Financing Arrangements

12 Months Ended

Sep. 30, 2020

Financing Arrangements

Financing Arrangements

NOTE 9—FINANCING ARRANGEMENTS

Long-term debt consists of the following (in thousands):

	September 30,
	2020		2019
Term Loan from a group of financial institutions	$	444,375	$	—
Senior unsecured notes payable		—		200,000
Less unamortized debt issuance costs		(3,010)		(176)
Less current portion		(11,250)		(10,714)
	$	430,115	$	189,110

Maturities of our long-term debt are as follows: 2021 — $11.3 million; 2022 — $16.9 million; 2023 — $28.1 million; 2024 — $33.8 million; 2025 — $354.4 million.

At September 30, 2019, we had $200.0 million of outstanding senior unsecured notes bearing interest rates ranging from 3.35% to 3.93% as well as $226.5 million outstanding under an $800.0 million committed revolving credit agreement with a group of financial institutions. On March 27, 2020, we repaid the remaining principal balance of $189.3 million of senior unsecured notes then outstanding and recognized a loss on debt extinguishment of $16.1 million, consisting of a $15.9 million make-whole payment to the note holders and a write-off of previously capitalized debt issuance costs of $0.2 million.

On March 27, 2020, we executed a Fifth Amended and Restated Credit Agreement (the “Credit Facility”) with a group of financial institutions. The Credit Facility provided for a new term loan in the aggregate amount of $450.0 million (the “Term Loan”) and increased our existing revolving line of credit limit (the “Revolving Line of Credit”) from $800.0 million to $850.0 million. The commitments under the Credit Facility will mature on March 27, 2025 and bear interest generally at the LIBOR rate plus a margin that ranges between 1.00% and 2.00%. At September 30, 2020, the weighted average interest rate on outstanding borrowings under the Credit Facility was 2.15%. The Credit Facility is unsecured, but it is required to be guaranteed by certain significant domestic subsidiaries of Cubic.

On April 1, 2020, we entered into interest rate swaps with a group of financial institutions to mitigate the variable interest rate risk associated with the Credit Facility. The interest rate swaps contain forward starting notional principal amounts which align with our fixed repayment schedules under the Credit Facility and as of September 30, 2020 have an interest rate of approximately 2.74% and the outstanding notional principal amounts of $500.0 million. See Note 5 for a description of the measurement of fair value of our derivative financial instruments.

Interest paid amounted to $20.1 million, $16.8 million and $10.0 million in fiscal 2020, 2019 and 2018, respectively.

Debt issuance and modification costs of $3.4 million were incurred in connection with the execution of the Credit Facility and are recorded as a reduction to the related liability on our Consolidated Balance Sheets, and are being amortized as interest expense using the effective interest method over the stated term of the Credit Facility. At September 30, 2020, our total debt issuance costs for our Term Loan and Revolving Line of Credit had an unamortized balance of $5.6 million.

The available credit under our Revolving Line of Credit is reduced by any letters of credit issued under the Credit Facility. As of September 30, 2020, there were $444.4 million of borrowings under the Term Loan and $209.0 million of borrowings under the Revolving Line of Credit. Letters of credit outstanding under the Credit Facility totaled $93.1 million at September 30, 2020, which reduced our available line of credit to $547.9 million.

As of September 30, 2020, we had letters of credit and bank guarantees outstanding totaling $100.0 million, which includes the $93.1 million of letters of credit issued under the Revolving Line of Credit and $6.9 million of letters of credit issued under other facilities. The $100.0 million of letters of credit and bank guarantees includes $96.0 million that guarantees either our performance or customer advances under certain contracts and financial letters of credit totaling $4.0 million that primarily guarantees our payment of certain self-insured liabilities. We have never had a drawing on a letter of credit instrument, nor are any anticipated; therefore, we estimate the fair value of these instruments to be zero. Surety bonds may be used as an alternative to letters of credit.

We have entered into a short-term borrowing arrangement in the United Kingdom in the amount of £20.0 million British Pounds (equivalent to approximately $25.8 million at September 30, 2020) to help meet the short-term working capital requirements of our subsidiary located in the United Kingdom. At September 30, 2020, an amount equivalent to approximately $6.7 million was outstanding under this arrangement.

We maintain a cash account with a bank in the United Kingdom for which the funds are restricted as to use. The account is required to secure the customer’s interest in cash deposited in the account to fund our activities related to our performance under a fare collection services contract in the United Kingdom. The balance in the account as of September 30, 2020 was $25.5 million and is classified as restricted cash in our Consolidated Balance Sheets.

The terms of the Credit Facility contain financial covenants setting a maximum total ratio of debt to adjusted earnings before interest, taxes, depreciation and amortization and a minimum interest coverage ratio. In addition, the terms contain covenants that restrict, among other things, our ability to sell assets, incur indebtedness, make investments, grant liens, pay dividends and make other restricted payments. As of September 30, 2020, we were in compliance with all covenants under the Credit Facility.

In December 2018, we completed an underwritten public offering of 3,795,000 shares of our common stock, including the exercise of the underwriters’ option to purchase additional shares. All shares were offered by us at a price to the public of $60.00 per share. Net proceeds were $215.8 million, after deducting underwriting discounts and commissions and offering expenses in the aggregate of $11.9 million. We used the net proceeds from the offering to repay a portion of our outstanding borrowings under our Revolving Line of Credit which had been used to finance the acquisition of Trafficware and for general corporate purposes.

Our self-insurance arrangements are limited to certain workers’ compensation plans, automobile liability and product liability claims. Under these arrangements, we self-insure only up to the amount of a specified deductible for each claim.

Self-insurance liabilities included in accrued compensation and current liabilities in our Consolidated Balance Sheets amounted to $5.1 million and $7.4 million as of September 30, 2020 and 2019, respectively.