Debt

9 Months Ended

Sep. 30, 2023

Debt Disclosure [Abstract]

Debt

Debt

The following table sets forth the components of the Company’s debt:

	As of September 30, 2023			As of December 31, 2022
	Interest Rate	Outstanding Balance		Interest Rate	Outstanding Balance
Credit Facilities:
Revolver	6.0%	$	82,838	5.2%	$	195,673
U.S. Term Loan	6.7%	585,000		5.7%	596,250
Euro Term Loan	5.0%	146,918		3.1%	151,572
Industrial development bonds	5.3%	10,000		5.3%	10,000
Bank lines of credit and other debt obligations	Various	1,120		Various	1,303
Total debt		$	825,876		$	954,798
Less: debt issuance costs		(1,657)			(1,992)
Less: short-term and current portion of long-term debts		(19,246)			(19,245)
Total long-term debt		$	804,973		$	933,561

Credit facilitiesDuring June 2022, the Company, and its wholly owned subsidiary, Quaker Houghton B.V., as borrowers, Bank of America, N.A., as administrative agent, U.S. dollar swing line lender and letter of credit issuer, Bank of America Europe Designated Active Company, as Euro Swing Line Lender, certain guarantors and other lenders entered into an amendment to its primary credit facility. The amended credit facility (the “Credit Facility”) established (A) a $150.0 million Euro equivalent senior secured term loan (the “Euro Term Loan”), (B) a $600.0 million senior secured term loan (the “U.S. Term Loan”), and (C) a $500.0 million senior secured revolving credit facility (the “Revolver”), each maturing in June 2027. The Company has the right to increase the amount of the Credit Facility by an aggregate amount not to exceed the greater of $300.0 million or 100% of Consolidated EBITDA, subject to certain conditions including the agreement to provide financing by any lender providing such increase.

As of September 30, 2023, the Company was in compliance with all of the Credit Facility covenants. See Note 20 of Notes to Consolidated Financial Statements in the Company’s 2022 Form 10-K.

The weighted average variable interest rates incurred on the outstanding borrowings under the Credit Facility during the three and nine months ended September 30, 2023 were approximately 6.4% and 6.1%, respectively. As of September 30, 2023, the interest rate on the outstanding borrowings under the Credit Facility was approximately 6.3%. As part of the Credit Facility, in addition to paying interest on outstanding principal, the Company is also required to pay an annual commitment fee ranging from 0.150% to 0.275% related to unutilized commitments under the Revolver, depending on the Company’s consolidated net leverage ratio. The Company had unused capacity under the Revolver of approximately $414 million, which is net of bank letters of credit of approximately $3 million, as of September 30, 2023.

In order to manage the Company’s exposure to variable interest rate risk associated with the Credit Facility, in the first quarter of 2023, the Company entered into $300.0 million notional amounts of three year interest rate swaps to convert a portion of the Company’s variable rate borrowings to an average fixed rate of 3.64% plus an applicable margin as provided in the Credit Facility based on the Company’s consolidated net leverage ratio. As of September 30, 2023, the aggregate interest rate on the swaps, including the fixed base rate plus the applicable margin, was 5.3%. See Note 17 of Notes to Condensed Consolidated Financial Statements.

In connection with executing the original credit facility in 2019 and the amended Credit Facility during the second quarter of 2022, the Company capitalized an aggregate of $2.2 million of certain third-party and creditor debt issuance costs. Approximately $0.7 million of the capitalized costs were attributed to the Euro Term Loan and U.S. Term Loan. These costs were recorded as a direct offset of Long-term debt on the Condensed Consolidated Balance Sheet. Approximately $1.5 million of the capitalized costs were attributed to the Revolver and recorded within Other assets on the Condensed Consolidated Balance Sheet. These capitalized costs will collectively be amortized into Interest expense over the five year term of the Credit Facility. As of September 30, 2023, the Company had $1.7 million of debt issuance costs recorded as an offset of Long-term debt on the Condensed Consolidated Balance Sheet and $3.6 million of debt issuance costs recorded within Other assets on the Condensed Consolidated Balance Sheet. Comparatively, as of December 31, 2022, the Company had $2.0 million of debt issuance costs recorded as an offset of Long-term debt on the Condensed Consolidated Balance Sheet and $4.3 million of debt issuance costs recorded within Other assets on the Condensed Consolidated Balance Sheet.

Industrial development bonds

As of September 30, 2023 and December 31, 2022, the Company had fixed rate, industrial development authority bonds totaling $10.0 million in principal amount due in 2028. These bonds have similar covenants to the Credit Facility noted above.

Bank lines of credit and other debt obligations

The Company has certain unsecured bank lines of credit and discounting facilities in certain foreign subsidiaries, which are not collateralized. The Company’s other debt obligations primarily consist of certain domestic and foreign low interest rate or interest-free municipality-related loans, local credit facilities of certain foreign subsidiaries, and capital lease obligations. Total unused capacity under these arrangements as of September 30, 2023 was approximately $34 million.

In addition to the bank letters of credit described in the “Credit facilities” subsection above, the Company’s other off-balance sheet arrangements include certain financial and other guarantees. The Company’s total bank letters of credit and guarantees outstanding as of September 30, 2023 were approximately $5 million.

Interest expense, net

The Company incurred the following debt related expenses included within Interest expense, net, in the Condensed Consolidated Statements of Operations:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Interest expense	$	12,598	$	9,465	$	40,863	$	20,339
Amortization of debt issuance costs	353		353		1,059		2,589
Total	$	12,951	$	9,818	$	41,922	$	22,928

Based on the variable interest rates associated with the Credit Facility, as of September 30, 2023 and as of December 31, 2022, the amounts at which the Company’s total debt were recorded are not materially different from their fair market value.