| Debt |
NOTE 12 - DEBT Debt for SBH and SB/RH as of September 30, 2019 and 2018 consists of the following: | | | | | | | | | | | | | | | | | | | | | | | | | | | SBH | | SB/RH | | | 2019 | | 2018 | | 2019 | | 2018 | (in millions) | | Amount | | Rate | | Amount | | Rate | | Amount | | Rate | | Amount | | Rate | Spectrum Brands Inc. | | | | | | | | | | | | | | | | | | | | | | | | | Term Loan, variable rate, due June 23, 2022 | | $ | — | | — | % | | $ | 1,231.7 | | 4.4 | % | | $ | — | | — | % | | $ | 1,231.7 | | 4.4 | % | CAD Term Loan, variable rate, due June 23, 2022 | | | — | | — | % | | | 32.8 | | 5.5 | % | | | — | | — | % | | | 32.8 | | 5.5 | % | Revolver Facility, variable rate, expiring March 6, 2022 | | | — | | — | % | | | — | | — | % | | | — | | — | % | | | — | | — | % | 6.625% Notes, due November 15, 2022 | | | 117.4 | | 6.6 | % | | | 570.0 | | 6.6 | % | | | 117.4 | | 6.6 | % | | | 570.0 | | 6.6 | % | 6.125% Notes, due December 15, 2024 | | | 250.0 | | 6.1 | % | | | 250.0 | | 6.1 | % | | | 250.0 | | 6.1 | % | | | 250.0 | | 6.1 | % | 5.00% Notes, due October 1, 2029 | | | 300.0 | | 5.0 | % | | | — | | — | % | | | 300.0 | | 5.0 | % | | | — | | — | % | 5.75% Notes, due July 15, 2025 | | | 1,000.0 | | 5.8 | % | | | 1,000.0 | | 5.8 | % | | | 1,000.0 | | 5.8 | % | | | 1,000.0 | | 5.8 | % | 4.00% Notes, due October 1, 2026 | | | 465.0 | | 4.0 | % | | | 494.7 | | 4.0 | % | | | 465.0 | | 4.0 | % | | | 494.7 | | 4.0 | % | Other notes and obligations | | | 9.5 | | 10.4 | % | | | 7.3 | | 9.5 | % | | | 9.5 | | 10.4 | % | | | 7.3 | | 9.5 | % | Intercompany note with parent | | | — | | — | % | | | — | | — | % | | | — | | — | % | | | 520.0 | | 4.3 | % | Obligations under capital leases | | | 165.6 | | 5.6 | % | | | 175.1 | | 5.5 | % | | | 165.6 | | 5.6 | % | | | 175.1 | | 5.5 | % | Total Spectrum Brands, Inc. debt | | | 2,307.5 | | | | | | 3,761.6 | | | | | | 2,307.5 | | | | | | 4,281.6 | | | | Spectrum Brands Holdings, Inc. | | | | | | | | | | | | | | | | | | | | | | | | | HRG - 7.75% Senior Unsecured Notes, due January 15, 2022 | | | — | | — | % | | | 890.0 | | 7.8 | % | | | — | | — | % | | | — | | — | % | Salus - unaffiliated long-term debt of consolidated VIE | | | 77.0 | | — | % | | | 77.0 | | — | % | | | — | | — | % | | | — | | — | % | Total SBH debt | | | 2,384.5 | | | | | | 4,728.6 | | | | | | 2,307.5 | | | | | | 4,281.6 | | | | Unamortized discount on debt | | | (0.2) | | | | | | (19.8) | | | | | | — | | | | | | (2.8) | | | | Debt issuance costs | | | (33.0) | | | | | | (57.6) | | | | | | (31.5) | | | | | | (45.5) | | | | Less current portion | | | (136.9) | | | | | | (26.9) | | | | | | (136.9) | | | | | | (546.9) | | | | Long-term debt, net of current portion | | $ | 2,214.4 | | | | | $ | 4,624.3 | | | | | $ | 2,139.1 | | | | | $ | 3,686.4 | | | |
The Company’s aggregate scheduled maturities of debt and capital lease obligations are as follows: | | | | | | | | | | | | | | | | | | | | | SBH | | SB/RH | (in millions) | | Capital Lease Obligations | | Debt | | Total | | Capital Lease Obligations | | Debt | | Total | 2020 | | $ | 17.5 | | $ | 126.9 | | $ | 144.4 | | $ | 17.5 | | $ | 126.9 | | $ | 144.4 | 2021 | | | 19.7 | | | 77.0 | | | 96.7 | | | 19.7 | | | — | | | 19.7 | 2022 | | | 16.5 | | | — | | | 16.5 | | | 16.5 | | | — | | | 16.5 | 2023 | | | 15.5 | | | — | | | 15.5 | | | 15.5 | | | — | | | 15.5 | 2024 | | | 15.4 | | | 250.0 | | | 265.4 | | | 15.4 | | | 250.0 | | | 265.4 | Thereafter | | | 179.9 | | | 1,765.0 | | | 1,944.9 | | | 179.9 | | | 1,765.0 | | | 1,944.9 | Total | | | 264.5 | | | 2,218.9 | | | 2,483.4 | | | 264.5 | | | 2,141.9 | | | 2,406.4 | Interest | | | (98.9) | | | — | | | (98.9) | | | (98.9) | | | — | | | (98.9) | Long-term debt | | $ | 165.6 | | $ | 2,218.9 | | $ | 2,384.5 | | $ | 165.6 | | $ | 2,141.9 | | $ | 2,307.5 |
Spectrum Term Loans and Revolver Facility On June 23, 2015, SBI entered into term loan facilities pursuant to a Senior Credit Agreement consisting of (i) a $1,450 million USD Term Loan due June 23, 2022, (ii) a $75 million CAD Term Loan due June 23, 2022 and (iii) a €300 million Euro Term Loan due June 23, 2022, (collectively, “Term Loans”) and (iv) entered into a $500 million Revolver Facility due June 23, 2020 (the “Revolver”). The proceeds from the Term Loans and draws on the Revolver were used to repay SBI’s then-existing senior term credit facility, repay SBI’s outstanding 6.75% senior unsecured notes due 2020, repay and replace SBI’s then-existing asset based revolving loan facility, and to pay fees and expenses in connection with the refinancing and for general corporate purposes. On October 6, 2016, the Company entered into the first amendment to the Senior Credit Agreement under its Term Loans and Revolver Facility (the “Credit Agreement”) reducing the interest rate margins applicable to the USD Term Loans to either adjusted LIBOR (International Exchange London Interbank Offered Rate), subject to a 0.75% floor plus margin of 2.50% per annum, or base rate with a 1.75% floor plus margin of 1.50% per annum. The Company recognized $1.0 million of costs in connection with amending the Credit Agreement that has been recognized as interest expense. On March 6, 2017, the Company entered into a second amendment to the Credit Agreement expanding the overall capacity of the Revolver Facility to $700 million, reducing the interest rate margin to either adjusted LIBOR plus margin ranging from 1.75% to 2.25%, or base rate plus margin ranging from 0.75% to 1.25%, reducing the commitment fee to 35bps, and extending the maturity to March 6, 2022. The Company recognized $2.6 million of costs in connection with amending the cash revolver that has been deferred as debt issuance costs. On April 7, 2017, the Company entered into a third amendment to the Credit Agreement reducing the interest rate margins applicable to the USD Term Loans to either adjusted LIBOR plus margin of 2.00% per annum, or base rate plus margin of 1.00%. The Company recognized $0.6 million of costs in connection with amending the Credit Agreement that has been recognized as interest expense. On May 16, 2017, the Company entered into a fourth amendment to the Credit Agreement increasing its USD Term Loan by $250.0 million of incremental borrowings and removing the floor which both LIBOR and base rates were subject to. The Company recognized $2.7 million as costs in connection with the increased borrowing that has been deferred as debt issuance costs. On May 24, 2017, the Company extinguished its Euro Term Loan and recognized non-cash interest expense of $0.6 million for previously deferred debt issuance costs in connection with the extinguishment. NOTE 12 – DEBT (continued) On March 28, 2018, the Company entered into a fifth amendment to the Credit Agreement, expanding the overall capacity of the Revolver Facility to $800 million. On October 31, 2018, the Company paid the $32.6 million CAD Term Loan in full. On January 4, 2019, the Company paid $1,231.7 million USD Term Loan in full using proceeds received from the divestiture of GBL, recognizing a loss on extinguishment of the debt of $9.0 million within interest expense attributable to a non-cash charge from the write-off of deferred financing costs and original issue discount associated with the debt. As of September 30, 2019, the Revolver Facility is subject to either adjusted LIBOR plus margin ranging from 1.75% to 2.25% per annum, or base rate plus margin ranging from 0.75% to 1.25% per annum. The Credit Agreement, solely with respect to the Revolver Facility, contains a financial covenant test on the last day of each fiscal quarter on the maximum total leverage ratio. This is calculated as the ratio of (i) the principal amount of third party debt for borrowed money (including unreimbursed letter of credit drawings), capital leases and purchase money debt, at period-end, less cash and cash equivalents, to (ii) adjusted EBITDA for the trailing twelve months. The maximum total leverage ratio should be no greater than 6.0 to 1.0. As of September 30, 2019, we were in compliance with all covenants under the Credit Agreement. Pursuant to a guarantee agreement, SB/RH and the material wholly-owned domestic subsidiaries of SBI have guaranteed SBI’s obligations under the Senior Credit Agreement and related loan documents. Pursuant to a security agreement, SBI and such subsidiary guarantors have pledged substantially all of their respective assets to secure such obligations and, in addition, SB/RH has pledged the capital stock of SBI to secure such obligations. The Senior Credit Agreement also provides for customary events of default including payment defaults and cross-defaults to other material indebtedness. As a result of borrowings and payments under the Revolver Facility, at September 30, 2019, the Company had borrowing availability of $779.0 million, net outstanding letters of credit of $19.5 million and $1.5 million allocated to a foreign subsidiary. Spectrum 5.00% Notes On September 24, 2019, SBI issued $300.0 million aggregate principal amount of 5.00% Senior Notes due October 1, 2029. The 5.00% Notes are guaranteed by SB/RH as well as by SBI’s existing and future domestic subsidiaries. On or after October 1, 2024, SBI may redeem some or all of the Notes at certain fixed redemption prices. In addition, prior to October 1, 2024, SBI may redeem the Notes at a redemption price equal to 100% of the principal amount plus a “make-whole” premium. SBI may redeem up to 35% of the Notes, including additional notes, with an amount of cash equal to the net proceeds of equity offerings at specified redemption prices. Further, the indenture governing the 5.00% Notes (the “2029 Indenture”) requires SBI to make an offer, in cash, to repurchase all or a portion of the applicable outstanding notes for a specified redemption price, including a redemption premium, upon the occurrence of a change of control of SBI, as defined in the 2029 Indenture. The 2029 Indenture contains covenants that limit, among other things, the incurrence of additional indebtedness, payment of dividends on or redemption or repurchase of equity interests, the making of certain investments, expansion into unrelated businesses, creation of liens on assets, merger or consolidation with another company, transfer or sale of all or substantially all assets, and transactions with affiliates. In addition, the 2029 Indenture proves for customary events of default, including failure to make required payments, failure to comply with certain agreements or covenants, failure to make payments when due or on acceleration of certain other indebtedness, and certain events of bankruptcy and insolvency. Events of default under the 2029 Indenture arising from certain events of bankruptcy or insolvency will automatically cause the acceleration of the amounts due under the 5.00% Notes. If any other event of default under the 2029 Indenture occurs and is continuing, the trustee for the 2029 Indenture or the registered holders of at least 25% in the then aggregate outstanding principal amount of the 5.00% Notes, may declare the acceleration of the amounts due under those notes. As of September 30, 2019, we were in compliance with all covenants under the indentures governing the 5.00% Notes. The Company recorded $4.1 million of fees in connection with the offering of the 5.00% Notes, which have been capitalized as debt issuance costs and are being amortized over the remaining life of the 5.00% Notes. Spectrum 4.00% Notes On September 20, 2016, SBI issued €425 million aggregate principal amount of 4.00% Notes at par value, due October 1, 2026. The 4.00% Notes are guaranteed by SB/RH as well as by SBI’s existing and future domestic subsidiaries. SBI may redeem all or a part of the 4.00% Notes, at any time on or after October 1, 2021 at specified redemption prices. In addition, prior to October 1, 2021, SBI may redeem the notes at a redemption price equal to 100% of the principal amounts plus a “make-whole” premium. SBI is also entitled to redeem up to 35% of the aggregate principal amount of the notes before October 1, 2019 with an amount of cash equal to the net proceeds that SBI raises in equity offerings at specified redemption prices. Further, the indenture governing the 4.00% Notes (the “2026 Indenture”) requires SBI to make an offer, in cash, to repurchase all or a portion of the applicable outstanding notes for a specified redemption price, including a redemption premium, upon the occurrence of a change of control of SBI, as defined in the 2026 Indenture. The 2026 Indenture contains customary covenants that limit, among other things, the incurrence of additional indebtedness, payment of dividends on or redemption or repurchase of equity interests, the making of certain investments, expansion into unrelated businesses, creation of liens on assets, merger or consolidation with another company, transfer or sale of all or substantially all assets, and transactions with affiliates. In addition, the 2026 Indenture provides for customary events of default, including failure to make required payments, failure to comply with certain agreements or covenants, failure to make payments when due or on acceleration of certain other indebtedness, and certain events of bankruptcy and insolvency. Events of default under the 2026 Indenture arising from certain events of bankruptcy or insolvency will automatically cause the acceleration of the amounts due under the 4.00% Notes. If any other event of default under the 2026 Indenture occurs and is continuing, the trustee for the 2026 Indenture or the registered holders of at least 25% in the then aggregate outstanding principal amount of the 4.00% Notes, may declare the acceleration of the amounts due under those notes. As of September 30, 2019, we were in compliance with all covenants under the indentures governing the 4.00% Notes. The Company recorded $7.7 million of fees in connection with the offering of the 4.00% Notes, which have been capitalized as debt issuance costs and are being amortized over the remaining life of the 4.00% Notes. NOTE 12 – DEBT (continued) Spectrum 5.75% Notes On May 20, 2015, SBI issued $1,000 million aggregate principal amount of 5.75% Notes at par value, due July 15, 2025 (the “5.75% Notes”). The 5.75% Notes are guaranteed by SB/RH as well as by SBI’s existing and future domestic subsidiaries. SBI may redeem all or a part of the 5.75% Notes, at any time on or after July 15, 2020, at specified redemption prices. In addition, prior to July 15, 2020, SBI may redeem the notes at a redemption price equal to 100% of the principal amount plus a “make-whole” premium. SBI is also entitled to redeem up to 35% of the aggregate principal amount of the notes before July 15, 2018 with an amount of cash equal to the net proceeds that SBI raises in equity offerings at specified redemption prices. Further, the indenture governing the 5.75% Notes (the “2025 Indenture”) requires SBI to make an offer, in cash, to repurchase all or a portion of the applicable outstanding notes for a specified redemption price, including a redemption premium, upon the occurrence of a change of control of SBI, as defined in the 2025 Indenture. The 2025 Indenture contains customary covenants that limit, among other things, the incurrence of additional indebtedness, payment of dividends on or redemption or repurchase of equity interests, the making of certain investments, expansion into unrelated businesses, creation of liens on assets, merger or consolidation with another company, transfer or sale of all or substantially all assets, and transactions with affiliates. In addition, the 2025 Indenture provides for customary events of default, including failure to make required payments, failure to comply with certain agreements or covenants, failure to make payments when due or on acceleration of certain other indebtedness, and certain events of bankruptcy and insolvency. Events of default under the 2025 Indenture arising from certain events of bankruptcy or insolvency will automatically cause the acceleration of the amounts due under the 5.75% Notes. If any other event of default under the 2025 Indenture occurs and is continuing, the trustee for the 2025 Indenture or the registered holders of at least 25% in the then aggregate outstanding principal amount of the 5.75% Notes, may declare the acceleration of the amounts due under those notes. As of September 30, 2019, we were in compliance with all covenants under the indentures governing the 5.75% Notes. The Company recorded $19.7 million of fees in connection with the offering of the 5.75% Notes, which have been capitalized as debt issuance costs and are being amortized over the remaining life of the 5.75% Notes. Spectrum 6.125% Notes On December 4, 2014, SBI issued $250 million aggregate principal amount of 6.125% Notes at par value, due December 15, 2024 (the”6.125% Notes”). The 6.125% Notes are guaranteed by SB/RH, as well as by SBI’s existing and future domestic subsidiaries. SBI may redeem all or a part of the 6.125% Notes, at any time on or after December 15, 2019, at specified redemption prices. Prior to December 15, 2019, SBI may redeem the notes at a redemption price equal to 100% of the principal amount plus a “make-whole” premium. SBI is also entitled to redeem up to 35% of the aggregate principal amount of the notes before December 15, 2017 with an amount of cash equal to the net proceeds that SBI raises in equity offerings at specified redemption prices. Further, the indenture governing the 6.125% Notes (the “2024 Indenture”) requires SBI to make an offer, in cash, to repurchase all or a portion of the applicable outstanding notes for a specified redemption price, including a redemption premium, upon the occurrence of a change of control of SBI, as defined in the 2024 Indenture. The 2024 Indenture contains customary covenants that limit, among other things, the incurrence of additional indebtedness, payment of dividends on or redemption or repurchase of equity interests, the making of certain investments, expansion into unrelated businesses, creation of liens on assets, merger or consolidation with another company, transfer or sale of all or substantially all assets, and transactions with affiliates. In addition, the 2024 Indenture provides for customary events of default, including failure to make required payments, failure to comply with certain agreements or covenants, failure to make payments when due or on acceleration of certain other indebtedness, and certain events of bankruptcy and insolvency. Events of default under the 2024 Indenture arising from certain events of bankruptcy or insolvency will automatically cause the acceleration of the amounts due under the 6.125% Notes. If any other event of default under the 2024 Indenture occurs and is continuing, the trustee for the 2024 Indenture or the registered holders of at least 25% in the then aggregate outstanding principal amount of the 6.125% Notes, may declare the acceleration of the amounts due under those notes. As of September 30, 2019, we were in compliance with all covenants under the indentures governing the 6.125% Notes. The Company recorded $4.6 million of fees in connection with the offering of the 6.125% Notes, which have been capitalized as debt issuance costs and are being amortized over the remaining life of the 6.125% Notes. Spectrum 6.375% Notes and 6.625% Notes On December 17, 2012, in connection with the acquisition of HHI Business, the Company assumed $520 million aggregate principal amount of 6.375% Notes at par value, due November 15, 2020 (the “6.375% Notes”), and $570 million aggregate principal amount of 6.625% Notes at par value, due November 15, 2022 (the “6.625% Notes”). During the year ended September 30, 2016, in connection with the issuance of the 4.00% Notes previously discussed, the Company repurchased $390.3 million aggregate principal amount of the 6.375% Notes in a cash tender offer. In connection with the tender, the Company recognized $6.5 million of fees and expenses and a $15.6 million tender premium as interest expense and wrote off $5.8 million of previously capitalized debt issuance costs as a non-cash charge to interest expense during the year ended September 30, 2016. On October 20, 2016, the Company redeemed the remaining outstanding aggregate principal on the 6.375% Notes of $129.7 million, with a make whole premium of $4.6 million recognized as interest expense and $1.9 million in non-cash interest expense for previously deferred debt issuance costs for the year ended September 30, 2017. The 6.625% Notes are unsecured and guaranteed by SB/RH, as well as by existing and future domestic restricted subsidiaries. The Company may redeem all or a part of the 6.625% Notes, upon not less than 30 or more than 60 days notice, at specified redemption prices. Further, the indenture governing the 6.625% Notes (the “2020/22 Indenture”) requires the Company to make an offer, in cash, to repurchase all or a portion of the applicable outstanding notes for a specified redemption price, including a redemption premium, upon the occurrence of a change of control of the Company, as defined in such indenture. Subsequent to the year ended September 30, 2017 and effective November 15, 2017, the 6.625% Notes became callable by the Company. NOTE 12 – DEBT (continued) On March 21, 2019, the Company completed the prepayment of $285.0 million of the $570.0 million aggregate principal amount of its 6.625% Notes, plus accrued and unpaid interest, using proceeds received from the GAC divestiture, recognizing a loss on extinguishment of the debt of $9.6 million attributable to a $6.3 million premium on repayment of the debt and a non-cash charge of $3.3 million attributable to the write-off of deferred financing costs associated with the debt. On September 24, 2019, the Company repurchased a total of $167.6 million aggregate principal amount or approximately 58.8% of the outstanding aggregate principal amount of the 6.625% Notes in a cash tender offer. In connection with the tender, the Company recognized a loss on extinguishment of debt of $4.6 million attributable to a $2.9 million premium on repayment of the debt and a non-cash charge of $1.7 million attributable to the write-off of deferred financing costs associated with the debt. On September 24, 2019, we amended the 6.625% Notes indenture to eliminate substantially all of the restrictive covenants and certain events of default. Subsequent to September 30, 2019 there was a redemption of $1.0 million as part of the original tender offer. On October 8, 2019, the Company issued a notice to redeem the remaining $116.5 million outstanding with an expected redemption date of November 15, 2019. HRG 7.75% Notes As of September 30, 2018, the Company had an outstanding balance of $890.0 million of 7.75% senior notes due 2022 (the “7.75% Notes”). On January 30, 2019, the Company repaid its 7.75% Senior Unsecured Notes from HRG Group in full using proceeds received from the GBL and GAC divestitures, recognizing a loss on extinguishment of the debt of $41.2 million within interest expense attributable to a $17.2 million premium on repayment of the debt and a non-cash charge of $24.0 million attributable to the write-off of deferred financing costs and original issue discount associated with the debt. Salus In February 2013, September 2013 and February 2015, Salus completed a collateralized loan obligation (“CLO”) securitization of up to $578.5 million notional aggregate principal amount. At September 30, 2019 and 2018, the outstanding notional aggregate principal amount of $77.0 million, was taken up by unaffiliated entities, including HRG’s former subsidiary, FGL, and consisted entirely of subordinated debt in both periods. As of September 30, 2017, there was $48.1 million taken up by FGL and included in Assets of Businesses Held for Sale in the accompanying Consolidated Statement of Financial Position. The CLO subordinated debt is non-recourse to the Company. The obligations of the securitization are secured by the assets of the variable interest entity, primarily asset-based loan receivables and carry residual interest subject to maintenance of certain covenants. As of September 30, 2019, the CLO’s assets consisted of $0.4 million of cash that is being held back to cover wind-down and legal expenses. The subordinated tranches carry residual interest subject to maintenance of certain covenants. Due to losses incurred in the CLO, the CLO did not accrue interest on the subordinated debt as of September 30, 2019 and 2018.
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