Credit Facilities and Long-Term Debt

3 Months Ended

Mar. 31, 2022

Credit Facilities and Long-Term Debt [Abstract]

Credit Facilities and Long-Term Debt

Note 9.  Credit Facilities and Long-Term Debt

Total debt outstanding is summarized as follows:

	March 31, 2022		December 31, 2021
	(In thousands)
Revolving credit facilities	$	245,450	$	125,298
Other (1)		3,235		3,138
Total debt	$	248,685	$	128,436
Current maturities of debt	$	248,685	$	128,415
Long-term debt		—		21
Total debt	$	248,685	$	128,436

(1) Other includes borrowings under our Polish overdraft facility of Zloty 13.2 million (approximately $3.2 million) and Zloty 12.3 million (approximately $3 million) as of March 31, 2022 and December 31, 2021, respectively.

Revolving Credit Facility

In March 2022, the Company and its wholly owned subsidiaries, SMP Motor Products Ltd. and Trumpet Holdings, Inc., entered into an amendment to our Credit Agreement, dated as of October 28, 2015 (as amended by the First Amendment to Credit Agreement, dated as of December 10, 2018), with JP Morgan Chase Bank, N.A., as agent, and a syndicate of lenders for our senior secured revolving credit facility. The amendment provides for the drawdown of an additional $50 million from the agreement’s accordion feature to increase the line of credit under the revolving credit facility from $250 million to $300 million, and updates the benchmark provisions to replace LIBOR with Term SOFR as the reference rate.  The amended credit agreement has a maturity date of December 10, 2023, and allows for a $10 million line of credit to Canada as part of the $300 million available for borrowing.

Direct borrowings under the amended credit agreement bear interest at SOFR for the selected term (adjusted to include a 0.10% credit spread adjustment) plus a margin ranging from 1.25% to 1.75% based on our borrowing availability, or floating at the alternate base rate plus a margin ranging from 0.25% to 0.75% based on our borrowing availability, at our option.  The amended credit agreement is guaranteed by certain of our subsidiaries and secured by certain of our assets.

Borrowings under the amended credit agreement are secured by substantially all of our assets, including accounts receivable, inventory and certain fixed assets, and those of certain of our subsidiaries.  Availability under the amended credit agreement is based on a formula of eligible accounts receivable, eligible drafts presented to the banks under our supply chain financing arrangements and eligible inventory.  After taking into account outstanding borrowings under the amended credit agreement, there was an additional $52 million available for us to borrow pursuant to the formula at March 31, 2022.  The loss of business of one or more of our key customers or, a significant reduction in purchases of our products from any one of them, could adversely impact availability under our amended revolving credit facility.

Outstanding borrowings under the credit agreement, which are classified as current liabilities, were $245.5 million and $125.3 million at March 31, 2022 and December 31, 2021, respectively; while letters of credit outstanding under the credit agreement were $2.6 million at both March 31, 2022 and December 31, 2021, respectively.  Borrowings under the credit agreement have been classified as current liabilities based upon accounting rules and certain provisions in the agreement.

At March 31, 2022, the weighted average interest rate on our amended credit agreement was 1.8%, which consisted of $230 million in direct borrowings at 1.5% and an alternative base rate loan of $15.5 million at 3.75%.  At December 31, 2021, the weighted average interest rate on our amended credit agreement was 1.4%, which consisted of $125 million in direct borrowings at 1.4% and an alternative base rate loan of $0.3 million at 3.5%. During the three months ended March 31, 2022, our average daily alternative base rate loan balance was $2.6 million compared to a balance of $1.2 million for the three months ended March 31, 2021 and a balance of $1.1 million for the year ended December 31, 2021.

At any time that our borrowing availability is less than the greater of either (a) $25 million, or 10% of the commitments if fixed assets are not included in the borrowing base, or (b) $31.25 million, or 12.5% of the commitments if fixed assets are included in the borrowing base, the terms of the amended credit agreement provide for, among other provisions, a financial covenant requiring us, on a consolidated basis, to maintain a fixed charge coverage ratio of 1:1 at the end of each fiscal quarter (rolling four quarters).  As of March 31, 2022, we were not subject to these covenants.  Additionally, the amended credit agreement permits us to pay cash dividends of $25 million in any fiscal year, so long as after giving effect to the payment (a) our borrowing availability is greater than, or equal to, the greater of $25 million or 10% of the commitments, or (b) our borrowing availability is greater than $15 million and our fixed charge coverage ratio is at least 1.15 to 1; and to make stock repurchases of $20 million in any fiscal year, so long as after giving effect to the repurchases our borrowing availability is greater than, or equal to, the greater of $25 million or 10% of the commitments.  Provided specific conditions are met, the amended credit agreement also permits acquisitions, permissible debt financing, capital expenditures, cash dividend payments greater than $25 million, and stock repurchases of greater than $20 million.

Polish Overdraft Facility

In February 2022, our Polish subsidiary, SMP Poland sp. z.o.o., amended its overdraft facility with HSBC Continental Europe (Spolka Akcyjna) Oddzial w Polsce, formerly HSBC France (Spolka Akcyjna) Oddzial w Polsce.  The amended overdraft facility provides for borrowings of up to Zloty 30 million (approximately $7.2 million).  Availability under the amended facility commences in March 2022 and ends in June 2022, with automatic three-month renewals until June 2027, subject to cancellation by either party, at its sole discretion, at least 30 days prior to the commencement of the three-month renewal period.  Borrowings under the overdraft facility will bear interest at a rate equal to WIBOR + 1.5% and are guaranteed by Standard Motor Products, Inc., the ultimate parent company.  At March 31, 2022 and December 31, 2021, borrowings under the overdraft facility were Zloty 13.2 million (approximately $3.2 million) and Zloty 12.3 million (approximately $3 million), respectively.

Deferred Financing Costs

We have deferred financing costs of approximately $0.6 million and $0.4 million as of March 31, 2022 and December 31, 2021, respectively.  Deferred financing costs as of March 31, 2022 are related to our amended revolving credit facility.  In connection with the amendment to our Credit Agreement with JPMorgan Chase Bank, N.A., as agent, entered into in March 2022, we incurred and capitalized approximately $0.2 million of financing costs related to bank, legal and other professional fees which are being amortized, along with the preexisting deferred financing costs, through 2023, the term of the amended agreement.  Deferred financing costs as of March 31, 2022 are being amortized in the amounts of $0.3 million for the remainder of 2022, and $0.3 million in 2023.