Debt And Other Financing

12 Months Ended

Dec. 31, 2019

9. Debt and Other Financing

Loans payable and current portion of long-term debt at December 31 consisted of the following:



	2019		2018
	(Dollars in thousands)
Loans payable	$	—	$	50
Current portion of long-term debt		8,703		8,871
Loans payable and current portion of long-term debt	$	8,703	$	8,921

Long-term debt at December 31 consisted of the following:



	2019		2018
	(Dollars in thousands)

Term loan facility, net of unamortized issuance costs, maturing 2024⁽¹⁾	$	801,764	$	809,022
Capital lease obligations		2,305		1,832
Other notes		3,496		4,098
Total long-term debt		807,565		814,952
Current portion of long-term debt		(8,703)		(8,871)
Long-term debt, less current portion	$	798,862	$	806,081

(1)The carrying value of the term loan facility, maturing 2024, is net of unamortized debt issuance costs of $3.9 million at December 31, 2019 and $4.8 million at December 31, 2018.

The annual maturities of long-term debt for each of the five years after December 31, 2019, are as follows (in thousands):


2020	$	8,938
2021		8,819
2022		8,810
2023		8,719
2024		773,275
Thereafter		3,550
Total maturities of long-term debt		812,111
Unamortized issuance costs on Term loan facility		(3,886)
Imputed interest and executory costs on capitalized lease obligations		(660)
Total long-term debt	$	807,565

Amended Credit Facility

On April 25, 2018, the Company entered into an amendment (the “Amended Credit Facility”) to its existing credit facility (the “Credit Facility”), which Amended Credit Facility (a) provided a new revolving facility (the “2018 Revolving Facility”), which replaced the Company’s existing revolving facility, (b) repriced the (“Tranche B-1 Loans”), and (c) provided new tranches of term loans (“Tranche B-2 Loans” and “Tranche B-3 Loans”) denominated in U.S. dollars. The Amended Credit Facility will be used for ongoing working capital requirements and general corporate purposes. The Tranche B-2 Loans are borrowed by the Company and the Tranche B-3 Loans are borrowed on a joint and several basis by Ferro GmbH and Ferro Europe Holdings LLC.

The Amended Credit Facility consists of a $500 million secured revolving line of credit with a maturity of February 14, 2023, a $355 million secured term loan facility with a maturity of February 14, 2024, a $235 million secured term loan facility with a maturity of February 14, 2024 and a $230 million secured term loan facility with a maturity of February 14, 2024. The term loans are payable in equal quarterly installments in an amount equal to 0.25% of the original principal amount of the term loans, with the remaining balance due on the maturity date thereof. In addition, the Company is required, on an annual basis, to make a prepayment in an amount equal to a portion of the Company’s excess cash flow, as calculated pursuant to the Amended Credit Facility, which prepayment will be applied first to the term loans until they are paid in full, and then to the revolving loans.

Subject to the satisfaction of certain conditions, the Company can request additional commitments under the revolving line of credit or term loans in the aggregate principal amount of up to $250 million to the extent that existing or new lenders agree to provide such additional commitments and/or term loans. The Company can also raise certain additional debt or credit facilities subject to satisfaction of certain covenant levels.

Certain of the Company’s U.S. subsidiaries have guaranteed the Company’s obligations under the Amended Credit Facility and such obligations are secured by (a) substantially all of the personal property of the Company and the U.S. subsidiary guarantors and (b) a pledge of 100% of the stock of certain of the Company’s U.S. subsidiaries and 65% of the stock of certain of the Company’s direct foreign subsidiaries. The Tranche B-3 Loans are guaranteed by the Company, the U.S. subsidiary guarantors and a cross-guaranty by the borrowers of the Tranche B-3 Loans, and are secured by the collateral securing the revolving loans and the other term loans, in addition to a pledge of the equity interests of Ferro GmbH.

Interest Rate – Term Loans: The interest rates applicable to the term loans will be, at the Company’s option, equal to either a base rate or a LIBOR rate plus, in both cases, an applicable margin.

The base rate for term loans will be the highest of (i) the federal funds rate plus 0.50%, (ii) syndication agent’s prime rate, (iii) the daily LIBOR rate plus 1.00% or (iv) 0.00%. The applicable margin for base rate loans is 1.25%.

The LIBOR rate for term loans shall not be less than 0.0% and the applicable margin for LIBOR rate term loans is 2.25%.

For LIBOR rate term loans, the Company may choose to set the duration on individual borrowings for periods of one, two, three or six months, with the interest rate based on the applicable LIBOR rate for the corresponding duration.

At December 31, 2019, the Company had borrowed $348.8 million under the Tranche B-1 Loans at an interest rate of 4.19%, $230.9 million under the Tranche B-2 Loans at an interest rate of 4.19%, and $226.0 million under the Tranche B-3 Loans at an interest rate of 4.19%. At December 31, 2019, there were no additional borrowings available under the Tranche B-1 Loans, Tranche B-2 Loans, and Tranche B-3 Loans. In connection with these borrowings, we entered into swap agreements in the second quarter of 2018. At December 31, 2019, the effective interest rate for the Tranche B-1 Loans, Tranche B-2 Loans, and Tranche B-3 Loans, after adjusting for the interest rate swap, was 5.10%, 2.96%, and 2.48%, respectively.

At December 31, 2018, the Company had borrowed $352.3 million under the Tranche B-1 Loans at an interest rate of 5.05%, $233.2 million under the Tranche B-2 Loans at an interest rate of 5.05%, and $228.3 million under the Tranche B-3 Loans at an interest rate of 5.05%. At December 31, 2018, there were no additional borrowings available under the Tranche B-1 Loans, Tranche B-2 Loans, and Tranche B-3 Loans. In connection with these borrowings, we entered into swap agreements in the second quarter of 2018. At December 31, 2018, the effective interest rate for the Tranche B-1 Loans, Tranche B-2 Loans, and Tranche B-3 Loans, after adjusting for the interest rate swap, was 5.19%, 3.43%, and 2.48%, respectively.

Interest Rate – Revolving Credit Line: The interest rates applicable to loans under the 2018 Revolving Credit Facility will be, at the Company’s option, equal to either a base rate or a LIBOR rate plus, in both cases, an applicable variable margin. The variable margin will be based on the ratio of (a) the Company’s total consolidated net debt outstanding (as defined in the Amended Credit Agreement) at such time to (b) the Company’s consolidated EBITDA (as defined in the Amended Credit Agreement) computed for the period of four consecutive fiscal quarters most recently ended.

The base rate for revolving loans will be the highest of (i) the federal funds rate plus 0.50%, (ii) the syndication agent’s prime rate, (iii) the daily LIBOR rate plus 1.00% or (iv) 0.00%. The applicable margin for base rate loans will vary between 0.50% to 1.50%.

The LIBOR rate for revolving loans shall not be less than 0% and the applicable margin for LIBOR rate revolving loans will vary between 1.50% and 2.50%.

For LIBOR rate revolving loans, the Company may choose to set the duration on individual borrowings for periods of one, two, three or six months, with the interest rate based on the applicable LIBOR rate for the corresponding duration.

At December 31, 2019, there were no borrowings under the 2018 Revolving Credit Facility. After reductions for outstanding letters of credit secured by these facilities, we had $495.8 million of additional borrowings available under the revolving credit facilities at December 31, 2019.

The Amended Credit Facility contains customary restrictive covenants including, but not limited to, limitations on use of loan proceeds, limitations on the Company’s ability to pay dividends and repurchase stock, limitations on acquisitions and dispositions, and limitations on certain types of investments. The Amended Credit Facility also contains standard provisions relating to conditions of borrowing and customary events of default, including the non-payment of obligations by the Company and the bankruptcy of the Company.

Specific to the 2018 Revolving Facility, the Company is subject to a financial covenant regarding the Company’s maximum leverage ratio. If an event of default occurs, all amounts outstanding under the Amended Credit Facility agreement may be accelerated and become immediately due and payable. At December 31, 2019, we were in compliance with the covenants of the Amended Credit Facility.

Credit Facility

On February 14, 2017, the Company entered into a credit facility (the “Credit Facility”) with a group of lenders to refinance its then outstanding credit facility debt and to provide liquidity for ongoing working capital requirements and general corporate purposes. The Credit Facility consisted of a $400 million secured revolving line of credit with a term of five years, a $357.5 million secured term loan facility with a term of seven years and a €250 million secured Euro term loan facility with a term of seven years. The term loans were payable in equal quarterly installments in an amount equal to 0.25% of the original principal amount of the term loans, with the remaining balance due on the maturity date thereof. In addition, the Company was required, on an annual basis, to make a prepayment of term loans until they were fully paid and then to the revolving loans in an amount equal to a portion of the Company’s excess cash flow, as calculated pursuant to the Credit Facility.

Subject to the satisfaction of certain conditions, the Company could request additional commitments under the revolving line of credit or term loans in the aggregate principal amount of up to $250 million, to the extent that existing or new lenders agree to provide such additional commitments and/or term loans. The Company could also raise certain additional debt or credit facilities subject to satisfaction of certain covenant levels.

Certain of the Company’s U.S. subsidiaries guaranteed the Company’s obligations under the Credit Facility and such obligations were secured by (a) substantially all of the personal property of the Company and the U.S. subsidiary guarantors and (b) a pledge of 100% of the stock of certain of the Company’s U.S. subsidiaries and 65% of the stock of certain of the Company’s direct foreign subsidiaries.

Interest Rate – Term Loans: The interest rates applicable to the U.S. term loans was, at the Company’s option, equal to either a base rate or a LIBOR rate plus, in both cases, an applicable margin. The interest rates applicable to the Euro term loans was a Euro Interbank Offered Rate (“EURIBOR”) rate plus an applicable margin.

The base rate for U.S. term loans will be the highest of (i) the federal funds rate plus 0.50%, (ii) the syndication agent’s prime rate or (iii) the daily LIBOR rate plus 1.00%. The applicable margin for base rate loans is 1.50%.

The LIBOR rate for U.S. term loans shall not be less than 0.75% and the applicable margin for LIBOR rate U.S. term loans is 2.50%.

The EURIBOR rate for Euro term loans shall not be less than 0% and the applicable margin for EURIBOR rate loans is 2.75%.

For LIBOR rate term loans and EURIBOR rate term loans, the Company may choose to set the duration on individual borrowings for periods of one, two, three or six months, with the interest rate based on the applicable LIBOR rate or EURIBOR rate, as applicable, for the corresponding duration.

At December 31, 2017, the Company had borrowed $354.8 million under the secured term loan facility at an interest rate of 4.07% and €248.1 million (approximately $297.9 million) under the secured Euro term loan facility at an interest rate of 2.75%. At December 31, 2017, there were no additional borrowings available under the term loan facilities. We entered into interest rate swap agreements in the second quarter of 2017. These swaps converted $150 million and €90 million of our term loans from variable interest rates to fixed interest rates. At December 31, 2017, the effective interest rate for the term loan facilities after adjusting for the interest rate swap was 4.27% for the secured term loan facility and 3.00% for the Euro term loan facility.

Interest Rate – Revolving Credit Line: The interest rates applicable to loans under the revolving credit line was, at the Company’s option, equal to either a base rate or a LIBOR rate plus, in both cases, an applicable variable margin. The variable margin was based on the ratio of (a) the Company’s total consolidated net debt outstanding at such time to (b) the Company’s consolidated EBITDA computed for the period of four consecutive fiscal quarters most recently ended.

The base rate for revolving loans will be the highest of (i) the federal funds rate plus 0.50%, (ii) the syndication agent’s prime rate or (iii) the daily LIBOR rate plus 1.00%. The applicable margin for base rate loans will vary between 0.75% and 1.75%.

The LIBOR rate for revolving loans shall not be less than 0% and the applicable margin for LIBOR rate revolving loans will vary between 1.75% and 2.75%.

At December 31, 2017, there were $78.0 million of borrowings under the revolving credit line at an interest rate of 3.63%. After reductions for outstanding letters of credit secured by these facilities, we had $317.3 million of additional borrowings available under the revolving credit facilities at December 31, 2017.

The Credit Facility contained customary restrictive covenants including, but not limited to, limitations on use of loan proceeds, limitations on the Company’s ability to pay dividends and repurchase stock, limitations on acquisitions and dispositions, and limitations on certain types of investments. The Credit Facility also contained standard provisions relating to conditions of borrowing and customary events of default, including the non-payment of obligations by the Company and the bankruptcy of the Company.

Specific to the revolving credit facility, the Company was subject to a financial covenant regarding the Company’s maximum leverage ratio. If an event of default occurs, all amounts outstanding under the Credit Facility may be accelerated and become immediately due and payable. At December 31, 2017, we were in compliance with the covenants of the Credit Facility.

In conjunction with the refinancing of the Credit Facility, we recorded a charge of $3.2 million in connection with the write-off of unamortized issuance costs, which is recorded within Loss on extinguishment of debt in our consolidated statement of operations for the year ended December 31, 2018.

2014 Credit Facility

In 2014, the Company entered into a credit facility, (the “2014 Credit Facility”), that was amended on January 25, 2016, and August 29, 2016, resulting in a $400 million secured revolving line of credit with a term of five years and a $300 million secured term loan facility with a term of seven years from the original issuance date with a group of lenders that was replaced on February 14, 2017, by the Credit Facility (as defined above).

In conjunction with the refinancing of the 2014 Credit Facility, we recorded a charge of $3.9 million in connection with the write-off of unamortized issuance costs, which is recorded within Loss on extinguishment of debt in our consolidated statement of operations for the year ended December 31, 2017.

International Receivable Sales Programs

We have several international programs to sell without recourse trade accounts receivable to financial institutions. These transactions are treated as a sale and are accounted for as a reduction in accounts receivable because the agreements transfer effective control over and risk related to the receivables to the buyers. The Company continues to service the receivables sold in exchange for a fee. The servicing fee for the year ended December 31, 2019 and 2018, was immaterial. The program, whose maximum capacity is €100 million, is scheduled to expire on December 31, 2023. Generally, at the transfer date, the Company receives cash equal to approximately 65% of the value of the sold receivable. Cash proceeds at the transfer date from these arrangements are reflected in operating activities in our consolidated statement of cash flows. The proceeds from the deferred purchase price are reflected in investing activities.

The outstanding principal amount of receivables sold under this program was $19.3 million at December 31, 2019 and $10.9 million at December 31, 2018. The carrying amount of the deferred purchase was $6.6 million at December 31, 2019 and $1.8 million at December 31, 2018, and is recorded in Other receivables. As discussed in Note 4, during the fourth quarter of 2019, we entered into a definitive agreement to sell our Tile Coatings business. As such, our Tile Coatings business was classified as held-for-sale. At December 31, 2019 and 2018, $52.6 million and $60.4 million, respectively, of the outstanding principal amount of receivables sold under this program pertained to the Tile Coatings business. The carrying amount of the deferred purchase price at December 31, 2019 and 2018 was $20.5 million and $21.2 million, respectively. Both are recorded in Current assets held-for-sale in our consolidated balance sheets.


	2019		2018
	(Dollars in thousands)
Trade accounts receivable sold to financial institutions	$	59,293	$	13,788	—
Cash proceeds from financial institutions ⁽¹⁾		39,958		8,282	—
Trade accounts receivable collected to be remitted ⁽²⁾		12,817		1,844	—

(1)In 2019 and 2018, our Tile Coatings business received cash proceeds from financial institutions of $131.5 million and $49.0 million, respectively. Refer to Note 4 for additional discussion of the Tile Coatings business and its classification as discontinued operations.

(2)Included in Accrued expense and other current liabilities. During 2019 and 2018, trade accounts receivable collected to be remitted of $12.8 million and $9.7 million, respectively, pertained to the Tile Coatings business and is included in Current liabilities held-for-sale in our consolidated balance sheets.

Other Financing Arrangements

We maintain other lines of credit to provide global flexibility for Ferro’s short-term liquidity requirements. These facilities are uncommitted lines for our international operations and totaled $28.1 million at December 31, 2019 and $31.4 million at December 31, 2018. The unused portions of these lines provided additional liquidity of $25.0 million at December 31, 2019 and $26.6 million at December 31, 2018.