Debt

12 Months Ended

Aug. 31, 2024

Debt Disclosure [Abstract]

Debt

Note 9 - Debt

Debt consisted of the following as of August 31 (in thousands):

	2024			2023
Bank revolving credit facilities, interest primarily at SOFR plus a spread	$	393,612		$	230,000
Finance lease liabilities		9,042			7,200
Other debt obligations		12,116			12,192
Total debt		414,770			249,392
Less current maturities		(5,688	)		(5,813	)
Debt, net of current maturities	$	409,082		$	243,579

The Company’s senior secured revolving credit facilities provide for $800 million and C$15 million in revolving loans maturing in August 2027. The $800 million credit facility includes a $50 million sublimit for letters of credit, a $25 million sublimit for swing line loans, and a $50 million sublimit for multicurrency borrowings. On June 17, 2024, the Company and certain of its subsidiaries entered into the Fourth Amendment (the “Fourth Amendment”) to its Third Amended and Restated Credit Agreement, dated as of April 6, 2016, by and among the Company, as the U.S. Borrower, Schnitzer Steel Canada, Ltd., as the Canadian Borrower, the subsidiaries of the Company party thereto (the “Guarantors”), Bank of America N.A., as administrative agent and the other lenders party thereto (as amended prior to the Fourth Amendment, the “Existing Credit Agreement”, the Existing Credit Agreement, as amended pursuant to the Fourth Amendment, the “Amended Credit Agreement”).

The principal changes to the Existing Credit Agreement effected by the Fourth Amendment are (i) the removal of the consolidated fixed charge coverage ratio for each of the fiscal quarters ending May 31, 2024 through February 28, 2025, (ii) the introduction of a minimum consolidated interest coverage ratio of 2.00 to 1.00 for the fiscal quarter ending May 31, 2024, and 1.25 to 1.00 for the fiscal quarter ending February 28, 2025, and (iii) the introduction of a minimum consolidated asset coverage ratio of 1.00 to 1.00 for each of the fiscal quarters ending May 31, 2024 through February 28, 2025. The Company incurred $2 million in debt issuance costs in connection with the Amended Credit Agreement, which are amortized to interest expense over the remaining term of the arrangement.

The Fourth Amendment also revised the applicable interest rates under the facility which are based, at the Company’s option, on either the Secured Overnight Financing Rate (“SOFR”) (or the Term Canadian Overnight Repo Rate Average “CORRA” for C$ loans), plus a spread of between 1.50% and 2.50%, with the amount of the spread based on a pricing grid tied to the Company’s ratio of consolidated net funded debt to EBITDA (as defined by the credit agreement), or the greater of (a) the prime rate, (b) the federal funds rate plus 0.50% or (c) the daily rate equal to Term SOFR plus 1.00%, in each case, plus a spread of between 0.50% and 1.50% based on a pricing grid tied to the Company’s consolidated net funded debt to EBITDA ratio. In addition, commitment fees are payable on the unused portion of the credit facilities at rates between 0.175% and 0.350% based on a pricing grid tied to the Company’s ratio of consolidated net funded debt to EBITDA.

As of August 31, 2024 and 2023, borrowings outstanding under the credit facilities were $394 million and $230 million respectively. The weighted average interest rate on amounts outstanding under the credit facilities was 8.0% and 7.2% as of August 31, 2024 and 2023, respectively.

The credit agreement contains various representations and warranties, events of default, and financial and other customary covenants which limit (subject to certain exceptions) the Company’s ability to, among other things, incur or suffer to exist certain liens, make investments, incur or guaranty additional indebtedness, enter into consolidations, mergers, acquisitions, and sales of assets, make distributions and other restricted payments, change the nature of the business, engage in transactions with affiliates, and enter into restrictive agreements, including agreements that restrict the ability of the subsidiaries to make distributions. The financial covenants under the credit agreement included (a) a consolidated fixed charge coverage ratio, defined as the four-quarter rolling sum of consolidated EBITDA less defined maintenance capital expenditures and certain environmental expenditures divided by consolidated fixed charges which, for the fiscal quarters ending May 31, 2024 through February 28, 2025, has been replaced with maintenance covenants during that period requiring compliance with a minimum permitted interest coverage ratio and a minimum permitted asset coverage ratio as per the Fourth Amendment as described above and (b) a consolidated leverage ratio, defined as consolidated funded indebtedness divided by the sum of consolidated net worth and consolidated funded indebtedness. The Company’s obligations under the credit agreement are guaranteed by substantially all of its subsidiaries. The credit facilities and the related guarantees are secured by senior first priority liens on certain of the Company’s and its subsidiaries’ assets, including equipment, inventory, and accounts receivable. The Fourth Amendment expanded the collateral package provided to the lenders to include most other personal property and equity interests held by the Company and the Guarantors in their respective subsidiaries.

As of August 31, 2024, the Company was in compliance with the applicable financial covenants under the Amended Credit Agreement. While the Company expects to remain in compliance with the financial covenants under the credit agreement, the Company may not be able to do so in the event market conditions do not improve, or other factors have a significant adverse impact on its results of operations and financial position. If the Company does not maintain compliance with its financial covenants and is unable to obtain an amendment or waiver from its lenders, a breach of a financial covenant would constitute an event of default and allow the lenders to exercise remedies under the agreements, the most severe of which is the termination of the credit facility under the Amended Credit Agreement and acceleration of the amounts owed under the Agreement.

Other debt obligations, which totaled $12 million as of both August 31, 2024 and 2023 primarily relate to equipment purchases, the contract consideration for which includes an obligation to make future monthly payments to the vendor in the form of licensing fees. For accounting purposes, such obligations are treated as a partial financing of the purchase price by the equipment vendor. Monthly payments commence when the equipment is placed in service and achieves specified minimum operating metrics, with payments continuing for a period of four years thereafter.

Principal payments on the Company’s bank revolving credit facilities and other debt obligations during the next five fiscal years and thereafter are as follows (in thousands):

Year Ending August 31,	Credit Facilities		Other Debt Obligations
2025	$	—	$	3,590
2026		—		2,453
2027		393,612		2,568
2028		—		2,622
2029		—		694
Thereafter		—		189
Total	$	393,612	$	12,116

See Note 5 - Leases for additional disclosure on finance lease obligations, including payments during the next five fiscal years and thereafter. The Company maintains stand-by letters of credit to provide for certain obligations including workers’ compensation and performance bonds. The Company had $7 million and $8 million outstanding under these arrangements as of August 31, 2024 and 2023, respectively.