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Debt and Other Financing
 12 Months Ended
Dec. 31, 2021
Debt Disclosure [Abstract]  
Debt and Other Financing . Debt and Other Financing
Loans payable and current portion of long-term debt at December 31, 2021 and 2020 consisted of the following:
(Dollars in thousands)20212020
Current portion of long-term debt$8,964 $8,839 
Loans payable and current portion of long-term debt$8,964 $8,839 
Long-term debt at December 31, 2021 and 2020 consisted of the following:
(Dollars in thousands)20212020
Term loan facility, net of unamortized issuance costs, maturing 2024(1)
$253,450 $793,731 
Capital lease obligations2,497 2,911 
Other notes4,327 3,706 
Total long-term debt260,274 800,348 
Current portion of long-term debt(8,964)(8,839)
Long-term debt, less current portion$251,310 $791,509 
(1)The carrying value of the term loan facility, maturing 2024, is net of unamortized debt issuance costs of $0.8 million at December 31, 2021 and $3.7 million at December 31, 2020.
The annual maturities of long-term debt for each of the five years after December 31, 2021, are as follows (in thousands):
2022$9,056 
20238,977 
2024238,645 
2025758 
2026624 
Thereafter3,499 
Total maturities of long-term debt261,559 
Unamortized issuance costs on Term loan facility(800)
Imputed interest and executory costs on capitalized lease obligations(485)
Total long-term debt$260,274 
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. On May 4, 2020, the Company entered into an amendment (Third Amendment to Credit Agreement) to the Amended Credit Facility, which added an approval to Section 7.2.8 Permitted Dispositions for the Tile Coatings Business Disposition. On December 13, 2021, the Company entered into an agreement to suspend the right from and after December 31, 2021 the ability to select a LIBOR interest period of two months for any borrowing under the Amended Credit Facility caused by this duration period becoming increasingly illiquid, in lieu of amending the Amended Credit Facility or irrevocably waiving any right thereunder. 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 0.00% 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, three or six months, with the interest rate based on the applicable LIBOR rate for the corresponding duration.
At December 31, 2021, the Company had borrowed $110.1 million under the Tranche B-1 Loans at an interest rate of 2.47%, $72.9 million under the Tranche B-2 Loans at an interest rate of 2.47%, and $71.3 million under the Tranche B-3 Loans at an interest rate of 2.47%. At December 31, 2021, 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, 2021, the effective interest rate for all tranches of the term loan facility, inclusive of hedging activities, was 3.58%.
At December 31, 2020, the Company had borrowed $345.2 million under the Tranche B-1 Loans at an interest rate of 2.50%, $228.5 million under the Tranche B-2 Loans at an interest rate of 2.50%, and $223.7 million under the Tranche B-3 Loans at an interest rate of 2.50%. At December 31, 2020, 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, 2020, the effective interest rate for all tranches of the term loan facility, inclusive of hedging activities, was 3.55%.
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 0.00% 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, three or six months, with the interest rate based on the applicable LIBOR rate for the corresponding duration.
At December 31, 2021, there were no borrowings under the 2018 Revolving Credit Facility. After reductions for outstanding letters of credit secured by these facilities, we had $496.1 million of borrowings available under the revolving credit facilities at December 31, 2021.
At December 31, 2020, 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 borrowings available under the revolving credit facilities at December 31, 2020.
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, 2021, we were in compliance with the covenants of the Amended Credit Facility.
As noted in Note 4, on February 25, 2021, we completed the sale of our Tile Coatings business. Proceeds from the close of the transaction, in addition to current cash balances, were used to pay down our term loan facility in the amount of $435.0 million on February 25, 2021. The debt pay-down reduced outstanding amounts of the Tranche B-1 Loans, Tranche B-2 Loans, and Tranche B-3 Loans, by $188.3 million, $124.7 million and $122.0 million, respectively. In conjunction with the prepayment of debt, we recorded a charge of $2.0 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 at December 31, 2021.
During the fourth quarter of 2021, the Company voluntarily paid down our term loan facility in the amount of $100.0 million. The debt pay-down reduced outstanding amounts of the Tranche B-1 Loans, Tranche B-2 Loans, and Tranche B-3 Loans, by $43.3 million, $28.7 million and $28.0 million, respectively. In conjunction with the prepayment of debt, we recorded a charge of $0.3 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 at December 31, 2021.
Receivable Sales Programs
We have several international programs to sell without recourse trade accounts receivable to financial institutions. During the third quarter of 2020, these programs were amended to include a domestic program. 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 years ended December 31, 2021, 2020 and 2019, were immaterial. The program, whose maximum capacity is €85 million, is scheduled to expire on December 31, 2023. Generally, at the transfer date, the Company receives cash equal to approximately 81% 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, which has not yet been collected from the customer, was $44.4 million at December 31, 2021 and $24.5 million at December 31, 2020. The carrying amount of the deferred purchase was $7.7 million at December 31, 2021 and $9.8 million at December 31, 2020 and is recorded in Other receivables. Trade accounts receivable collected from customers to be remitted to financial institutions was $44.5 million at December 31, 2021 and $36.0 million at December 31, 2020 and recorded in Accrued expenses and other current liabilities.
(Dollars in thousands)20212020
Trade accounts receivable sold to financial institutions$618,646 $340,516 
Cash proceeds from financial institutions (1)
499,635 241,937 
(1)Excluded from the table above, in 2020, our Tile Coatings business received cash proceeds from financial institutions of $47.3 million. Refer to Note 4 for additional discussion of the Tile Coatings business and its classification as discontinued operations.
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 $25.0 million and $28.1 million at December 31, 2021 and December 31, 2020, respectively. The unused portions of these lines provided additional liquidity of $25.0 million at December 31, 2021 and December 31, 2020