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LONG-TERM OBLIGATIONS | 3 Months Ended
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Mar. 31, 2021
Debt Disclosure [Abstract] |
LONG-TERM OBLIGATIONS | LONG-TERM OBLIGATIONS 2017 Credit Agreement On January 31, 2017, the Company entered into a credit agreement (as amended, the “2017 Credit Agreement”) with the lenders and issuing banks party thereto and Credit Suisse AG, Cayman Islands Branch (“CSAG”), as administrative agent and collateral agent. The 2017 Credit Agreement included (i) a $600 million revolving line of credit (the “Revolver”) and (ii) senior secured term loans totaling $600 million that will mature on January 31, 2024 (the “Term Loans”). On April 23, 2020, the Company entered into Loan Modification Agreement and Amendment No. 4 (“Amendment No. 4”) to the 2017 Credit Agreement which extended the term of the Revolver to expire on January 31, 2023, waived or amended certain financial covenants during 2020 and 2021, increased the interest rate on the Revolver by 25 basis points until December 31, 2021 and contained other provisions, such as prohibiting share repurchases and dividends, in 2020. The $400 million senior secured term loan (the “Original Term Loan”) under the 2017 Credit Agreement bears interest at a rate of LIBOR plus 2.00% with a 0.75% LIBOR floor. During the first quarter of 2021, the Company prepaid the $200 million term loan (the “2019 Term Loan”) under the 2017 Credit Agreement prior to its maturity date to reduce the Company’s outstanding debt and lower its leverage. The Company recorded a loss on early extinguishment of debt related to prepayment of $2.1 million for accelerated amortization of debt acquisition costs and original issue discount. The 2019 Term Loan bore interest at a rate of LIBOR plus 2.75% with a 0.75% LIBOR floor. In April 2021, the Company entered into an amendment and restatement agreement dated as of April 1, 2021 (the “Amendment and Restatement Agreement”) to the 2017 Credit Agreement. In connection with the Amendment and Restatement Agreement, the 2017 Credit Agreement has been amended and restated as of April 1, 2021 (the “Amended and Restated Credit Agreement” and collectively with the Amendment and Restatement Agreement, the “Amended Agreement”). The principal changes in the Amended Agreement are: (i) extension of the term of the Revolver to expire on April 1, 2026 (previously January 31, 2023), which maturity will spring forward to November 1, 2023 if the Original Term Loan outstanding under the Amended and Restated Credit Agreement is not repaid or its maturity date is not extended, (ii) reinstatement of financial covenants that were waived in 2020 by Amendment No. 4, (iii) decrease in the interest rate on the drawn Revolver by 25 basis points and (iv) certain other technical changes, including additional language regarding the potential cessation of LIBOR as a benchmark rate. The Company expects to record a loss on early extinguishment of debt related to the execution of the Amended Agreement of approximately $2 million in the second quarter of 2021. Unlimited incremental commitments may be extended at the option of the existing or new lenders and can be in the form of revolving credit commitments, term loan commitments, or a combination of both, with incremental amounts in excess of $150 million through March 31, 2021 under the 2017 Credit Agreement and $300 million thereafter under the Amended Agreement as long as the Company satisfies the maximum permitted level of the senior secured leverage as defined in these agreements. The 2017 Credit Agreement required the Company to comply with a number of covenants which limit, in certain circumstances, the Company’s ability to take a variety of actions, including but not limited to: incur indebtedness; create or maintain liens on its property or assets; make investments, loans and advances; repurchase shares of its common stock; engage in acquisitions, mergers, consolidations and asset sales; redeem debt; and pay dividends and distributions. If the Company’s borrowings under the Revolver were greater than 30% of the total revolving credit commitments, the 2017 Credit Agreement required the Company to comply with certain financial tests, as defined in the 2017 Credit Agreement. Compliance with minimum required levels of the interest coverage ratio was waived at March 31, 2021 by Amendment No. 4. Minimum required levels of the interest coverage ratio will be 2.5 to 1.0 at June 30, 2021 and thereafter under the Amended Agreement. Maximum permitted level of the senior secured leverage ratio was 3.75 to 1.0 at March 31, 2021 under Amendment No. 4 and will be 2.75 to 1.0 at June 30, 2021 and thereafter under the Amended Agreement. The 2017 Credit Agreement also contained customary default provisions. The Company was in compliance with all covenants contained in the 2017 Credit Agreement as of March 31, 2021. As of March 31, 2021 and December 31, 2020, the Company had $383.1 million and $579.9 million, net of discount, respectively, in Term Loans outstanding under the 2017 Credit Agreement. The weighted average interest rate on the Term Loans at March 31, 2021 and December 31, 2020 was 2.75% and 3.00%, respectively. The Company had no revolving credit amounts outstanding as of March 31, 2021 and December 31, 2020. The Company issues letters of credit that generally serve as collateral for certain liabilities included in the Condensed Consolidated Balance Sheet and guaranteeing the Company’s performance under contracts. Letters of credit can be issued under two facilities provided in the 2017 Credit Agreement and via bilateral arrangements outside the 2017 Credit Agreement. The 2017 Credit Agreement incorporated secured facilities for issuance of letters of credit up to $400 million (the “$400 Million Facility”). Letters of credit issued under the $400 Million Facility decrease availability under the Revolver. The 2017 Credit Agreement also permitted the Company to have additional secured facilities for the issuance of letters of credit up to $300 million (the “$300 Million Facility”). Letters of credit issued under the $300 Million Facility did not decrease availability under the Revolver. The Company also has bilateral arrangements to issue letters of credit with various other financial institutions (the “Bilateral Arrangements”). The Bilateral Arrangements were not secured under the 2017 Credit Agreement and did not decrease availability under the Revolver. Letters of credit outstanding (in millions):
|  |  |  | March 31, 2021 |  |  |  |  | December 31, 2020
$400 Million Facility |  |  |  |  | $ | — |  |  |  |  |  |  | $ | — |
$300 Million Facility |  |  |  |  | 59.7 |  |  |  |  |  |  | 35.3 |
Bilateral Arrangements |  |  |  |  | 55.5 |  |  |  |  |  |  | 47.2 |
Total |  |  |  |  | $ | 115.2 |  |  |  |  |  |  | $ | 82.5 |
Furthermore, the Company and certain of its subsidiaries agreed to take certain actions to secure borrowings under the 2017 Credit Agreement. As a result, on January 31, 2017, Terex and certain of its subsidiaries entered into a Guarantee and Collateral Agreement with CSAG, as collateral agent for the lenders, granting security and guarantees to the lenders for amounts borrowed under the 2017 Credit Agreement. Pursuant to the Guarantee and Collateral Agreement, Terex was required to (a) pledge as collateral the capital stock of the Company’s material domestic subsidiaries and 65% of the capital stock of certain of the Company’s material foreign subsidiaries and (b) provide a first priority security interest in substantially all of the Company’s domestic assets. 5-5/8% Senior Notes On January 31, 2017, the Company sold and issued $600.0 million aggregate principal amount of Senior Notes Due 2025 (“5-5/8% Notes”) at par in a private offering. The proceeds from the 5-5/8% Notes, together with cash on hand, including cash from the sale of the Company’s Material Handling and Port Solutions business, was used: (i) to complete a tender offer for up to $550.0 million of the Company’s Senior Notes due 2021 (“6% Notes”), (ii) to redeem and discharge such portion of the 6% Notes not purchased in the tender offer, (iii) to fund a $300.0 million partial redemption of the 6% Notes, (iv) to fund repayment of all $300.0 million aggregate principal amount outstanding of the Company’s 6-1/2% Senior Notes due 2021 on or before April 3, 2017, (v) to pay related premiums, fees, discounts and expenses, and (vi) for general corporate purposes. The 5-5/8% Notes were jointly and severally guaranteed by certain of the Company’s domestic subsidiaries. On March 15, 2021, the Company delivered a notice for the conditional redemption of all of its outstanding 5-5/8% Notes. On April 5, 2021, the Company redeemed the 5-5/8% Notes in full for $622.9 million, including redemption premiums of $16.9 million and accrued but unpaid interest of $6.0 million. The Company expects to record a loss on early extinguishment of debt related to the redemption of the 5-5/8% Notes of approximately $23 million in the second quarter of 2021. 5% Senior Notes In Apri1 2021, the Company sold and issued $600.0 million aggregate principal amount of Senior Notes Due 2029 (“5% Notes”) at par in a private offering. The proceeds from the 5% Notes, together with cash on hand, was used: (i) to fund redemption and discharge of the 5-5/8% Notes and (ii) to pay related premiums, fees, discounts and expenses. The 5% Notes are jointly and severally guaranteed by certain of the Company’s domestic subsidiaries. Fair Value of Debt Based on indicative price quotations from financial institutions multiplied by the amount recorded on the Company’s Condensed Consolidated Balance Sheet (“Book Value”), the Company estimates the fair values of its debt set forth below as of March 31, 2021, as follows (in millions, except for quotes):
| Book Value |  | Quote |  | Fair Value
5-5/8% Notes | $ | 600.0 |  |  | $ | 1.02875 |  |  | $ | 617.3 |
2017 Credit Agreement Original Term Loan (net of discount) | $ | 383.1 |  |  | $ | 0.99708 |  |  | $ | 382.0 |
The fair value of debt reported in the table above is based on adjusted price quotations on the debt instruments in an active market and therefore is categorized under Level 2 of the ASC 820 hierarchy. See Note A – “Basis of Presentation” for an explanation of ASC 820 hierarchy. The Company believes that the carrying value of its other borrowings, including amounts outstanding, if any, for the revolving credit line under the 2017 Credit Agreement, approximate fair market value based on maturities for debt of similar terms. Fair value of these other borrowings are categorized under Level 2 of the ASC 820 hierarchy.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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