Debt

12 Months Ended

Dec. 31, 2012

Debt

Debt

Note 6 - Debt

(In millions)	December 31, 2012		December 31, 2011
Foreign operation’s working capital line of credit	$	4.8	$	4.8
Current maturities of capital lease and other obligations	1.8		0.3
Current maturities of term loan	10.0		7.5
Short-term borrowings and current maturities of long-term debt	16.6		12.6
Senior secured credit facility —term loan due 2015	75.0		85.0
Senior secured credit facility — revolving loan due 2015	165.0		78.0
6.75% senior subordinated notes due 2015	—		73.5
Capital lease and other obligations	—		1.8
Long-term notes payable and capital lease obligations	240.0		238.3
Total debt	$	256.6	$	250.9

Estimated Fair Values of Notes Payable

The approximate, aggregate fair value of our notes payable as of December 31, 2012 and 2011 were as follows:

(In millions)	December 31, 2012		December 31, 2011
6.75% senior subordinated notes, due 2015	$	—	$	74.0
Senior secured credit facility —term loan due 2015	$	85.0	$	93.0

The aggregate fair values of the notes payable were estimated on the basis of quoted market prices.

Senior Secured Credit Facility

Hexcel Corporation has a $460 million senior secured credit facility (the “Facility”), consisting of a $360 million revolving loan and a $100 million term loan.  The facility was increased by $75 million in 2012 to fund the repurchase of the remaining 6.75% Senior Subordinated Notes due in 2015.  The Facility matures on July 9, 2015.  The interest rate on the Facility is LIBOR plus 2.75% and ranges down to LIBOR plus 2% depending upon the leverage ratio.  For the years ended December 31, 2012 and 2011, our leverage ratio was less than 1.75; accordingly in 2012 and 2011 the margin paid on our borrowing rate was 2%.  The term loan was borrowed at closing and once repaid cannot be reborrowed.  The term loan is scheduled to be repaid at a current rate of $2.5 million per quarter, with two payments of $10.0 million in September 2014 and December 2014 and two final $25.0 million payments in March and June 2015.

The Facility permits us to issue letters of credit up to an aggregate amount of $40 million and allows us to draw up to $75 million in Euros.  Amounts drawn in Euros or any outstanding letters of credit reduce the amount available for borrowing under the revolving loan.  As of December 31, 2012, we had $165.0 million of borrowings under the revolving loan and we had issued letters of credit totaling $2.2 million under the Facility.  Total undrawn availability under the Senior Secured Credit Facility as of December 31, 2012 was $192.8 million.

The credit agreement contains financial and other covenants including, but not limited to, restrictions on the incurrence of debt and the granting of liens, as well as the maintenance of an interest coverage ratio and a leverage ratio, and limitations on capital expenditures. In accordance with the terms of the Facility, we are required to maintain a minimum interest coverage ratio of 4.00 (based on the ratio of EBITDA, as defined in the credit agreement, to interest expense) and may not exceed a maximum leverage ratio of 3.00 (based on the ratio of total debt to EBITDA) throughout the term of the Facility.  In addition, the Facility contains other terms and conditions such as customary representations and warranties, additional covenants and customary events of default.  A violation of any of these covenants could result in a default under the credit agreement, which would permit the lenders to accelerate the payment of all borrowings and to terminate the credit agreement.  In addition, such a default could, under certain circumstances, permit the holders of other outstanding unsecured debt to accelerate the repayment of such obligations.  As of December 31, 2012, we were in compliance with all debt covenants and expect to remain in compliance.

Additionally, at December 31, 2012 we have interest rate swaps totaling approximately $160 million that expire in March 2014.  These interest rate swaps are designated as cash flow hedges to our term loan.  The interest rate swaps trade LIBOR for a fixed rate at an average rate of 0.8625%.

6.75% Senior Subordinated Notes, due 2015

On February 1, 2005, we issued $225 million of 6.75% senior subordinated notes due 2015.  As of June 2012, all of the outstanding notes were redeemed.  The notes were unsecured senior subordinated obligations of Hexcel Corporation.  Interest accrued at the rate of 6.75% per annum and were payable semi-annually in arrears on February 1 and August 1.

In June 2012 and February 2011, we redeemed $73.5 million and $150 million of these notes at a call premium of 1.125% and 2.25%, respectively.  The redemptions were primarily funded by a $75 million and $135.0 million add-on to the Facility in 2012 and December 2010.  As a result of the redemptions, we accelerated the unamortized financing costs of the senior subordinated notes being redeemed and expensed the call premium incurring a pretax charge of $1.1 million (after tax of $0.01 per diluted share)  and $4.9 million (after tax of $0.03 per diluted share) in 2012 and 2011, respectively.

Other Credit Facility

We have a $12.0 million borrowing facility for working capital needs of our Chinese entity with an outstanding balance of $4.8 million on December 31, 2012.  The facility contains a $10.0 million revolving credit line and a $2.0 million factoring facility.  The factoring facility was not used in 2012.  These funds can only be used locally, and accordingly, we do not include this facility in our borrowing capacity disclosures.  The facility expires on September 6, 2013 and is guaranteed by Hexcel Corporation.

Aggregate Maturities of Debt

The table below reflects aggregate scheduled maturities of notes payable, excluding capital lease obligations, as of December 31, 2012.  See Note 7 for capital lease obligation maturities.

Payable during the years ending December 31:	(In millions)
2013	$	14.8
2014	25.0
2015	215.0
2016	—
2017	—
Total debt	$	254.8