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Debt | 3 Months Ended
--- | ---
Mar. 31, 2024
Debt Disclosure [Abstract] |
Debt | (8) Debt The Company’s outstanding debt is as follows:
|  | March 31, 2024 |  |  | December 31, 2023 |
Short-term debt: |  |  |  |  |  |
Term Loan Facility |  | $ | 50 |  |  | $ | 93 |
Long-term debt, net: |  |  |  |  |  |
Term Loan Facility |  | $ | 4,692 |  |  | $ | 4,696 |
Long-term debt is net of deferred financing fees, original issuance discount and repricing fees in the aggregate amount of $149 and $164 as of March 31, 2024 and December 31, 2023, respectively. Credit Facilities In connection with the completion of the Atotech Acquisition, on August 17, 2022 (the “Effective Date”) the Company entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, Barclays Bank PLC, and the lenders from time to time party thereto (the “Credit Agreement”). The Credit Agreement provided for (i) a senior secured term loan facility comprised of three tranches: a $1,000 loan (the “USD Tranche A”), a $3,600 loan (as further increased, refinanced and otherwise modified as described herein, the “USD Tranche B”) and a €600 loan (as further increased and otherwise modified as described herein, the “Euro Tranche B” and together with the USD Tranche A and the USD Tranche B, the “Term Loan Facility”), each of which were borrowed in full on the Effective Date, and (ii) a senior secured revolving credit facility of $500 (as further increased and otherwise modified as described herein, the “Revolving Facility” and, together with the Term Loan Facility, the “Credit Facilities”), with the commitments under each of the foregoing facilities subject to increase from time to time subject to certain conditions. The proceeds of the Term Loan Facility were used on the Effective Date, among other things, to fund a portion of the consideration payable in connection with the Atotech Acquisition and to refinance the existing term loan and revolving credit facilities of the Company and certain indebtedness of Atotech. Initially, borrowings under the Credit Facilities bore interest at a rate per annum equal to, at the Company’s option, any of the following, plus, in each case, an applicable margin: (a) with respect to the USD Tranche A, the Revolving Facility and the USD Tranche B, (x) a base rate determined by reference to the highest of (1) the federal funds effective rate plus 0.50%, (2) the prime rate quoted in The Wall Street Journal, or (3) a forward-looking term rate based on Term SOFR (plus an applicable credit spread adjustment) for an interest period of one month, plus 1.00%; and (y) a Term SOFR rate (plus an applicable credit spread adjustment) for the interest period relevant to such borrowing, subject to a rate floor of (I) with respect to the USD Tranche B, 0.50% and (II) with respect to the USD Tranche A and the Revolving Facility, 0.0%; and (b) with respect to the Euro Tranche B, a Euro Interbank Offered Rate (“EURIBOR”) rate determined by reference to the costs of funds for Euro deposits for the interest period relevant to such borrowing adjusted for certain additional costs, subject to a EURIBOR rate floor of 0.0%. Initially, the applicable margins for borrowings under the Credit Facilities were (i) under the USD Tranche A, 1.50% with respect to base rate borrowings and 2.50% with respect to Term SOFR borrowings, (ii) under the USD Tranche B, 1.75% with respect to base rate borrowings and 2.75% with respect to Term SOFR borrowings, (iii) under the Euro Tranche B, 3.00% and (iv) under the Revolving Facility, 1.50% with respect to base rate borrowings and 2.50% with respect to Term SOFR borrowings. In addition to paying interest on outstanding principal under the Credit Facilities, the Company is required to pay a commitment fee in respect of the unutilized commitments under the Revolving Facility. The commitment fee is 0.375% per annum. The commitment fee is subject to downward adjustment based on the Company’s first lien net leverage ratio as of the end of the preceding fiscal quarter. The Company must also pay customary letter of credit fees and agency fees. On October 3, 2023 (the “First Amendment Effective Date”), the Company entered into the First Amendment to Credit Agreement (the “First Amendment”), which refinanced all of the $3,564 outstanding USD Tranche B to (i) decrease the applicable margin for the USD Tranche B to 1.50% with respect to base rate borrowings and 2.50% with respect to Term SOFR borrowings and (ii) remove the credit spread adjustment applicable to Term SOFR borrowings of the USD Tranche B. On January 22, 2024 (the “Second Amendment Effective Date”), the Company entered into the Second Amendment to Credit Agreement (the “Second Amendment”), pursuant to which the Company (i) borrowed additional USD Tranche B loans in an aggregate principal amount of $490 and additional Euro Tranche B loans in an aggregate principal amount of €250 (collectively, the “Incremental Tranche B Loans”) and (ii) used a portion of the proceeds of the Incremental Tranche B Loans to prepay the USD Tranche A in full in an aggregate principal amount of $744. On February 13, 2024, the Company entered into the Third Amendment to Credit Agreement (the “Third Amendment”), pursuant to which the Company increased the available borrowing capacity under the Revolving Facility by $175 (the “Incremental Revolving Commitments”). As of March 31, 2024, the available borrowing capacity under the Revolving Facility was $675. The USD Tranche A was issued with original issue discount of 0.25% of the principal amount thereof. The USD Tranche B and the Euro Tranche B were issued on the Effective Date with original issue discount of 2.00% of the principal amounts thereof. The USD Tranche B was issued on the First Amendment Effective Date with original issue discount of 0.25% of the principal amount thereof. The Incremental Tranche B Loans were issued with original issue discount of 0.25% of the principal amount thereof. The Company incurred $242 of deferred financing fees and original issue discount related to the term loans under the Term Loan Facility funded on the Effective Date, which are included in long-term debt, net in the accompanying consolidated balance sheets and are being amortized to interest expense over the estimated life of the term loans using the effective interest method. The Company incurred $11 of deferred financing fees and original issue discount related to the USD Tranche B funded on the First Amendment Effective Date, of which $9 is included in long-term debt, net in the accompanying consolidated balance sheets and is being amortized to interest expense over the estimated life of the term loans using the effective interest method. The Company recorded an $8 loss on extinguishment of debt in connection with the First Amendment. The Company incurred $5 of deferred financing fees and original issue discount related to the Incremental Tranche B Loans funded on the Second Amendment Effective Date, of which $2 is included in long-term debt, net in the accompanying consolidated balance sheets and is being amortized to interest expense over the estimated life of the term loans using the effective interest method. The Company recorded a $9 loss on extinguishment of debt in connection with the Second Amendment. Under the Credit Agreement, the Company is required to prepay outstanding term loans, subject to certain exceptions, with portions of its annual excess cash flow as well as with the net cash proceeds of certain of its asset sales, certain casualty and condemnation events and the incurrence or issuances of certain debt. If at any time the aggregate amount of outstanding loans, unreimbursed letter of credit drawings and undrawn letters of credit under the Revolving Facility exceeds the aggregate commitments under the Revolving Facility, the Company is required to repay outstanding loans and/or cash collateralize letters of credit, with no reduction of the commitment amount. The Company may voluntarily prepay outstanding loans under the Credit Facilities from time to time, subject to certain conditions, without premium or penalty other than customary “breakage” costs with respect to Term SOFR or EURIBOR loans; provided, however, that subject to certain exceptions, if on or prior to the date that is six months after the Second Amendment Effective Date, the Company prepays any loans under the USD Tranche B or the Euro Tranche B in connection with a repricing transaction, the Company must pay a prepayment premium of 1.00% of the aggregate principal amount of the loans so prepaid. Additionally, the Company may voluntarily reduce the unutilized portion of the commitment amount under the Revolving Facility. Prior to the repayment in full of the USD Tranche A, the Company was required to make scheduled quarterly payments each equal to 1.25% of the original principal amount of the USD Tranche A. The Company is required to make scheduled quarterly payments each equal to approximately 0.25% of the aggregate principal amount of each of the Euro Tranche B and the USD Tranche B as of the Second Amendment Effective Date, in each case with the balance due thereunder on the seventh anniversary of the Effective Date. There is no scheduled amortization under the Revolving Facility. Any principal amount outstanding under the Revolving Facility is due and payable in full on the fifth anniversary of the Effective Date. All obligations under the Credit Facilities are guaranteed by certain of the Company’s wholly-owned domestic subsidiaries and are required to be guaranteed by certain of the Company’s future wholly-owned domestic subsidiaries, and are secured by substantially all of the Company’s assets and the assets of such subsidiaries, subject to certain exceptions and exclusions. Under the Credit Agreement, the Company has the ability to incur additional incremental debt facilities in an amount up to (x) the greater of (1) $1,011 and (2) 75% of consolidated earnings before interest, taxes, depreciation, and amortization (“EBITDA”), plus (y) an amount equal to the sum of all voluntary prepayments of term loans under the Term Loan Facility, plus (z) an additional unlimited amount subject to pro forma compliance with certain leverage ratio tests (based on the security and priority of such incremental debt). Under the USD Tranche A and the Revolving Facility, so long as any USD Tranche A loans (or commitments in respect thereof) are outstanding as of the end of any fiscal quarter, the Company may not allow its total net leverage ratio as of the end of such fiscal quarter to be greater than 5.25 to 1.00 for the fiscal quarters ending December 31, 2023 through September 30, 2024, with an annual step-down of 0.25:1.00 and subject to a step-up of 0.50:1.00 for the four full fiscal quarter period following any material acquisition, not to exceed 5.50 to 1.00. In addition, in the event there are no loans outstanding under the USD Tranche A, as of the end of any fiscal quarter of the Company when the aggregate amount of loans outstanding under the Revolving Facility (net of (a) all letters of credit (whether cash collateralized or not) and (b) unrestricted cash of the Company and its restricted subsidiaries) exceeds 35% of the aggregate amount of all commitments under the Revolving Facility in effect as of such date, the Company may not allow its first lien net leverage ratio as of the end of each such fiscal quarter to be greater than 6.00 to 1.00. The USD Tranche B and the Euro Tranche B are not subject to financial maintenance covenants. The Credit Agreement contains a number of negative covenants that, among other things and subject to certain exceptions, restrict the ability of the Company and each of its subsidiaries to: incur additional indebtedness; pay dividends on its capital stock or redeem, repurchase or retire its capital stock or its subordinated indebtedness; make investments, loans and acquisitions; create restrictions on the payment of dividends or other amounts to the Company from the Company’s restricted subsidiaries or restrictions on the ability of the Company’s restricted subsidiaries to incur liens; engage in transactions with its affiliates; sell assets, including capital stock of its subsidiaries; materially alter the business it conducts; consolidate or merge; incur liens; and engage in sale-leaseback transactions. The Credit Agreement also contains customary representations and warranties, affirmative covenants and provisions relating to events of default. If an event of default occurs, the lenders under the Credit Facilities will be entitled to take various actions, including the acceleration of amounts due under the Credit Facilities and all actions permitted to be taken by a secured creditor. As of March 31, 2024, the Company was in compliance with all covenants under the Credit Agreement. The Company paid certain customary fees to and expenses of (i) JPMorgan Chase Bank, N.A., Barclays Bank PLC, BofA Securities, Inc., Citibank, N.A., HSBC Securities (USA) Inc. and Mizuho Bank, Ltd. in their respective capacities as lead arrangers and bookrunners in connection with the Credit Facilities on the Effective Date, (ii) JPMorgan Chase Bank, N.A. in its capacity as lead arranger in connection with each of the First Amendment, the Second Amendment and the Third Amendment and (iii) the lenders providing the Incremental Revolving Commitments pursuant to the Third Amendment. As of March 31, 2024, the outstanding principal of the Term Loan Facility was $4,891 and the weighted average interest rate was 7.6%. The Revolving Facility has a maturity date in August 2027 while the Incremental Tranche B Loans have a maturity in August 2029. As of March 31, 2024, there were no borrowings under the Revolving Facility. Lines of Credit and Borrowing Arrangements Certain of the Company’s Japanese subsidiaries have lines of credit and a financing facility with various financial institutions, many of which generally expire and are renewed at three-month intervals with the remaining having no expiration date. The lines of credit and financing facility provided for aggregate borrowings as of March 31, 2024 and December 31, 2023 of up to an equivalent of $20 and $14, respectively. There were no borrowings outstanding under these arrangements at March 31, 2024 and December 31, 2023. Contractual maturities of the Company’s debt obligations as of March 31, 2024 are as follows:
Year |  | Amount |
2024 (remaining) |  | $ | 38 |
2025 |  |  | 50 |
2026 |  |  | 50 |
2027 |  |  | 50 |
2028 |  |  | 50 |
2029 |  |  | 4,653 |

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