Debt

12 Months Ended

Sep. 30, 2022

Debt

Debt

Note 8.  Debt

U.S. revolving credit facility

On October 19, 2020, the Company and JPMorgan Chase Bank, N.A. entered into a Credit Agreement (the “Credit Agreement”) and related Pledge and Security Agreement with certain other lenders (the “Security Agreement”, and, together with the Credit Agreement, the “Credit Documents”).  The Credit Documents, which had a three-year term

expiring in October 2023, replaced the Third Amended and Restated Loan and Security Agreement and related agreements, dated as of July 14, 2011, as amended, previously entered into between the Company and Wells Fargo Capital Finance, LLC with certain other lenders.  On August 30, 2022, the Company amended the Credit Agreement to extend the maturity of the agreement from October 19, 2023 to April 19, 2024 and switched from a LIBOR-based interest rate calculation to a SOFR-based interest rate calculation.  On October 7, 2022, the Company again amended the Credit Agreement to implement an accordion feature that increased the maximum borrowing amount from $100.0 million to $160.0 million, subject to a borrowing base and certain reserves.  

As of September 30, 2022, the Credit Agreement had a balance of $74.7 million which is classified as long-term on the Consolidated Balance Sheet.  With the amendment executed on October 7, 2022, the Credit Agreement provides for revolving loans in the maximum amount of $160.0 million, subject to a borrowing base and certain reserves. The Credit Agreement has a remaining accordion which permits an increase in the maximum revolving loan amount from $160.0 million up to an aggregate amount of $170.0 million at the request of the borrower if certain conditions are met. Borrowings under the Credit Agreement bear interest, at the Company’s option, at either JPMorgan’s “prime rate”, plus 1.25% - 1.75% per annum, or the adjusted SOFR rate (SOFR plus 0.10%) by the lender, plus 2.25% - 2.75% per annum (with a SOFR floor of 0.5%).    

The Company must pay monthly, in arrears, a commitment fee of 0.425% per annum on the unused amount of the U.S. revolving credit facility total commitment. For letters of credit, the Company must pay a fronting fee of 0.125% per annum as well as customary fees for issuance, amendments and processing.

The Company is subject to certain covenants as to fixed charge coverage ratios and other customary covenants, including covenants restricting the incurrence of indebtedness, the granting of liens and the sale of assets. The covenant pertaining to fixed charge coverage ratios is only effective in the event the amount of excess availability under the revolver is less than the greater of (i) 12.5% of the maximum credit revolving loan amount and (ii) $12.5 million. The Company is permitted to pay dividends and repurchase common stock if certain financial metrics are met.  The Company may pay quarterly cash dividends up to $3.5 million per fiscal quarter so long as the Company is not in default under the Credit Documents.

Borrowings under the Credit Agreement are collateralized by a pledge of substantially all of the U.S. assets of the Company, including the equity interests in its U.S. subsidiaries, but excluding the four-high Steckel rolling mill and related assets, which are pledged to Titanium Metals Corporation (“TIMET”) to secure the performance of the Company’s obligations under a Conversion Services Agreement with TIMET (see discussion of TIMET at Note 15).  Borrowings under the Credit Agreement are also secured by a pledge of a 100% equity interest in each of the Company’s direct foreign subsidiaries.

The Company’s U.K. subsidiary (Haynes International Ltd.) has an overdraft facility of 1,333 Pounds Sterling ($1,471), all of which was available on September 30, 2022. The Company’s French subsidiary (Haynes International, S.A.R.L.) has an overdraft banking facility of 240 Euro ($234), all of which was available on September 30, 2022.  The Company’s Swiss subsidiary (Haynes International AG) has an overdraft banking facility of 1,020 Swiss Francs ($1,040), all of which was available on September 30, 2022.