Credit Facilities and Long-Term Debt

3 Months Ended

Mar. 31, 2023

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, 2023		December 31, 2022
	(In thousands)
Credit facility – term loan due 2027	$	96,250	$	97,500
Credit facility – revolver due 2027		176,750		142,000
Other		101		120
Total debt	$	273,101	$	239,620
Current maturities of debt	$	57,614	$	55,031
Long-term debt		215,487		184,589
Total debt	$	273,101	$	239,620

Term Loan and Revolving Credit Facility

In June 2022, the Company entered into a new Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders (the “Credit Agreement”).  The Credit Agreement provides for a $500 million credit facility comprised of a $100 million term loan facility (the “term loan”) and a $400 million multi-currency revolving credit facility available in U.S. Dollars, Euros, Sterling, Swiss Francs, Canadian Dollars and other currencies as agreed to by the administrative agent and the lenders (the “revolving facility”). The Credit Agreement replaces and refinances the 2015 Credit Agreement.

Borrowings under the Credit Agreement were used to repay all outstanding borrowings under the 2015 Credit Agreement, and pay certain fees and expenses incurred in connection with the Credit Agreement, with future borrowings used for other general corporate purposes of the Company and its subsidiaries.  The term loan amortizes in quarterly installments of 1.25% in each of the first four years, and quarterly installments of 2.5% in the fifth year of the Credit Agreement.  The revolving facility has a $25 million sub-limit for the issuance of letters of credit and a $25 million sub-limit for the borrowing of swingline loans.  The maturity date is June 1, 2027.  The Company may request up to two one-year extensions of the maturity date.

The Company may, upon the agreement of one or more then existing lenders or of additional financial institutions not currently party to the Credit Agreement, increase the revolving facility commitments or obtain incremental term loans by an aggregate amount not to exceed (x) the greater of (i) $168 million or (ii) 100% of consolidated EBITDA (as defined in the Credit Agreement) for the four fiscal quarters ended most recently before such date, plus (y) the amount of any voluntary prepayment of term loans, plus (z) an unlimited amount so long as, immediately after giving effect thereto, the pro forma First Lien Net Leverage Ratio (as defined in the Credit Agreement) does not exceed 2.5 to 1.0.

Term loan and revolver facility borrowings in U.S. Dollars bear interest, at the Company’s election, at a rate per annum equal to Term SOFR plus 0.10% plus an applicable margin, or an alternate base rate plus an applicable margin, where the alternate base rate is the greater of the prime rate, the federal funds effective rate plus 0.50%, and one-month Term SOFR plus 0.10% plus 1.00%. Term loan borrowings are being made at one-month Term SOFR. The applicable margin for the term benchmark borrowings ranges from 1.0% to 2.0%, and the applicable margin for alternate base rate borrowings ranges from 0% to 1.0%, in each case, based on the total net leverage ratio of the Company and its restricted subsidiaries.  The Company may select interest periods of one, three or six months for Term SOFR borrowings.  Interest is payable at the end of the selected interest period, but no less frequently than quarterly.

The Company’s obligations under the Credit Agreement are guaranteed by its material domestic subsidiaries (each, a “Guarantor”), and secured by a first priority perfected security interest in substantially all of the existing and future personal property of the Company and each Guarantor, subject to certain exceptions.  The collateral security described above also secures certain banking services obligations and interest rate swaps and currency or other hedging obligations of the Company owing to any of the then existing lenders or any affiliates thereof.  Concurrently with the Company’s entry into the Credit Agreement, the Company also entered into a seven year interest rate swap agreement with Wells Fargo Bank, N.A., Co-Syndication Agent and lender under the Credit Agreement, on $100 million of borrowings under the Credit Agreement. The interest rate swap agreement matures in May 2029.

Outstanding borrowings at March 31, 2023 under the Credit Agreement were $273 million, consisting of current borrowings of $57.6 million and long-term debt of $215.4 million; while outstanding borrowings at December 31, 2022 were $239.5 million, consisting of current borrowings of $55 million and long-term debt of $184.5 million.  Letters of credit outstanding under the Credit Agreement were $2.4 million at both March 31, 2023 and December 31, 2022.

At March 31, 2023, the weighted average interest rate under our Credit Agreement was 5.6%, which consisted of $273 million in borrowings under Term SOFR, adjusted for the impact of the interest rate swap agreement on $100 million of borrowings.  At December 31, 2022, the weighted average interest rate under our Credit Agreement was 5.2%, which consisted of $237 million in borrowings at 5.2% under Term SOFR, adjusted for the impact of the interest rate swap agreement on $100 million of borrowings, and an alternative base rate borrowing of $2.5 million at 8%.  During the three months ended March 31, 2023, our average daily alternative base rate loan balance was $0.3 million, compared to a balance of $2.6 million for the three months ended March 31, 2022 and a balance of $5.6 million for the year ended December 31, 2022.

The Credit Agreement contains customary covenants limiting, among other things, the incurrence of additional indebtedness, the creation of liens, mergers, consolidations, liquidations and dissolutions, sales of assets, dividends and other payments in respect of equity interests, acquisitions, investments, loans and guarantees, subject, in each case, to customary exceptions, thresholds and baskets.  The Credit Agreement also contains customary events of default.

Polish Overdraft Facility

In October 2022, our Polish subsidiary, SMP Poland sp. z.o.o., amended its overdraft facility with HSBC Continental Europe (Spolka Akcyjna) Oddzial w Polsce to provide for borrowings under the facility in Euros and U.S. Dollars. Under the amended terms, the overdraft facility provides for borrowings of up to Zloty 30 million (approximately $7 million) if borrowings are solely in Zloty, or up to 85% of the Zloty 30 million limit (approximately $5.9 million) if borrowings are in Euros and/or U.S. Dollars. The overdraft facility has an initial maturity date in December 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 amended overdraft facility will bear interest at a rate equal to (1) the one month Warsaw Interbank Offered Rate (“WIBOR”) + 1.5% for borrowings in Polish Zloty, (2) the one month Euro Interbank Offered Rate (“EURIBOR”) + 1.5% for  borrowings in Euros, and (3) the Mid-Point of the Fed Target Range + 1.75% for borrowings in U.S Dollars.  Borrowings under the overdraft facility are guaranteed by Standard Motor Products, Inc., the ultimate parent company.  There were no borrowings outstanding under the overdraft facility at both March 31, 2023 and December 31, 2022.

Maturities of Debt

As of March 31, 2023, maturities of debt through 2027, assuming no prepayments, are as follows (in thousands):

	Revolving Credit Facility			Term Loan Facility			Polish Overdraft Facility and Other Debt			Total
Remainder of 2023	$	—		$	3,750		$	14		$	3,764
2024		—			5,000			87			5,087
2025		—			5,000			—			5,000
2026		—			7,500			—			7,500
2027		176,750			75,000			—			251,750
Total	$	176,750		$	96,250		$	101		$	273,101
Less: current maturities		(52,600	)		(5,000	)		(14	)		(57,614	)
Long-term debt	$	124,150		$	91,250		$	87		$	215,487

Deferred Financing Costs

We have deferred financing costs of approximately $2 million and $2.1 million as of March 31, 2023 and December 31, 2022, respectively.  Deferred financing costs are related to our term loan and revolving credit facilities. Deferred financing costs as of March 31, 2023, assuming no prepayments, are being amortized in the amounts of $0.3 million for the remainder of 2023, $0.5 million in 2024, $0.5 million in 2025, $0.5 million in 2026 and $0.2 million in 2027.