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Debt
6 Months Ended
Jun. 30, 2011
Debt [Abstract]  
Debt
NOTE 8. Debt
On April 21, 2011, we entered into a Revolving Credit and Security Agreement with PNC Bank, National Association (“PNC”). Subject to the terms and conditions of the agreement, PNC agreed to provide us with up to a $45.0 million revolving line of credit, including up to $10.0 million in letters of credit, subject to a borrowing base formula, lender reserves and PNC’s reasonable discretion, expiring on April 15, 2015 and bearing interest at either LIBOR or an alternative base rate, plus a margin that varies with borrowing availability. The facility is guaranteed by Tecumseh Products Company and its U.S. and Canadian subsidiaries and is secured by substantially all of the assets of the borrowers, with some exclusions
The agreement contains various covenants, including limitations on dividends, investments and additional indebtedness and liens, and a minimum fixed charge coverage ratio, which would apply only if average undrawn borrowing availability, as defined by the credit agreement, were to fall below a specified level.
As of June 30, 2011, we had no borrowings outstanding against this agreement, and our average undrawn borrowing availability was such that the covenant did not apply. At June 30, 2011, we had outstanding letters of credit of $2.0 million under this facility and the capacity for borrowings under the borrowing base formula of $40.6 million under this facility. We paid $330,000 in fees associated with the new agreement, which were capitalized and will be amortized over the term of the agreement. We must also pay a facility fee of 0.375% a year on the unused portion of the facility.
At June 30, 2011, JPMorgan Chase Bank, N.A. (“Chase”) and its affiliates hold a security interest in approximately $2.3 million of cash collateral (the “Cash Collateral”), to secure letters of credit, and derivative obligations. The Cash Collateral will remain in a restricted account until these obligations are paid in full or they are replaced with third parties and are included in restricted cash and cash equivalents on our balance sheet. Tecumseh Products will have no ability to withdraw, or have any other control over, the Cash Collateral, and acknowledged that Chase and its affiliates shall have sole control over the Cash Collateral.
We have various borrowing arrangements at our foreign subsidiaries to support working capital needs and government sponsored borrowings which provide advantageous lending rates.
In Europe, based upon exchange rates as of June 30, 2011, we have an unsecured, uncommitted discretionary credit facility of $2.9 million that expires on October 27, 2011. Historically we have been able to extend this facility when it expires, but such extension is at the discretion of the bank. Our borrowings under this facility based on the exchange rate as of June 30, 2011, totaled $2.9 million with no availability for additional borrowings. There are no restrictive covenants on this credit facility.
In Brazil, based upon the exchange rates as of June 30, 2011, we have uncommitted, discretionary revolving credit facilities with several local private Brazilian banks (most of which are guaranteed by the Brazilian government) for an aggregate maximum of $98.0 million, subject to a borrowing base formula computed on a monthly basis. These facilities are secured by a portion of our accounts receivable and inventory balances and expire at various times from mid September, 2011 through July 15, 2013. Historically we have been able to enter into replacement facilities when these facilities expire, but such replacements are at the discretion of the banks. Lenders determine, in their discretion, whether to make new advances with respect to each draw on such facility and there are no restrictive covenants on these credit facilities. Our borrowings under these facilities totaled $49.6 million based upon exchange rate as of June 30, 2011, with an additional $48.4 million available for borrowing, based on our accounts receivable and inventory balances and exchange rates as of June 30, 2011.
In India, based upon exchange rates as of June 30, 2011, we have an aggregate maximum of $17.0 million of revolving credit facilities subject to a borrowing base formula computed on a monthly basis and secured by land, building and equipment, inventories and receivables. The arrangements expire at various times from February 2012 through May 2012. Historically we have been able to renew these facilities when they expire, but such renewal is at the discretion of the banks. Our borrowings under these facilities, based on the exchange rate as of June 30, 2011, totaled $16.1 million, and based on the exchange rate and our borrowing base as of June 30, 2011; we had an additional $0.9 million available for borrowing under these facilities. There are no restrictive covenants on these credit facilities, except that consent must be received from the bank in order to dispose of certain assets.
Our consolidated borrowings under these arrangements totaled $68.6 million at June 30, 2011 and $65.4 million at December 31, 2010. Our weighted average interest rate for these borrowings was 8.9% for the six months ended June 30, 2011 and 7.4% for the year ended December 31, 2010.