Long-term debt

12 Months Ended

Dec. 31, 2023

Debt Disclosure [Abstract]

Long-term debt

Note 9 – Long-term debt:

	December 31,
	2022		2023
	(In millions)
Valhi:
Contran credit facility	$	121.4	$	93.4
Subsidiary debt:
Kronos:
Kronos International, Inc. 3.75% Senior Secured Notes due 2025		424.1		440.9
LandWell:
Note payable to Western Alliance Business Trust		12.9		12.2
Other		1.1		—
Total subsidiary debt		438.1		453.1
Total debt		559.5		546.5
Less current maturities		1.8		.7
Total long-term debt	$	557.7	$	545.8

Valhi – Contran credit facility – We have an unsecured revolving credit facility with Contran which, as amended, provides for borrowings from Contran of up to $150 million. The facility, as amended, bears interest at prime plus 1% (9.50% at December 31, 2023), and is due on demand, but in any event no earlier than December 31, 2025. The facility contains no financial covenants or other financial restrictions. Valhi pays an unused commitment fee quarterly to Contran on the available balance (except during periods during which Contran would be a net borrower from Valhi). The average interest rate on the credit facility for the year ended December 31, 2023 was 9.20%. During 2023 we had no borrowings and repayments of $28.0 million under this facility, and at December 31, 2023 an additional $56.6 million was available for borrowings under this facility.

Kronos

3.75% Senior Secured Notes due 2025 – On September 13, 2017, Kronos International, Inc. (KII), Kronos’ wholly-owned subsidiary, issued €400 million aggregate principal amount of its 3.75% Senior Secured Notes due September 15, 2025 (the “Old Notes”) at par value ($477.6 million when issued).

The Old Notes:

● bear interest at 3.75% per annum, payable semi-annually on March 15 and September 15 of each year, payments began on March 15, 2018;

● have a maturity date of September 15, 2025. Kronos may redeem the Old Notes at 100%, plus accrued and unpaid interest. If Kronos experiences certain specified change of control events as outlined in the indenture governing its Old Notes, it would be required to make an offer to purchase the Old Notes at 101% of the principal amount, plus accrued and unpaid interest. Kronos would also be required to make an offer to purchase a specified portion of the Old Notes at par value, plus accrued and unpaid interest, in the event that it generates a certain amount of net proceeds from the sale of assets outside the ordinary course of business, and such net proceeds are not otherwise used for specified purposes within a specified time period as described in the indenture governing its Old Notes;

● are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by Kronos Worldwide, Inc. and each of its direct and indirect domestic, wholly-owned subsidiaries; and

● have substantially similar collateral, guarantees and covenants to the New Notes.

The carrying value of the Old Notes at December 31, 2023 is stated net of unamortized debt issuance costs of $1.6 million (December 31, 2022 - $2.4 million).

9.50% Senior Secured Notes due 2029 – On February 12, 2024, for certain eligible holders of existing Old Notes, KII executed an exchange of €325 million principal amount of the outstanding Old Notes for newly issued €276.174 million aggregate outstanding KII 9.50% Senior Secured Notes due March 2029 (the “New Notes” and together with the Old Notes, the “Senior Secured Notes”) plus additional cash consideration of €50 million. Kronos financed the €50 million cash consideration with a new unsecured term loan from Contran Corporation (described below). Holders of the Old Notes received for each €1,000 principal amount of Old Notes exchanged, €850 in principal amount of New Notes plus a cash payment in an amount equal to €150. Following the exchange, Old Notes totaling €75 million principal amount that were not exchanged continue to remain outstanding. In connection with the exchange, the indenture governing the Old Notes was amended to conform to the restrictive covenants in the indenture governing the New Notes and to make other conforming changes. KII did not receive any cash proceeds from the issuance and delivery of the New Notes in connection with the exchange.

The New Notes:

● bear interest at 9.50% per annum, payable semi-annually on March 15 and September 15 of each year, payments begin on September 15, 2024;

● have a maturity date of March 15, 2029. Prior to March 15, 2026, Kronos may redeem some or all of the New Notes at a price equal to 100% of the principal amount thereof, plus an applicable premium as of the date of the redemption as described in the indenture governing its New Notes, plus accrued and unpaid interest. On or after March 15, 2026, Kronos may redeem the New Notes at redemption prices ranging from 104.750% of the principal amount, declining to 100% on or after March 15, 2028, plus accrued and unpaid interest. In addition, on or before March 15, 2026, Kronos may redeem up to 40% of the New Notes with the net proceeds of certain public or private equity offerings at 109.50% of the principal amount, plus accrued and unpaid interest, provided that following the redemption at least 50% of the New Notes remain outstanding. If Kronos or Kronos’ subsidiaries experience certain change of control events, as outlined in the indenture governing its New Notes, Kronos would be required to make an offer to purchase the New Notes at 101% of the principal amount thereof, plus accrued and unpaid interest. Kronos would also be required to make an offer to purchase a specified portion of the New Notes at par value, plus accrued and unpaid interest, in the event that Kronos and its subsidiaries generate a certain amount of net proceeds from the sale of assets outside the ordinary course of business, and such net proceeds are not otherwise used for specified purposes within a specified time period as described in the indenture governing Kronos’ New Notes;

● are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by Kronos Worldwide, Inc. and each of its direct and indirect domestic, wholly-owned subsidiaries;

● are collateralized by a first priority lien on (i) 100% of the common stock or other ownership interests of each existing and future direct domestic subsidiary of KII and the guarantors, and (ii) 65% of the voting common stock or other ownership interests and 100% of the non-voting common stock or other ownership interests of each non-U.S. subsidiary that is directly owned by KII or any guarantor;

● contain a number of covenants and restrictions which, among other things, restrict Kronos’ ability to incur or guarantee additional debt, incur liens, pay dividends or make other restricted payments, or merge or consolidate with, or sell or transfer substantially all of its assets to, another entity, and contain other provisions and restrictive covenants customary in lending transactions of this type (however, there are no ongoing financial maintenance covenants); and

● contain customary default provisions, including a default under any of Kronos’ other indebtedness in excess of $50.0 million.

Subordinated, Unsecured Term Loan from Contran – As part of the refinancing of a majority of Kronos’ Old Notes discussed above, Kronos borrowed $53.7 million (€50.0 million) from Contran through the issuance of an unsecured subordinated term promissory note dated February 12, 2024 (the “Contran Term Loan”). The Contran Term Loan is guaranteed by Kronos’ domestic wholly-owned subsidiaries.  Kronos’ obligations under the Contran Term Loan, and the obligations of the guarantors under the related guaranties, are unsecured and subordinated in right of payment to Kronos’ Senior Secured Notes and its $225 million global revolving credit facility (Global Revolver). Interest on the Contran Term Loan is payable in cash at an interest rate of 11.5%. The Contran Term Loan matures on demand (but no earlier than

September 2029), is not subject to any amortization payments and is prepayable at par beginning in March 2026. The restrictive covenants in the Contran Term Loan are substantially similar to those contained in the indenture governing Kronos’ New Notes. In accordance with Kronos’ related party transaction policy, the audit committee of its board of directors, comprised of the independent directors, approved the terms and conditions of the new term loan from Contran.

Revolving credit facility – On April 20, 2021, Kronos entered into the $225 million Global Revolver which matures in April 2026.  Borrowings under the Global Revolver are available for Kronos’ general corporate purposes. Available borrowings are based on formula-determined amounts of eligible trade receivables and inventories, as defined in the agreement, less any outstanding letters of credit issued under the Global Revolver. Borrowings by Kronos’ Canadian, Belgian and German subsidiaries are limited to $25 million, €30 million and €60 million, respectively. Any amounts outstanding under the Global Revolver bear interest, at Kronos’ option, at the applicable non-base rate (SOFR, CDOR or EURIBOR, dependent on the currency of the borrowing) plus a margin ranging from 1.5% to 2.0%, or at the applicable base rate, as defined in the agreement, plus a margin ranging from .5% to 2.0%. The Global Revolver is collateralized by, among other things, a first priority lien on the borrowers’ trade receivables and inventories. The facility contains a number of covenants and restrictions customary in lending transactions of this type which, among other things, restrict the borrowers’ ability to incur additional debt, incur liens, pay additional dividends or merge or consolidate with, or sell or transfer all or substantially all of their assets to another entity and, under certain conditions, requires the maintenance of a fixed charge coverage ratio, as defined in the agreement, of at least 1.0 to 1.0.        

During 2023, Kronos had no borrowings or repayments under its Global Revolver and at December 31, 2023, the full $225 million was available for borrowing under this revolving facility.

Other – In December 2019, LandWell entered into the $15.0 million loan agreement with Western Alliance Business Trust. The agreement requires semi-annual payments of principal and interest on April 15 and October 15 aggregating $1.3 million annually beginning on April 15, 2020 through the maturity date in April 2036 and is payable from the tax increment reimbursement funds received under the OPA. The agreement bears interest at a fixed 4.76% rate and is collateralized by all tax increment reimbursement funds LandWell receives under the OPA. See Note 7.  

Aggregate maturities of long-term debt – Aggregate maturities of debt at December 31, 2023 are presented in the table below.

Years ending December 31,	Amount
	(In millions)
Gross amounts due each year:
2024	$	.7
2025		536.7
2026		.8
2027		.8
2028		.9
2029 and thereafter		8.2
Subtotal		548.1
Less amounts representing original issue discount and debt issuance costs		1.6
Total long-term debt	$	546.5

After considering the effect of the exchange of the Old Notes and issuance of the New Notes and Contran Term Loan discussed above, our aggregate maturities of long-term debt would be:

Years ending December 31,	Amount
	(In millions)
2024	$	.7
2025		177.2
2026		.8
2027		.8
2028		.9
2029 and thereafter		369.0
Gross maturities		549.4
Less debt issuance costs		6.1
Total	$	543.3

We are in compliance with all of our debt covenants at December 31, 2023.