Borrowing Arrangements

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Borrowing Arrangements

8. Borrowing Arrangements

Long-term borrowings, as of September 30, 2022 (unaudited) and December 31, 2021, in order of preference, were as follows:

	Amount Outstanding
(millions)	September 30, 2022			December 31, 2021
Senior Credit Facility, net of original discount on borrowings(1)	$	285.8		$	301.6
Other borrowings(2)		21.9			23.9
Deferred financing costs		(2.5	)		(1.5	)
Total obligations		305.2			324.0
Less: Current portion of long-term borrowings		11.8			25.6
Total long-term borrowings, excluding current portion	$	293.4		$	298.4

(1)Includes discount on borrowings of $1.3 million and $0.5 million as of September 30, 2022 and December 31, 2021, respectively.

(2)Includes finance lease liabilities of $20.8 million and $20.7 million as of September 30, 2022 and December 31, 2021, respectively.

Senior Credit Facility

On April 21, 2022 (the “Fifth Amendment Effective Date”), the Company entered into a fifth amendment (the “Fifth Amendment”) to the Company’s credit agreement (as amended prior to the Fifth Amendment Effective Date, the “Credit Agreement”; the Credit Agreement, as amended by the Fifth Amendment, the “Amended Credit Agreement”) with Bank of America, N.A. (“Bank of America”), as Administrative Agent, swing-line lender and a letter of credit issuer; certain subsidiaries of the Company, as guarantors; and the lenders party thereto (the “Lenders”), pursuant to which the Lenders have made available to the Company a senior secured credit facility (the “Senior Credit Facility”). The Senior Credit Facility permits aggregate borrowings of $600.0 million consisting of (i) a revolving credit facility of up to $400.0 million at any time outstanding, which includes a letter of credit facility that is limited to $100.0 million at any time outstanding, and (ii) a term loan facility of $200.0 million. The maturity date of the Senior Credit Facility is April 21, 2027. Prior to the Fifth Amendment Effective Date, the outstanding principal balance under the term loan facility was $182.8 million. Pursuant to the terms of the Fifth Amendment, the Company received an additional advance under the term loan facility in an aggregate principal amount of $17.2 million on April 21, 2022, so that as of the Fifth Amendment Effective Date, the outstanding balance thereunder was $200.0 million.

In addition, the Fifth Amendment transitioned all loans under the Senior Credit Facility that bore interest at the London Interbank Offered Rate (“LIBOR”) to a forward-looking SOFR term interest rate administered by CME (“Term SOFR”). Borrowings under the Senior Credit Facility bear interest, at the Company’s option, at the (i) Term SOFR plus a credit spread adjustment, subject to a “floor” on Term SOFR of 0.00%, or a successor rate to SOFR approved in accordance with the terms of the Amended Credit Agreement or (ii) a base rate consisting of the highest of (x) the federal funds rate plus 0.5%, (y) the Bank of America prime rate or (z) a daily rate equal to Term SOFR for an interest period of one-month plus 1.0%. The applicable margin is based on the Company’s ratio of consolidated total debt (net of up to $30.0 million in unrestricted cash and cash equivalents) to EBITDA for the 12-month period ending as of the last day of the immediately preceding fiscal quarter (the “Consolidated Leverage Ratio”), determined in accordance with the applicable pricing levels set forth in the Amended Credit Agreement.

The Amended Credit Agreement provided that the maximum Consolidated Leverage Ratio was 4.50:1.0 for the fiscal quarter ending September 30, 2022. Additionally, per the terms of the Amended Credit Agreement, the Consolidated Leverage Ratio will be 4.25:1.0 for the fiscal quarters ending December 31, 2022, March 31, 2023, June 30, 2023 and September 30, 2023, and 4.00:1.00 for the fiscal quarter ending December 31, 2023 and each fiscal quarter ending thereafter. In addition, the Amended Credit Agreement provides a covenant holiday option to the Consolidated Leverage Ratio covenant, which allows the Company to elect to raise the maximum Consolidated Leverage Ratio up to 4.50:1.0 for a fiscal quarter in which an acquisition involving consideration in excess of $50.0 million would be consummated, subject to the conditions in the Amended Credit Agreement.

The Amended Credit Agreement provides that the Company shall maintain a minimum consolidated interest coverage ratio of 3.5:1.0 for each fiscal quarter.

Under the terms of the Amended Credit Agreement, term loans under the Senior Credit Facility are subject to scheduled quarterly payments of principal in installments equal to 0.625% of the initial aggregate principal amount of such term loan outstanding on the Fifth Amendment Effective Date and commencing at the end of the fiscal quarter ending June 30, 2024, in quarterly installments equal to 1.25% of the initial aggregate principal amount of the term loan outstanding on the Fifth Amendment Effective Date.

Events of default under the Amended Credit Agreement include failure to pay principal or interest when due, failure to comply with the financial and operational covenants, the occurrence of any cross default event, non-compliance with other loan documents, the occurrence of a change in control event, and bankruptcy and other insolvency events.

Each wholly owned domestic subsidiary of the Company (subject to certain exceptions set forth in the Amended Credit Agreement) has guaranteed all existing and future indebtedness and liabilities of the other guarantors and the Company arising under the Credit Agreement. The Company’s obligations under the Credit Agreement and such domestic subsidiaries’ guaranty obligations are secured by substantially all of their respective assets.

As of September 30, 2022, the Company was in compliance with its debt covenants under the Amended Credit Agreement.

As of September 30, 2022, the Company had $39.5 million of letters of credit outstanding under the Senior Credit Facility and borrowings against the Senior Credit Facility aggregated to $287.1 million.

The weighted average interest rate on the Company's Senior Credit Facility was 4.6% and 3.6% during the nine months ended September 30, 2022 and 2021, respectively. That rate included the interest rate collars and letters of credit. The weighted average interest rate on all outstanding borrowings, not including letters of credit, was 4.9% and 3.8% during the nine months ended September 30, 2022 and 2021, respectively.

During the nine months ended September 30, 2022 and 2021, the Company incurred approximately $2.5 million and $1.3 million, respectively, for fees and other customary closing costs in connection with the Fifth Amendment and the fourth amendment to the Credit Agreement, respectively.

Interest Rate Collars

In May 2019, the Company entered into three-year interest rate collar contracts with an aggregate notional amount of $222.3 million. The interest rate collar contracts matured in April 2022. The interest rate collars were used to manage interest rate risk associated with variable interest rate borrowings under the Credit Agreement. The interest rate collars established a range where the Company would pay the counterparties if the one-month LIBOR rate fell below the established floor rate, and the counterparties would pay the Company if the one-month LIBOR rate exceeded the established ceiling rate of 2.5%. The interest rate collars settled monthly through the maturity date. No payments or receipts were exchanged on the interest rate collar contracts unless interest rates rose above or fell below the pre-determined ceiling or floor rates. The notional amount amortized consistently with the term loan portion of the Senior Credit Facility under the Credit Agreement prior to the third amendment to the Credit Agreement (the “Third Amendment”). The fair value of the interest rate collars was a Level 2 fair value measurement, as the fair value was determined based on quoted prices of similar instruments in active markets. As of December 31, 2021, the liability for the interest rate collars was $0.7 million, which was included in Other noncurrent liabilities within the Condensed Consolidated Balance Sheets. The interest rate collars were classified as cash flow hedges through May 5, 2020.

On May 6, 2020, concurrent with entering into the Third Amendment, the Company de-designated the interest rate collars. Prior to de-designation, the effective portion of the change in the fair value of the interest rate collars was reported in Accumulated other comprehensive loss. Upon de-designation, the balance in Accumulated other comprehensive loss was being reclassified to Other expense within the Condensed Consolidated Statements of Income on a straight-line basis through April 2022, which was over the remaining life for which the interest rate collars had previously been designated as cash flow hedges. Changes in the fair value of the interest rate collars after de-designation were included in Other expense within the Condensed Consolidated Statements of Income. During the nine months ended September 30, 2022, $0.8 million was paid in interest related to the interest rate collars. During the three and nine months ended September 30, 2021, $0.6 million and $1.8 million, respectively, was paid in interest related to the interest rate collars.

See Note 12. Comprehensive Income for the amount reclassified from Accumulated other comprehensive loss to the Condensed Consolidated Statements of Income.

Subordinated Convertible Debentures

The Company acquired Subordinated Convertible Debentures ("Convertible Debentures") as a result of the October 2, 2012 acquisition of Central Parking Corporation. As of October 2, 2012, the Convertible Debentures were no longer redeemable for shares. The subordinated debenture holders have the right to redeem the Convertible Debentures for $19.18 per share upon acceleration or earlier repayment of the Convertible Debentures. The Convertible Debentures mature April 1, 2028 at $25 per share. There were no redemptions of Convertible Debentures during the periods ended September 30, 2022 and December 31, 2021, respectively. The approximate redemption value of the Convertible Debentures outstanding as of September 30, 2022 and December 31, 2021 was $1.1 million, which was included in Long-term borrowings, excluding current portion, within the Condensed Consolidated Balance Sheets.