Note 8 - Debt

3 Months Ended

Mar. 31, 2021

Notes to Financial Statements

Debt Disclosure [Text Block]

8. Debt

Financial Covenants

In 2017, the Company and certain of our foreign subsidiaries entered into a secured Credit Agreement (the "2017 Credit Agreement") with JPMorgan, as administrative agent, Goldman Sachs Bank USA, as syndication agent, Wells Fargo National Association, U.S. Bank National Association, and HSBC Bank USA, National Association, as co-documentation agents, and the lenders (including JPMorgan) from time to time party thereto. The 2017 Credit Agreement contains customary representations, warranties and covenants, including, but not limited to, covenants restricting the Company’s ability to incur indebtedness and liens and merge or consolidate with another entity, and expires in April 2022. The 2017 Credit Agreement also contains financial covenants requiring us to maintain a net leverage ratio of consolidated net indebtedness to consolidated earnings before income, taxes, depreciation and amortization, subject to certain adjustments ("Adjusted EBITDA") of not greater than 4.00 to 1, as well as requiring us to maintain an interest coverage ratio of consolidated Adjusted EBITDA to consolidated interest expense of no less than 3.50 to 1 for the quarter ended March 31, 2021. The 2017 Credit Agreement also contains a financial covenant requiring us to maintain a senior secured net leverage ratio of consolidated senior secured net indebtedness to consolidated Adjusted EBITDA ratio of not greater than 3.50 to 1. These financial covenants may restrict our ability to pay dividends and purchase outstanding shares of our common stock. We were in compliance with our financial covenants at March 31, 2021.

Senior Notes Guarantees

Our Senior Notes (the "Notes") are unconditionally and jointly and severally guaranteed by Tennant Sales and Service Company (the "Guarantor" or "Guarantor Subsidiary"), which is a 100% owned subsidiary of the Company.

The Notes and the guarantees constitute senior unsecured obligations of the Company and the Guarantor, respectively. The Notes and the guarantees, respectively, are: (a) equal in right of payment with all of the Company's and the Guarantor senior debt, without giving effect to collateral arrangements; (b) senior in right of payment to all of the Company's and the Guarantor future subordinated debt, if any; (c) effectively subordinated in right of payment to all of the Company's and the Guarantor debt and obligations that are secured, including borrowings under the Company's senior secured credit facilities for so long as the senior secured credit facilities are secured, to the extent of the value of the assets securing such liens, and (d) structurally subordinated in right of payment to all liabilities (including trade payables) of the Company's and the Guarantor subsidiary that do not guarantee the Notes.

In the second quarter of 2020, the Company early adopted the SEC's rule titled "Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant's Securities," which simplifies the disclosure requirements related to the Notes under Rule 3-10 of Regulation S-X. Under this amended rule, the Company is not required to disclose separate financial statements for the guarantee as it no longer has a reporting requirement. The Company has filed a Form 15 for the Guarantor to suspend the Company's duty to file reports on the guarantor financial statements.

Debt Outstanding

Debt outstanding consisted of the following:

	March 31,			December 31,
	2021			2020
Senior unsecured notes	$	300.0		$	300.0
Credit facility borrowings		10.0			10.0
Secured borrowings		1.2			1.5
Finance lease liabilities		0.1			0.1
Unamortized debt issuance costs		(3.0	)		(3.1	)
Total debt		308.3			308.5
Less: current portion of long-term debt(a)		(36.4	)		(10.9	)
Long-term debt	$	271.9		$	297.6

^(a) The Company has the ability and intent to repay $35.6 million in outstanding credit facility borrowings, $0.7 million of current maturities of secured borrowings and $0.1 million of current maturities of finance lease liabilities over the next 12 months. Therefore, $36.4 million of debt has been classified as a current liability on the Consolidated Balance Sheet at March 31, 2021.

As of March 31, 2021, we had outstanding borrowings under our Senior Unsecured Notes of $300.0 million. In addition, we had outstanding borrowings of $10.0 million under our revolving facility and had letters of credit and bank guarantees outstanding in the amount of $3.2 million, leaving approximately $186.8 million of unused borrowing capacity on our revolving facility. Commitment fees on unused lines of credit for the three months ended March 31, 2021 were $0.2 million. The overall weighted average cost of debt is approximately 5.5% and net of a related cross-currency swap instrument is approximately 4.4%. Further details regarding the cross-currency swap instrument are discussed in Note 10.

In April 2021, we signed an agreement that restructured our existing credit agreement. In May 2021, we plan to use the proceeds from the amended agreement to retire our Senior Notes. See Note 17 to the Consolidated Financial Statements for more detail on the amended credit agreement.