per year, paid semi-annually, from 2022 through 2027.

Title XI Debt: In September 2003, MatNav issued $55.0 million in U.S. Government guaranteed vessel finance bonds (Title XI) to finance the delivery of Manukai. The secured bonds have a final maturity in September 2028 with a coupon rate of 5.34 percent. The bonds are amortized by semi-annual payments of $1.1 million plus interest. In August 2004, MatNav issued $55.0 million of U.S. Government guaranteed vessel finance bonds (Title XI) to finance the delivery of Maunawili. The secured bonds have a final maturity in July 2029 with a coupon rate of 5.27 percent. The bonds are amortized by semi-annual payments of $1.1 million plus interest.

Revolving Credit Facility: On June 29, 2017 (the “Closing Date”), the Company entered into an amended and restated credit agreement that provides the Company with additional sources of liquidity for working capital, capital expenditures and investment opportunities, and amends and restates the Company’s previously amended and restated credit agreement (the “Credit Agreement” or the “revolving credit facility”). The Credit Agreement expires on June 29, 2022, and provides for committed aggregate borrowing of up to $650 million, with an uncommitted option to increase the aggregate borrowing by up to $250 million. The aggregate borrowing within the Credit Agreement includes a $100 million sublimit for the issuance of standby and commercial letters of credit, and a $50 million sublimit for swing line loans. The Company may prepay any amounts outstanding under the Credit Agreement without premium or penalty. All obligations of the Company under the Credit Agreement are guaranteed by Matson’s principal operating subsidiary MatNav and by certain other subsidiaries.

Depending on the Company’s consolidated net leverage ratio, borrowings under the Credit Agreement bear interest at either LIBOR plus a margin of between 1.00 percent and 1.75 percent or the base rate plus a margin of between zero percent and 0.75 percent. Letters of credit are subject to fees based on the Company’s consolidated net leverage ratio at a rate of between 1.00 percent and 1.75 percent. The Company also pays a commitment fee of between 0.15 percent and 0.30 percent depending on the Company’s consolidated net leverage ratio.

As of December 31, 2019, the Company had $75.1 million of remaining availability under the Credit Agreement. The Company used $7.7 million of the sublimit for letters of credit outstanding as of December 31, 2019. Based on the Company’s consolidated net leverage ratio, which stipulates borrowing margins, the interest rate applicable to revolving credit facility usage was approximately 3.33 percent at December 31, 2019.

Amendments to Existing Private Placement Term Loan Facilities and New Shelf Facilities (“Private Loan Facilities”): On June 29, 2017, the Company and the holders of the Company’s term loans entered into amendments (collectively, the “2017 Amendments”) to each of the term loan agreements and amendments thereto, previously issued prior to the Closing Date. The 2017 Amendments provide for amendments to certain covenants and other terms, including (at the Company’s option under certain circumstances) adjustments to the required consolidated leverage ratio, and, in connection with the exercise of such option, the payment of additional interest for certain pre-defined periods. Interest rates and other substantive terms remained unchanged.

Interest Rates: The Company incurs interest on debt based upon the levels of outstanding borrowings throughout the year and the related interest rates as described above. Interest rates on the private placement term loans increase when the Company elects for Special Relief Periods to the maximum consolidated leverage ratio as defined within the 2017 Amendments.

Debt Covenants in the Private Placement Term Loans and the Revolving Credit Facility: The Credit Agreement and Private Loan Facilities (collectively, the “Private Debt Agreements”) contain affirmative, negative and financial covenants customary for financings of this type, including, among other things, limitations on certain other indebtedness, loans and investments, liens, mergers, asset sales, and transactions with affiliates as defined within the Private Debt Agreements. The Private Debt Agreements also contain customary events of default, including cross defaults to other material indebtedness, including the Title XI Debt (as defined below). A brief description of the principal covenants contained in the Private Debt Agreements includes, but is not limited to the following (as defined within the Agreements):

◾ Minimum Consolidated Interest Coverage Ratio as of the end of any fiscal quarter is not permitted to be less than 3.50 to 1.0;

◾ Maximum Consolidated Leverage Ratio as of the end of any fiscal quarter is not permitted to exceed 3.25 to 1.0, subject to the Company’s election of Special Relief Periods in which the Maximum Consolidated Leverage Ratio is

not permitted to exceed 3.75 to 1.0 as described in the Private Debt Agreements;

◾ The principal amount of Priority Debt: (i) is not permitted to exceed 20 percent of Consolidated Tangible Assets at any time (subject to a reduction to 17.5 percent upon the earlier of December 31, 2017, or upon the occurrence of certain events), and; (ii) the principal amount of Priority Debt that is not Title XI Priority Debt at any time is not permitted to exceed 10 percent of Consolidated Tangible Assets.

Principal covenants generally will restrict the incurrence of liens except for permitted liens, which include, without limitation, liens securing Title XI Debt up to certain thresholds, as defined within the Private Debt Agreements. The Company was in compliance with these covenants as of December 31, 2019.

Debt Covenants in the Title XI Debt Agreements: The Title XI debt agreements contain customary representations and warranties as well as affirmative and negative covenants, defaults and other provisions typical for MARAD-guaranteed financings of this type, with definitions and limitations as defined within the Title XI debt agreements. These covenants include, among other things, minimum working capital and net worth requirements, limitations on certain other indebtedness, loans and investments, liens, mergers, asset sales, sale and leaseback transactions, and transactions with affiliates as defined within the Title XI debt agreements. Certain of the covenants in the Title XI debt agreements are applicable only upon and during the continuance of either (i) an event of default or (ii) the failure of MatNav to meet certain financial requirements.

Capital Leases:  The Company’s capital lease obligations represent leasing of containers and other equipment, and have been classified as current and long-term debt in the Company’s Consolidated Balance Sheets. As of December 31, 2019, there were no capital lease obligations.

Debt Security and Guarantees: All of the debt of the Company and MatNav, including related guarantees, as of December 31, 2019 was unsecured, except for the Title XI Debt.

Debt Maturities: At December 31, 2019, debt maturities during the next five years and thereafter are as follows:

Year (in millions)	Total
2020	$	48.4
2021		54.2
2022		439.0
2023		59.9
2024		55.8
Thereafter		301.1
Total debt	$	958.4