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DEBT | 3 Months Ended
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Mar. 31, 2020
DEBT |
DEBT | 6. DEBT ​ At March 31, 2020 and December 31, 2019, the Company’s debt consisted of the following: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | March 31, | ​ | December 31, | ​
(In millions) |  | 2020 |  | 2019 |
Private Placement Term Loans: | ​ | ​ | ​ | ​ | ​ | ​ | ​
5.79 %, payable through 2020 | ​ | $ | 3.5 | ​ | $ | 3.5 | ​
3.66 %, payable through 2023 | ​ |  | 31.9 | ​ |  | 31.9 | ​
4.16 %, payable through 2027 | ​ |  | 39.3 | ​ |  | 39.3 | ​
3.37 %, payable through 2027 | ​ | ​ | 75.0 | ​ | ​ | 75.0 | ​
3.14 %, payable through 2031 | ​ | ​ | 178.8 | ​ | ​ | 188.0 | ​
4.31 %, payable through 2032 | ​ |  | 30.3 | ​ |  | 30.3 | ​
4.35 %, payable through 2044 | ​ | ​ | 100.0 | ​ | ​ | 100.0 | ​
3.92 %, payable through 2045 | ​ | ​ | 69.5 | ​ | ​ | 69.5 | ​
Title XI Debt: | ​ | ​ | ​ | ​ | ​ | ​ | ​
5.34 %, payable through 2028 | ​ |  | 18.7 | ​ |  | 19.8 | ​
5.27 %, payable through 2029 | ​ |  | 20.9 | ​ |  | 22.0 | ​
Revolving credit facility, maturity date of June 29, 2022 | ​ |  | 357.0 | ​ |  | 379.1 | ​
Total Debt | ​ |  | 924.9 | ​ |  | 958.4 | ​
Less: Current portion | ​ |  | (53.4) | ​ |  | (48.4) | ​
Total Long-term Debt | ​ | $ | 871.5 | ​ | $ | 910.0 | ​
​ The following is a description of the Company’s debt: ​ Private Placement Term Loans: The 5.79 percent notes payable through 2020 are amortized by semi-annual principal payments of $3.5 million plus interest. ​ During the second quarter of 2012, the Company issued $170.0 million of unsecured notes, which funded in three tranches, $77.5 million at an interest rate of 3.66 percent, $55.0 million at an interest rate of 4.16 percent, and $37.5 million at an interest rate of 4.31 percent (the “2012 Notes”). Principal and interest are payable semi-annually. The 2012 Notes began to amortize in 2015 with aggregate semi-annual payments of $4.6 million which continued through 2016, followed by $8.4 million in 2017 through mid-year 2023, $3.8 million through mid-year 2027, and $1.2 million thereafter. ​ In January 2014, the Company issued $100.0 million of 30-year senior unsecured notes at an interest rate of 4.35 percent, payable semi-annually (the “2014 Notes”). The 2014 Notes will begin to amortize in 2021, with annual principal payments of $5.0 million in 2021, $7.5 million in 2022 and 2023, $10.0 million from 2024 to 2027, and $8.0 million in 2028. Starting in 2029, and in each year thereafter until 2044, annual principal payments will be $2.0 million. ​ In July 2015, the Company issued $75.0 million of 30-year senior unsecured notes at an interest rate of 3.92 percent, payable semi-annually (the “2015 Notes”). The 2015 Notes began to amortize in 2017, with annual principal payments of approximately $1.8 million through 2019. During the years 2020 to 2026, the annual principal payments will range between approximately $1.3 million and $8.0 million. Starting in 2027, and in each year thereafter, the annual principal payments will be approximately $1.5 million. ​ In September 2016, the Company issued $200.0 million of 15-year senior unsecured notes (the “Series D Notes”) at an interest rate of 3.14 percent, payable semi-annually. The Series D Notes began to amortize in 2019, with semi-annual principal payments of $6.0 million. During the years 2020 through 2023, semi-annual principal payments will be $9.2 million. Starting in 2024, and in each year thereafter through maturity in 2031, the semi-annual principal payments will be $7.15 million. ​ In December 2016, the Company issued $75 million of 11-year senior unsecured notes at an interest rate of 3.37 percent, payable semi-annually (the “Series A Notes”). The Series A Notes will begin to amortize in 2021, with principal payments of $5.8 million in 2021 and $11.5 million per year, paid semi-annually, from 2022 through 2027. ​ ​ Existing and 2020 Title XI Bonds: In September 2003, MatNav issued $55.0 million in U.S. Government guaranteed ship financing bonds (Title XI) to finance the delivery of Manukai (the “Existing Title XI Bonds”). The bonds have a final maturity in September 2028 with a coupon rate of 5.34 percent. The bonds are amortized by semi-annual payments of $1.1 million plus interest. In August 2004, MatNav issued $55.0 million of U.S. Government guaranteed ship financing bonds (Title XI) to finance the delivery of Maunawili. The bonds have a final maturity in July 2029 with a coupon rate of 5.27 percent. The bonds are amortized by semi-annual payments of $1.1 million plus interest. ​ On April 27, 2020, MatNav entered into (i) a consolidated agreement (the “Consolidated Agreement”) among MatNav, the United States of America, represented by the Maritime Administrator of the Maritime Administration (“MARAD”) and, with respect to certain provisions, the Company and (ii) a Note Purchase Agreement (the “Note Purchase Agreement”) among MatNav, MARAD, and the Federal Financing Bank (the “FFB”). Pursuant to the Consolidated Agreement, the Note Purchase Agreement and certain related agreements (collectively, the “2020 Title XI Debt Agreements”), MatNav obtained Title XI financing in the amount of $185.9 million (the “2020 Title XI Bonds” and, collectively with the Existing Title XI Bonds, the “Title XI Bonds”). A fee of approximately $8.7 million was paid to MARAD out of the proceeds at closing. The net proceeds of approximately $177 million were used to reduce outstanding debt. ​ The 2020 Title XI Bonds mature on October 15, 2043 and have a cash interest rate of 1.22 percent, payable semi-annually in arrears on April 15 and October 15, commencing on October 15, 2020, together with a principal payment of approximately $4.0 million. MatNav may prepay any amounts outstanding under the Consolidated Agreement subject to a potential prepayment premium or other adjustment, in accordance with the 2020 Title XI Debt Agreements. Once amounts under the 2020 Title XI Bonds are repaid, they may not be reborrowed. Mandatory prepayments are required under certain limited circumstances, including specified casualty events with respect to the vessel Daniel K. Inouye (the “Vessel”). ​ Revolving Credit Facility: On June 29, 2017 (the “Closing Date”), the Company entered into an amended and restated credit agreement that provides the Company with additional sources of liquidity for working capital, capital expenditures and investment opportunities, and amends and restates the Company’s previously amended and restated credit agreement (the “Credit Agreement” or the “revolving credit facility”). The Credit Agreement expires on June 29, 2022, and provides for committed aggregate borrowing of up to $650 million, with an uncommitted option to increase the aggregate borrowing by up to $250 million. The aggregate borrowing within the Credit Agreement includes a $100 million sublimit for the issuance of standby and commercial letters of credit, and a $50 million sublimit for swing line loans. The Company may prepay any amounts outstanding under the Credit Agreement without premium or penalty. All obligations of the Company under the Credit Agreement are guaranteed by Matson’s principal operating subsidiary MatNav and by certain other subsidiaries. ​ On March 31, 2020 the Company entered into a First Amendment to Amended and Restated Credit Agreement (the “Credit Agreement Amendment”) to the Credit Agreement. The Credit Agreement Amendment provides for amendments to certain covenants and other terms, including increasing the permitted consolidated leverage ratio from March 31, 2020 to December 30, 2021, amending the pricing grid to provide for pricing ranging from, at the Company’s election, LIBOR plus a margin between 1.75 percent and 3.50 percent or a base rate plus a margin between 0.75 percent and 2.50 percent depending on the Company’s consolidated net leverage ratio; providing for additional limitations on stock redemptions and repurchases, sale leaseback transactions and asset sales during the period from March 31, 2020 through December 30, 2021; and providing for additional limitations on incurrence of priority debt through December 21, 2027. In addition, the Credit Agreement Amendment adds a “most favored lender” provision for the benefit of the lenders with respect to the Company’s Private Loan Facilities. ​ Pursuant to the Credit Agreement Amendment, commencing March 31, 2020, borrowings under the Credit Agreement bear interest at either LIBOR plus a margin of between 1.75 percent and 3.50 percent or the base rate plus a margin of between 0.75 percent and 2.50 percent. Letters of credit are subject to fees based on the Company’s consolidated net leverage ratio at a rate of between 1.75 percent and 3.50 percent, and the Company also pays a commitment fee of between 0.25 percent and 0.55 percent depending on the Company’s consolidated net leverage ratio. ​ As of March 31, 2020, the Company had $163.6 million of remaining borrowing availability under the revolving credit facility. The Company used $7.7 million of the sublimit for letters of credit outstanding as of March 31, 2020. Based on the Company’s consolidated net leverage ratio, which stipulates borrowing margins, the interest rate applicable to revolving credit facility was approximately 3.50 percent at March 31, 2020. ​ Amendments to Existing Private Placement Term Loan Facilities and New Shelf Facilities (“Private Debt Agreements”): On June 29, 2017, the Company and the holders of the Company’s term loans entered into amendments (collectively, the “2017 Amendments”) to each of Company’s Private Debt Agreements, previously issued prior to the Closing Date. The 2017 Amendments provide for amendments to certain covenants and other terms, including (at the Company’s option under certain circumstances) adjustments to the required consolidated leverage ratio, and, in connection with the exercise of such option, the payment of additional interest for certain pre-defined periods. ​ On March 31, 2020, the Company and the holders of notes party thereto entered into amendments (collectively, the “2020 Amendments”) to each of the Company’s Private Loan Facilities. The 2020 Amendments modify certain covenants and other terms, including increasing the permitted consolidated leverage ratio from March 31, 2020 to December 30, 2021; providing for additional quarterly interest enhancement payments based on the Company’s consolidated leverage ratio from the quarter ended March 31, 2020 through the quarters ending December 31, 2021; providing for an additional 25 basis points of interest on the Notes commencing on January 1, 2022 (subject to termination of such incremental interest upon the Company meeting a consolidated leverage ratio of less than 3:00 to 1:00 for two consecutive fiscal quarters); providing for additional fee payments to be made for the quarters ending June 30, 2021 and September 30, 2021; providing for prepayment at par at the option of the holders with proceeds of certain Title XI debt and dispositions of capital assets; providing for additional limitations on stock redemptions and repurchases, sale leaseback transactions and asset sales during the period from March 31, 2020 through and including December 30, 2021; and providing for additional limitations on incurrence of priority debt through December 21, 2027. In addition, the 2020 Amendments add a “most favored lender” provision for the benefit of the noteholders with respect to the other Private Loan Facilities and the Credit Agreement. ​ Financing Costs: The Company paid approximately $2.0 million and $0.8 million related to the Credit Agreement Amendment and the 2020 Amendments, respectively. These amounts have been included in other assets in the Condensed Consolidated Balance Sheet as of March 31, 2020. ​ Debt Covenants in the Private Placement Term Loans and the Revolving Credit Facility: The Credit Agreement and Private Loan Facilities (collectively, the “Private Debt Agreements”) contain affirmative, negative and financial covenants customary for financings of this type, including, among other things, limitations on certain other indebtedness, loans and investments, liens, mergers, asset sales, and transactions with affiliates as defined within the Private Debt Agreements. The Private Debt Agreements also contain customary events of default, including cross defaults to other material indebtedness, including the Title XI debt. A brief description of the principal covenants contained in the Private Debt Agreements includes, but is not limited to the following (as defined within the Private Debt Agreements): ​
● | Minimum Consolidated Interest Coverage Ratio as of the end of any fiscal quarter is not permitted to be less than 3.50 to 1.0;
● | Maximum Consolidated Leverage Ratio as of the end of any fiscal quarter is not permitted to exceed the ratios specified in the Private Debt Agreements for the applicable quarter; and
● | No Priority Debt may be incurred other than: (i) an aggregate of $331,000,000 principal amount of Title XI Priority Debt and (ii) Priority Debt incurred by Foreign Subsidiaries in an aggregate principal amount not to exceed $20,000,000.
​ Principal covenants generally will restrict the incurrence of liens except for permitted liens, which include, without limitation, liens securing Title XI debt up to certain thresholds, as defined within the Private Debt Agreements. The Company was in compliance with these covenants as of March 31, 2020. ​ Debt Covenants in Existing Title XI Bonds and 2020 Title XI Debt Agreements: The Existing Title XI Bonds contain customary representations and warranties as well as affirmative and negative covenants, defaults and other provisions typical for MARAD-guaranteed financings of this type, with definitions and limitations as defined within the Existing Title XI Bonds. These covenants include, among other things, minimum working capital and net worth requirements, limitations on certain other indebtedness, loans and investments, liens, mergers, asset sales, sale and leaseback transactions, and transactions with affiliates as defined within the Existing Title XI Bonds. Certain of the covenants in the Existing Title XI Bonds are applicable only upon and during the continuance of either (i) an event of default or (ii) the failure of MatNav to meet certain financial requirements. ​ The 2020 Title XI Debt Agreements contain customary representations and warranties as well as affirmative and negative covenants, defaults and other provisions typical for MARAD-guaranteed financings of this type, with definitions, limitations and financial tests all as negotiated between MatNav and MARAD. As part of the 2020 Title XI Debt Agreements, certain covenants contained in the Existing Title XI Bonds were eliminated. The covenants in the 2020 Title XI Debt Agreements include, among other things, limitations on certain other indebtedness, loans and investments, liens, mergers, asset sales, sale-leasebacks, and transactions with affiliates as defined within the 2020 Title XI Debt Agreements. Certain of the covenants in the 2020 Title XI Debt Agreements are applicable only upon and during the continuance of either (i) an event of default or (ii) the failure of either the Company or MatNav to meet certain supplemental financial tests. ​
● | The supplemental financial tests applicable to MatNav include maintenance of a working capital minimum of $1, and maintenance of a long term debt to net worth ratio of greater than or equal to 2.0 to 1.0; and
● | The supplemental financial tests applicable to the Company include maintenance of a net worth greater than or equal to 90% of the net worth of the Company as set forth in the most recent audited financial statements prior to closing of the issuance of the 2020 Title XI Bonds and compliance with the leverage ratio set forth in the Company’s Credit Agreement.
​ Debt Security and Guarantees: All of the debt of the Company and MatNav, including related guarantees, as of March 31, 2020 was unsecured, except for the Title XI debt. ​ Under the 2020 Title XI Debt Agreements, MARAD has guaranteed certain obligations of MatNav to the FFB. MatNav has agreed to reimburse MARAD for any payments it makes under the MARAD guaranty, and MatNav’s obligations to MARAD with respect to the 2020 Title XI Bonds are secured by a mortgage on the Vessel and certain related assets (the “Collateral”), as well as the Existing Vessels (as defined below). In addition, MatNav’s obligations to MARAD with respect to the 2020 Title XI Bonds are guaranteed by the Company under an Affiliate Guaranty (the “Guaranty”). ​ The 2020 Title XI Debt Agreements also provide that the two vessels securing MatNav’s Existing Title XI Bonds – Manukai and Maunawili (the “Existing Vessels”) – also secure the 2020 Title XI Bonds until the Existing Title XI Bonds are retired in 2028 and 2029, respectively, subject to certain exceptions. ​ Debt Maturities: At March 31, 2020, debt maturities during the next five years and thereafter are as follows: ​
​ | ​ | ​ | ​ | ​
Year (in millions) |  | Total |
2020 | ​ | $ | 37.0 | ​
2021 | ​ |  | 54.2 | ​
2022 | ​ |  | 416.9 | ​
2023 | ​ |  | 59.9 | ​
2024 | ​ |  | 55.8 | ​
Thereafter | ​ |  | 301.1 | ​
Total debt | ​ | $ | 924.9 | ​
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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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