7.	Borrowing Arrangements

The Corporation has a five-year Revolving Credit and Security Agreement (the “Credit Agreement”) with a syndicate of banks that expires in May 2021. The Credit Agreement provides for initial borrowings not to exceed $100,000 with an option to increase the credit facility by an additional $50,000 at the request of the Corporation and with the approval of the banks. The Credit Agreement includes sublimits for letters of credit not to exceed $40,000, European borrowings not to exceed $15,000, and Canadian borrowings not to exceed $15,000.

In 2018, the banks provided their consent to a sale and leaseback financing transaction, whereby Union Electric Steel Corporation (“UES”) sold certain of its real estate assets to Store Capital Acquisitions, LLC. In connection with providing the consent, the Credit Agreement was amended to increase the interest rate margin by one-half percent per annum for any borrowings, add certain additional reporting requirements regarding beneficial ownership of the Corporation, and update certain schedules to the Credit Agreement. All other material terms, conditions, and covenants with respect to the Credit Agreement remain unchanged.

Availability under the Credit Agreement is based on eligible accounts receivable, inventory and fixed assets. As amended, amounts outstanding under the credit facility bear interest, at the Corporation’s option, at either (i) LIBOR plus an applicable margin ranging between 1.75% to 2.25% based on the quarterly average excess availability or (ii) the base rate plus an applicable margin ranging between 0.75% to 1.25% based on the quarterly average excess availability. Additionally, the Corporation is required to pay a commitment fee ranging between 0.25% and 0.375% based on the daily unused portion of the credit facility. As of September 30, 2018, the Corporation had outstanding borrowings under the Credit Agreement of $13,803 (including £1,000 of European borrowings for its U.K. subsidiary). The average interest rate for the nine months ended September 30, 2018, was approximately 2.77%. Additionally, the Corporation had utilized a portion of the credit facility for letters of credit (Note 8). As of September 30, 2018, remaining availability under the Credit Agreement approximated $45,000, net of an availability reserve associated with proceeds from a sale and leaseback financing transaction. The availability from this reserve will be used toward the settlement of the promissory notes and interest due in March 2019.

Borrowings outstanding under the Credit Agreement are collateralized by a first priority perfected security interest in substantially all of the assets of the Corporation and its subsidiaries (other than real property). Additionally, the Credit Agreement contains customary affirmative and negative covenants and limitations, including, but not limited to, investments in certain of its subsidiaries, payment of dividends, incurrence of additional indebtedness, upstream distributions from subsidiaries, and acquisitions and divestures. The Corporation must also maintain a certain level of excess availability. If excess availability falls below the established threshold, or in an event of default, the Corporation will be required to maintain a minimum fixed charge coverage ratio of not less than 1.00 to 1.00. The Corporation was in compliance with the applicable bank covenants as of September 30, 2018.

In September 2018, UES completed a sale and leaseback financing transaction for certain of its real property, including its manufacturing facilities in Valparaiso, Indiana and Burgettstown, Pennsylvania, and its manufacturing facility and corporate headquarters located in Carnegie, Pennsylvania (the “Properties”). Simultaneously with the sale, UES entered into a lease agreement pursuant to which UES would lease the Properties from the buyer. The lease provides for an initial term of 20 years; however, UES may extend the lease for four successive periods of approximately five years each. If fully extended, the lease would expire in September 2058. UES also has the option to repurchase the Properties, which it may exercise in 2025, for a price equal to the greater of (i) their Fair Market Value, of (ii) 115% of Lessor’s Total Investment for the Facilities, with such terms defined in the lease agreement.

The sale and leaseback financing transaction does not qualify for sale and leaseback accounting due to UES’ ability to repurchase the Properties in 2025. Accordingly, the net asset value of the Properties is not removed and a gain or loss on the sale of the Properties is not recognized. Instead, proceeds are recognized as a debt obligation on the condensed consolidated balance sheet.

Gross proceeds equaled $19,000. The initial annual payment approximates $1,644, due monthly in advance, which is included in debt – current portion on the condensed consolidated balance sheet. Annual payments will increase each anniversary date by an amount equal to the lesser of 2% or 1.25% of the change in the consumer price index, as defined in the lease agreement. Deferred financing fees of approximately $477 were incurred, which are recognized as a reduction of the financing obligation, and are being amortized over seven years.

Outstanding borrowings of the Corporation as of September 30, 2018, and December 31, 2017, consisted of the following:

	September 30, 2018			December 31, 2017
Industrial Revenue Bonds ("IRB")	$	13,311		$	13,311
Promissory notes (and interest)		25,917			25,395
Revolving Credit and Security Agreement		13,803			20,349
Sale and leaseback financing obligation		18,382			0
Minority shareholder loan		4,899			5,325
Capital leases		1,742			1,773
Outstanding borrowings		78,054			66,153
Debt - current portion		(46,163	)		(19,335	)
Long-term debt	$	31,891		$	46,818