Debt and Financing Arrangements

12 Months Ended

Dec. 31, 2019

The Company’s debt and finance lease obligations were as follows:



(in thousands)	December 31, 2019			December 31, 2018
Term loan facility	$	350,000		$	—
Term loan A facility	—			330,469
Delayed draw term loan A facility	—			54,375
Revolving credit facility	50,321			—
Other short-term borrowings	3,802			920
Finance lease obligations	273			—
Debt issuance costs	(2,072		)	(2,266		)
Total	402,324			383,498
Less: short-term debt and current portion of long-term debt	71,623			36,545
Total long-term debt and finance lease obligations	$	330,701		$	346,953

The debt issuance costs of $2.1 million as of December 31, 2019 relates to the term loan facility. The debt issuance costs of $2.3 million as of December 31, 2018 relates to the term loan A facility and delayed draw term loan A facility.

Restated Credit Agreement

On December 23, 2019, the Company entered into an amended and restated credit agreement (the “restated credit agreement”) arranged by Wells Fargo Bank, National Association (“Wells Fargo”) to amend various terms of the Company’s credit agreement, dated as of April 27, 2016, as amended, for its senior secured credit facilities with Wells Fargo, as administrative agent, and the other lenders and agents party thereto (the “senior secured credit facility”). The restated credit agreement, together with related security, guarantee and other agreements, is referred to as the “restated credit facility.”

The restated credit facility provides for (x) a $350.0 million term loan facility maturing December 23, 2024 and (y) a $400.0 million revolving credit facility maturing December 23, 2024, including a $50.0 million letter of credit sublimit, a $50.0 million swing line sublimit, a C$50.0 million sublimit available for revolving credit borrowings by Acushnet Canada Inc., a £45.0 million sublimit available for revolving credit borrowings by Acushnet Europe Ltd. and a $200.0 million sublimit for borrowings in Canadian dollars, euros, pounds sterling, Japanese yen and other currencies agreed to by the lenders under the revolving credit facility. The revolving credit facility and term loan facility are collateralized by certain assets, including inventory, accounts receivable, fixed assets and intangible assets of the Company.

The Company has the right under the restated credit facility to request additional term loans and/or increases to the revolving credit facility in an aggregate principal amount not to exceed (i) $225.0 million plus (ii) an unlimited amount so long as the Net Average Secured Leverage Ratio (as defined in the restated credit agreement) does not exceed 2.25:1.00 on a pro forma basis. The lenders under the restated credit facility will not be under any obligation to provide any such additional term loans or increases to the revolving credit facility, and the incurrence of any additional term loans or increases to the revolving credit facility is subject to customary conditions precedent.

Borrowings under the restated credit facility bear interest at a rate per annum equal to, at the applicable Borrower’s option, either (a) a base rate determined by reference to the highest of (1) the prime rate of Wells Fargo, (2) the federal funds effective rate plus 0.50% and (3) a Eurodollar Rate, subject to certain adjustments, plus 1.00% or (b) a Eurodollar Rate (or, in the case of Canadian borrowings, a Canadian Dollar Offered Rate), subject to certain adjustments, in each case, plus an applicable margin. The restated credit agreement reduced the applicable margin by 0.25%. Under the restated credit agreement, the applicable margin is 0.00% to 0.75% for base rate borrowings and 1.00% to 1.75% for Eurodollar rate or Canadian Dollar Offered Rate borrowings, in each case, depending on the Net Average Total Leverage Ratio (as defined in the restated credit agreement). In addition, the Company is required to pay a commitment fee on any unutilized commitments under the revolving credit facility. The restated credit agreement reduced the commitment fee rate payable in respect of unused portions of the revolving credit facility by 0.05% to 0.15% to 0.30% per annum, depending on the Net Average Total Leverage Ratio. The initial commitment fee rate is 0.20% per annum. The Company is also required to pay customary letter of credit fees.

Interest on borrowings under the restated credit agreement is payable (1) on the last day of any interest period with respect to Eurodollar borrowings with an applicable interest period of three months or less, (2) every three months with respect to Eurodollar borrowings with an interest period of greater than three months or (3) on the last business day of each March, June, September and December with respect to base rate borrowings and swing line borrowings.

The Company is required to make principal payments on the loans under the term loan facility in quarterly installments in an aggregate annual amount equal to 5.00%.

The restated credit agreement requires the Company to prepay outstanding term loans, subject to certain exceptions, with:

•

100% of the net cash proceeds of all non‑ordinary course asset sales or other dispositions of property by the Company and its restricted subsidiaries (including insurance and condemnation proceeds, subject to de minimis thresholds), (1) if the Company does not reinvest those net cash proceeds in assets to be used in its business or to make certain other permitted investments, within 12 months of the receipt of such net cash proceeds or (2) if the Company commits to reinvest such net cash proceeds within 12 months of the receipt thereof, but does not reinvest such net cash proceeds within 18 months of the receipt thereof; and


•	100% of the net proceeds of any issuance or incurrence of debt by the Company or any of its restricted subsidiaries, other than debt permitted under the credit agreement.

The foregoing mandatory prepayments are used to reduce the installments of principal in such order: first, to prepay outstanding loans under the term loan facility and any incremental term loans on a pro rata basis in direct order of maturity and second, to prepay outstanding loans under the revolving credit facility.

The Company may voluntarily repay outstanding loans under the credit agreement at any time without premium or penalty, other than customary “breakage” costs with respect to Eurodollar loans.

The financial covenants were modified under the restated credit facility. The maximum Net Average Total Leverage Ratio was increased to 3.50:1.00, which is subject to increase to 3.75:1.00 in connection with certain acquisitions, and the minimum Consolidated Interest Coverage Ratio (as defined in the restated credit agreement) was decreased to 3.00:1.00. In addition the restated credit facility modified certain covenant baskets.

The initial net proceeds from the restated credit facility were used to repay all of the outstanding debt under the Company's previously existing senior secured credit facility, as well as, payments of accrued interest and closing fees. Immediately prior to repayment, the aggregate amounts outstanding were approximately $309.4 million, $48.8 million and $44.0 million related to the term loan A facility, delayed draw term loan A facility and revolving credit facility, respectively. In connection with amending its credit agreement, the Company incurred fees and expenses of approximately $2.7 million, of which approximately $2.3 million was capitalized as debt issuance costs included in other assets and long-term debt on the consolidated balance sheet. The remaining $0.4 million was included in interest expense, net for the year ended December 31, 2019. In addition, the redemption of the previously existing senior secured credit facility resulted in interest expense, net of approximately $0.4 million for the year ended December 31, 2019.

The interest rate applicable to the term loan facility as of December 31, 2019 was 3.04%. The weighted average interest rate applicable to the outstanding borrowings under the revolving credit facility was 3.54% as of December 31, 2019.

As of December 31, 2019, the Company had available borrowings under its revolving credit facility of $338.5 million after giving effect to $11.2 million of outstanding letters of credit.

Senior Secured Credit Facility

On April 27, 2016, the Company entered into a senior secured credit facilities agreement arranged by Wells Fargo. As amended, this agreement provided for (i) a $275.0 million multi‑currency revolving credit facility, including a $25.0 million letter of credit sublimit, a $25.0 million swing line sublimit, a C$35.0 million sublimit for Acushnet Canada, Inc., a £30.0 million sublimit for Acushnet Europe Limited and an alternative currency sublimit of $100.0 million for borrowings in Canadian dollars, euros, pounds sterling and Japanese yen (“revolving credit facility”), (ii) a $375.0 million term loan A facility and (iii) a $100.0 million delayed draw term loan A facility.

During the first quarter of 2017, the Company drew down $100.0 million on the delayed draw term loan A facility and $47.8 million under the revolving credit facility to substantially fund the equity appreciation rights (“EAR") plan payout.

In connection with amending the senior secured credit facilities during the second quarter of 2018, the Company incurred approximately $0.4 million in fees and expenses, which were initially recorded as debt issuance costs and recognized as interest expense over the term of the senior secured credit facilities.

The interest rate applicable to the term loan A facility and delayed draw term loan A facility as of December 31, 2018 was 4.02%.

Debt Covenants

The restated credit agreement contains a number of covenants that, among other things, restrict the ability of the Company, subject to certain exceptions, to incur, assume, or permit to exist additional indebtedness or guarantees; incur liens; make investments and loans; pay dividends, make payments on, or redeem or repurchase capital stock or make prepayments, repurchases or redemptions of certain indebtedness; engage in mergers, liquidations, dissolutions, asset sales, and other non-ordinary course dispositions (including sale leaseback transactions); amend or otherwise alter terms of certain indebtedness or certain other agreements; enter into agreements limiting subsidiary distributions or containing negative pledge clauses; engage in certain transactions with affiliates; alter the nature of the business that it conducts or change its fiscal year or accounting practices. Certain exceptions to these covenants are determined based on ratios that are calculated in part using the calculation of Adjusted EBITDA. The restated credit agreement also restricts the ability of Acushnet Holdings Corp. to engage in certain mergers or consolidations or engage in any activities other than permitted activities. The Company’s restated credit agreement contains certain customary affirmative and restrictive covenants, including, among others, financial covenants based on the Company’s leverage and interest coverage ratios. The restated credit agreement includes customary events of default, the occurrence of which, following any applicable cure period, would permit the lenders to, among other things, declare the principal, accrued interest and other obligations to be immediately due and payable.

As of December 31, 2019, the Company was in compliance with all covenants under the restated credit agreement.

Change of Control

A change of control is an event of default under the restated credit agreement which could result in the acceleration of all outstanding indebtedness and the termination of all commitments under the restated credit agreement and would allow the lenders under the restated credit agreement to enforce their rights with respect to the collateral granted. A change of control occurs if any person (other than certain permitted parties, including Fila) becomes the beneficial owner of 35% or more of the outstanding common stock of the Company.

Other Short-Term Borrowings

The Company has certain unsecured local credit facilities available through its subsidiaries. The weighted average interest rate applicable to the outstanding borrowings was 2.29% and 3.25% as of December 31, 2019 and 2018, respectively. As of December 31, 2019, the Company had available borrowings remaining under these local credit facilities of $60.1 million.

Letters of Credit

As of December 31, 2019, there were outstanding letters of credit related to agreements, including the Company's restated credit facility, totaling $14.8 million of which $11.6 million was secured. As of December 31, 2018, there were outstanding letters of credit related to agreements, including the Company's senior secured credit facility, totaling $15.5 million of which $12.4 million was secured. These agreements provided a maximum commitment for letters of credit of $59.8 million and $29.2 million as of December 31, 2019 and 2018, respectively.

Payments of Debt Obligations due by Period

As of December 31, 2019, principal payments due on outstanding long-term debt obligations were as follows:



(in thousands)
Year ending December 31,
2020	$	17,500
2021	17,500
2022	17,500
2023	17,500
2024	280,000
Total	$	350,000