CREDIT ARRANGEMENTS

12 Months Ended

Aug. 31, 2020

NOTE 10. CREDIT ARRANGEMENTS

Long-term debt was as follows:


	Weighted Average Interest Rate as of August 31, 2020	Year Ended August 31,
(in thousands)				2020			2019
2027 Notes	5.375%	$	300,000		$	300,000
2026 Notes	5.750%	350,000			350,000
2023 Notes	4.875%	330,000			330,000
Poland Term Loan	1.730%	40,713			—
Other	5.100%	21,329			23,168
Term Loan	3.148%	—			210,125

Short-term borrowings	0.980%	—			3,929
Finance leases		50,224			37,699
Total debt		1,092,266			1,254,921
Less debt issuance costs		8,581			10,268
Total amounts outstanding		1,083,685			1,244,653
Less current maturities of long-term debt and short-term borrowings		18,149			17,439
Long-term debt		$	1,065,536		$	1,227,214

In July 2017, the Company issued $300.0 million of 5.375% Senior Notes due July 2027 (the "2027 Notes"). Interest on these notes is payable semiannually.

In May 2018, the Company issued $350.0 million of 5.750% Senior Notes due April 2026 (the "2026 Notes"). Interest on the 2026 Notes is payable semiannually.

In May 2013, the Company issued $330.0 million of 4.875% Senior Notes due May 2023 (the "2023 Notes"). Interest on these notes is payable semiannually.

The Company has a $350.0 million revolving credit facility (the "Revolver") pursuant to the Fourth Amended and Restated Credit Agreement (as amended, the "Credit Agreement"). The Credit Agreement has a maturity date in June 2022. The maximum availability under the Revolver can be increased to $600.0 million with bank approval. The Company's obligations under the Credit Agreement are collateralized by its North America inventory and certain of its North America receivables. The Credit Agreement's capacity includes a $50.0 million sub-limit for the issuance of stand-by letters of credit. The Company had no amounts drawn under the Revolver at August 31, 2020 or 2019. The availability under the Revolver was reduced by outstanding stand-by letters of credit of $3.0 million at August 31, 2020 and 2019.

The Company also had a term loan (the "Term Loan") contemplated under the Credit Agreement. The Term Loan was funded in two tranches: one drawn on July 13, 2017 with an original principal amount of $150.0 million, and one drawn on November 1, 2018 with an original principal amount of $180.0 million. The Company repaid the remaining Term Loan balance in 2020, and recognized $1.8 million of expense related to early extinguishment of this debt, which is included in selling, general and administrative expenses in the Company's consolidated statement of earnings for the year ended August 31, 2020.

Under the Credit Agreement, the Company is required to comply with certain financial and non-financial covenants, including covenants to maintain: (i) an interest coverage ratio (consolidated EBITDA to consolidated interest expense, as each is defined in the Credit Agreement) of not less than 2.50 to 1.00 and (ii) a debt to capitalization ratio (consolidated funded debt to total capitalization, as each is defined in the Credit Agreement) that does not exceed 0.60 to 1.00. Loans under the Credit Agreement

bear interest based on the Eurocurrency rate, a base rate, or the LIBOR rate. At August 31, 2020, the Company's interest coverage ratio was 9.36 to 1.00 and the Company's debt to capitalization ratio was 0.37 to 1.00.

In August 2020, the Company entered into an agreement through its subsidiary, CMCP, which allowed for a delayed draw Term Loan facility ("Poland Term Loan") in the maximum aggregate principal amount of up to PLN 250.0 million, or $67.9 million at August 31, 2020. The proceeds of the Poland Term Loan will be used to finance the third rolling mill in Poland. At August 31, 2020, PLN 150.0 million, or $40.7 million, was outstanding. CMCP is required to make quarterly interest and principal payments on the Poland Term Loan with interest based on the Warsaw Interbank Offer Rate ("WIBOR") plus a margin. The Poland Term Loan has a maturity date of August 2026.

The Company also has credit facilities in Poland, through its subsidiary, CMCP, available to support working capital, short-term cash needs, letters of credit, financial assurance and other trade finance-related matters. At August 31, 2020 and 2019, CMCP's credit facilities totaled PLN 275.0 million, or $74.6 million and $69.0 million, respectively. These facilities expire in March 2022. At August 31, 2020 and 2019, no amounts were outstanding under these facilities. In 2020, CMCP had $22.4 million borrowings and $22.4 million repayments under its credit facilities. CMCP had no borrowings or repayments under its credit facilities in 2019 and 2018. The available balance of these credit facilities was reduced by outstanding stand-by letters of credit, guarantees and/or other financial assurance instruments, which totaled $0.8 million and $1.1 million at August 31, 2020 and August 31, 2019, respectively.

At August 31, 2020, the Company was in compliance with all of the covenants contained in its credit arrangements.

The scheduled maturities of the Company's long-term debt, excluding obligations related to finance leases, are included in the table below. See Note 9, Leases, for scheduled maturities of finance leases.


Year Ended August 31,	(in thousands)
2021	$	3,776
2022	9,576
2023	339,565
2024	11,706
2025	9,556
Thereafter	667,863
Total long-term debt, excluding finance leases	1,042,042
Less debt issuance costs	8,581
Total long-term debt outstanding, excluding finance leases	$	1,033,461

The Company capitalized $2.5 million, $0.3 million and $7.3 million of interest in the cost of property, plant and equipment during 2020, 2019 and 2018, respectively.

Accounts Receivable Facilities

CMC has a $200.0 million U.S. trade accounts receivable facility (the "U.S. Facility"), which expires in November 2021. Under the U.S. Facility, CMC contributes, and certain of its subsidiaries transfer without recourse, certain eligible trade accounts receivable to CMC Receivables, Inc. ("CMCRV"), a wholly-owned subsidiary of CMC. CMCRV is structured to be a bankruptcy-remote entity formed for the sole purpose of facilitating transfers of trade accounts receivable generated by the Company. CMCRV transfers the trade accounts receivable in their entirety to two financial institutions. Under the U.S. Facility, with the consent of both CMCRV and the program's administrative agent, the amount advanced by the financial institutions can be increased to a maximum of $300.0 million for all trade accounts receivable. The remaining portion of the purchase price of the trade accounts receivable takes the form of subordinated notes from the respective financial institutions. These notes will be satisfied from the ultimate collection of the trade accounts receivable after payment of certain fees and other costs. The U.S. Facility contains certain cross-default provisions whereby a termination event could occur if the Company defaulted under certain of its credit arrangements. The covenants contained in the receivables purchase agreement are consistent with the Credit Agreement. Advances taken under the U.S. Facility incur interest based on LIBOR plus a margin. The Company had no advance payments outstanding under the U.S. Facility at August 31, 2020 and August 31, 2019.

In addition to the U.S. Facility, the Company's subsidiary in Poland transfers trade accounts receivable to financial institutions without recourse (the "Poland Facility"). The Poland Facility has a facility limit of PLN 220.0 million ($59.7 million and $55.2 million as of August 31, 2020 and 2019, respectively) and allows the Company's Polish subsidiaries to obtain an advance of up

to 90% of eligible trade accounts receivable transferred under the terms of the arrangement. Advances taken under the Poland Program incur interest based on the WIBOR plus a margin. The Company had no advance payments outstanding under the Poland Facility at August 31, 2020, compared to $3.9 million at August 31, 2019. The transfer of receivables under the U.S. and Poland Facilities do not qualify to be accounted for as sales. Therefore, any advances outstanding under these programs are recorded as debt on the Company's consolidated balance sheets.