DEBT

12 Months Ended

Dec. 31, 2023

DEBT

DEBT

8. DEBT

The Company’s debt consists of the following as of December 31, 2023 and 2022:

	As of December 31,
(In millions)	2023		2022
Private Placement Term Loans:
3.66 %, payable through 2023	$	—	$	4.5
3.37 %, payable through 2027		46.2		57.7
3.14 %, payable through 2031		114.4		132.8
Title XI Debt:
5.34 %, payable through 2028		—		13.2
5.27 %, payable through 2029		—		15.4
1.22 %, payable through 2043		158.2		166.2
1.35 %, payable through 2044		121.8		127.7
Total Debt		440.6		517.5
Less: Current portion		(39.7)		(76.9)
Total Long-term Debt		400.9		440.6
Less: Deferred loan fees		(11.6)		(12.9)
Total Long-term Debt, net of deferred loan fees	$	389.3	$	427.7

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

Private Placement Term Loans: During 2012, the Company issued $170.0 million of unsecured notes, which were funded in three tranches. The remaining tranche, at an interest rate of 3.66 percent, was fully repaid during 2023. 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. 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”).

Title XI Bonds: In September 2003, MatNav issued $55.0 million in U.S. government guaranteed ship financing bonds (“Title XI”) to finance the delivery of Manukai (the “Manukai Title XI Bonds”). In August 2004, MatNav issued $55.0 million of U.S. government guaranteed ship financing bonds (Title XI) to finance the delivery of Maunawili (the “Maunawili Title XI Bonds”).

In January 2023, the Company prepaid $14.3 million of outstanding principal on the Maunawili Title XI Bonds representing all of the remaining outstanding principal for this bond. In March 2023, the Company also prepaid the outstanding principal of approximately $12.1 million on the Manukai Title XI Bonds, representing all of the remaining outstanding principal for this bond.

In April 2020, MatNav issued $185.9 million in U.S. government guaranteed vessel financing bonds to partially refinance debt incurred in connection with the construction of Daniel K. Inouye (the “DKI Title XI Debt”). The secured DKI Title XI Debt matures in October 2043 and has a cash interest rate of 1.22 percent, payable semi-annually in arrears.

In June 2020, MatNav issued $139.6 million in U.S. government guaranteed vessel financing bonds to partially refinance debt incurred in connection with the construction of Kaimana Hila (the “KMH Title XI Debt”, and together with the DKI Title XI Debt, the “2020 Title XI Debt”). The secured KMH Title XI Debt matures in March 2044 and has a cash interest rate of 1.35 percent, payable semi-annually in arrears.

MatNav may prepay any amounts outstanding under the 2020 Title XI Debt agreements subject to a potential prepayment premium or other adjustment, in accordance with the 2020 Title XI Debt agreements. Once amounts under the 2020 Title XI Debt are repaid, they may not be reborrowed. Mandatory prepayments are required under certain limited circumstances, including specified casualty events with respect to Daniel K. Inouye and Kaimana Hila (the “Vessels”).

Revolving Credit Facility: In March 2021, the Company entered into the Second Amended and Restated Credit Agreement (the “Credit Agreement”), which extended the maturity date to March 31, 2026, and retained the committed aggregate borrowings of up to $650 million. The Credit Agreement amended certain covenants and other terms including (i) amending the pricing grid to provide for pricing ranging from, at the Company’s election, LIBOR plus a margin between 1.00 percent and 1.75 percent depending on the Company’s consolidated net leverage ratio, or base rate plus a margin between 0.00 percent and 0.75 percent depending on the Company’s consolidated net leverage ratio; and (ii) reducing the maximum permitted consolidated leverage ratio to 3.50 to 1.0, with an option for a one-time increase to 4.0 to 1.0 in connection with a material acquisition. The Company may prepay any amounts outstanding under the Credit Agreement without premium or penalty. The Credit Agreement contains 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. The Credit Agreement also contains customary events of default.

In February 2023, the Company further amended the Credit Agreement to replace LIBOR with a new benchmark interest rate, the Secured Overnight Financing Rate (“SOFR”). There were no other significant changes to the Credit Agreement as a result of this amendment.

As of December 31, 2023, the Company had $644.2 million of remaining borrowing availability under the revolving credit facility. The Company used $5.8 million of the revolving credit facility for letters of credit outstanding as of December 31, 2023. Borrowings under the revolving credit facility are classified as long-term debt in the Company’s Consolidated Balance Sheets, as principal payments are not required until the maturity date.

Amendments to Existing Private Placement Term Loan Facilities and New Shelf Facilities (“Private Loan Facilities”): In March 2021, the Company and the holders of the notes party thereto entered into amendments (collectively, the “2021 Note Amendments”) to each of (i) the Third Amended and Restated Note Purchase Agreement and Private Shelf Agreement dated as of September 14, 2016, among the Company and the holders of the notes issued thereunder, as amended; and (ii) the Note Purchase Agreement dated December 21, 2016 among the Company and the holders of the notes issued thereunder, in each case as amended prior to such date.

The 2021 Note Amendments amended certain covenants and other terms, including the reduction of the maximum permitted consolidated leverage ratio to 3.50 to 1.0, with an option for a one-time increase to 4.0 to 1.0 in connection with a material acquisition, with potential interest enhancement payments if leverage is over 3.25 to 1.0. The Company paid fees of approximately $0.8 million related to the 2021 Note Amendments which is included in deferred loan fees in debt in the Company’s Consolidated Balance Sheets.

Debt Maturities: At December 31, 2023, debt maturities during the next five years and thereafter are as follows:

	As of
Year (in millions)	December 31, 2023
2024	$	39.7
2025		39.7
2026		39.7
2027		39.7
2028		28.2
Thereafter		253.6
Total Debt	$	440.6

Deferred Loan Fees: Activity relating to deferred loan fees for the year ended December 31, 2023 are as follows:

Deferred Loan Fees (in millions)	Amount
Balance at December 31, 2022	$	12.9
Amortization expense for the year ended December 31, 2023		(1.3)
Balance at December 31, 2023	$	11.6

As of December 31, 2023, amortization expense relating to deferred loan fees during the next five years and thereafter are as follows:

Year (in millions)	Amount
2024	$	1.2
2025		1.1
2026		1.0
2027		0.9
2028		0.9
Thereafter		6.5
Total amortization expense of deferred loan fees	$	11.6

Debt Covenants in 2020 Title XI Debt Agreements: The 2020 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, limitations and financial tests all as negotiated between MatNav and MARAD. The covenants in the 2020 Title XI Debt agreements include, among other things, limitations on certain other indebtedness, loans and investments, liens, mergers, asset sales, sale and leasebacks, and transactions with affiliates as defined within the 2020 Title XI Debt agreements. Certain of the covenants in the 2020 Title XI Debt agreements are applicable only upon and during the continuance of either (i) an event of default or (ii) the failure of either the Company or MatNav to meet certain supplemental financial tests, including the following:

● The supplemental financial tests applicable to MatNav include maintenance of a working capital minimum of $1, and maintenance of a long-term debt to net worth ratio of greater than or equal to 2.0 to 1.0; and

● The supplemental financial tests applicable to the Company include maintenance of a net worth greater than or equal to 90% of the net worth of the Company as set forth in the most recent audited financial statements prior to closing of the issuance of the 2020 Title XI Bonds and compliance with the leverage ratio set forth in the Credit Agreement.

Debt Security and Guarantees: All of the debt of the Company and MatNav, including related guarantees, as of December 31, 2023 was unsecured, except for the 2020 Title XI Debt.

Under the 2020 Title XI Debt agreements, MARAD has guaranteed certain obligations of MatNav. MatNav has agreed to reimburse MARAD for any payments it makes under the MARAD guaranty, and MatNav’s obligations to MARAD

with respect to the 2020 Title XI Debt are secured by a mortgage on the Vessels and certain other related assets (the “Collateral”). In addition, MatNav’s obligations to MARAD with respect to the 2020 Title XI Debt are guaranteed by the Company under an Affiliate Guaranty.