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Notes Payable, net | 12 Months Ended
--- | ---
Aug. 31, 2024
Debt Disclosure [Abstract] |
Notes Payable, net | Note 12 — Notes Payable, net
|  | As of August 31, |
(In millions) |  | 2024 |  |  | 2023 |
Leasing nonrecourse term loans |  | $ | 792.1 |  |  | $ | 640.2 |
Senior term debt |  |  | 251.7 |  |  |  | 266.4 |
2.875% Convertible senior notes, due 2028 |  |  | 373.8 |  |  |  | 373.8 |
2.875% Convertible senior notes, due 2024 |  |  | — |  |  |  | 47.7 |
Other notes payable |  |  | 3.3 |  |  |  | 1.8 |
|  | $ | 1,420.9 |  |  | $ | 1,329.9 |
Debt discount and issuance costs |  |  | (16.7 | ) |  |  | (18.2 | )
|  | $ | 1,404.2 |  |  | $ | 1,311.7 |
Leasing nonrecourse term loans include: • N onrecourse senior term debt, secured by a pool of leased railcars. The debt bears a floating interest rate of SOFR plus 1.625% plus 0.10% as a SOFR adjustment, with principal of $3.1 million paid quarterly in arrears and a balloon payment of $283.7 million due upon maturity in August 2027. Interest rate swap agreements cover nearly 100% of the principal balance to swap the floating interest rate to fixed rates. The principal balance as of August 31, 2024 was $320.5 million. • Asset-backed term notes, as discussed below. The principal balance as of August 31, 2024 was $471.6 million. Senior term debt bears a floating interest rate of SOFR plus 1.50% plus 0.10% as a SOFR adjustment, with principal of $3.7 million paid quarterly in arrears and a balloon payment of $222.6 million due upon maturity in August 2026. Interest rate swap agreements cover approximately 75% of the principal balance to swap the floating interest rate to fixed rates. The principal balance as of August 31, 2024 was $251.7 million. The notes payable, along with the revolving and operating lines of credit, contain certain covenants with respect to the Company and various subsidiaries, the most restrictive of which, among other things, limit the ability to: incur additional indebtedness or guarantees; pay dividends or repurchase stock; enter into capital leases; create liens; sell assets; engage in transactions with affiliates, including joint ventures and non U.S. subsidiaries, including but not limited to loans, advances, equity investments and guarantees; enter into mergers, consolidations or sales of substantially all the Company’s assets; and enter into new lines of business. The covenants also require certain maximum ratios of debt to total capitalization and minimum levels of fixed charges (interest and rent) coverage. As of August 31, 2024, principal payments on the notes payable are expected as follows:
(In millions) |  |  |
Year ending August 31, |  |  |
2025 |  | $ | 42.8 |
2026 |  |  | 265.5 |
2027 |  |  | 312.4 |
2028 1 |  |  | 389.2 |
2029 |  |  | 14.6 |
Thereafter |  |  | 396.4 |
|  | $ | 1,420.9 |
1 The repayment of the $373.8 million of 2028 Convertible Notes due April 2028 is assumed to occur at the scheduled maturity instead of assuming an earlier conversion by the holders. Convertible notes Convertible senior notes, due 2028 (2028 Convertible Notes), bear interest at a fixed rate of 2.875%, paid semiannually in arrears on April 15 th and October 15 th. Issuance costs are amortized using the effective interest rate method through 2028 and the amortization expense is included in Interest and foreign exchange on the Company's Consolidated Statements of Income. As of August 31, 2024, the effective interest rate was 5.75%. The convertible notes mature on April 15, 2028, unless earlier repurchased, redeemed or converted in accordance with their terms prior to such date. The convertible notes are senior unsecured obligations and rank equally with other senior unsecured debt. The notes are convertible into shares of the Company’s common stock, at an initial conversion rate of 18.0317 shares of common stock per $1,000 principal amount which is equivalent to an initial conversion price of approximately $55.46 per share. The conversion rate and the resulting conversion price are subject to adjustment in certain events, such as distributions, dividends or stock splits. Conversion of the par value of the note will be settled in cash, with any premium convertible in cash or shares at the Company’s option. Upon a conversion of the notes, the Company may elect to pay or deliver, as the case may be, cash and, if applicable, shares of the Company’s common stock, as provided in the 2028 Notes Indenture (as defined below). As of August 31, 2024, the Company has reserved approximately 8.2 million shares for issuance upon conversion of these notes. The 2028 Convertible Notes are subject to an indenture entered into on April 20, 2021 by the Company and Wells Fargo Bank, National Association, as trustee, as amended and restated by the first supplemental indenture dated June 1, 2021 (2028 Notes Indenture). The 2028 Convertible Notes are convertible at the option of the holders prior to January 15, 2028, under certain circumstances as described in the 2028 Notes Indenture. Additionally, the Company may elect to call the notes on or after April 15, 2025 and on or before the 40 th trading day prior to April 15, 2028, at a cash redemption price described in the 2028 Notes Indenture if the stock price exceeds 130% of the conversion price during certain trading days as defined in the 2028 Notes Indenture. Calling any Convertible Note for redemption will constitute a make-whole fundamental change with respect to that Convertible Note, in which case the conversion rate applicable to the conversion of that Convertible Note will be increased in certain circumstances if it is converted after it is called for redemption. The Company's 2.875% Convertible senior notes, due 2024 (2024 Convertible Notes), matured on February 1, 2024. The outstanding principal balance of $47.7 million plus accrued interest was settled in cash on the maturity date to retire the 2024 Convertible Notes. Asset-backed term notes GBX Leasing 2022-1 LLC (GBXL I or Issuer) was formed as a wholly owned special purpose entity (SPE) of GBX Leasing to securitize the leasing assets of GBX Leasing. GBXL I issued $323.3 million of term notes in February 2022 (2022 GBXL Notes) and $178.5 million of term notes in November 2023 (2023 GBXL Notes), which are secured by a portfolio of railcars and associated operating leases and other assets, acquired and owned by GBXL I. Greenbrier Management Services, LLC (GMS) entered into certain agreements relating to the management and servicing of the Issuer’s assets. The Company evaluated the accounting for the transaction and concluded that, based on its equity investment in the Issuer combined with GMS’s capacity as servicer, the Company is the primary beneficiary of the SPE and therefore consolidates the SPE for financial reporting purposes. Issued debt of GBXL I includes: • GBXL I Series 2022-1 Class A Secured Railcar Equipment Notes (2022 Class A Notes) with a principal balance of $274.8 million as of August 31, 2024 and GBXL I Series 2022-1 Class B Secured Railcar Equipment Notes (2022 Class B Notes) with a principal balance of $20.7 million as of August 31, 2024, collectively the 2022 GBXL Notes; and • GBXL I Series 2023-1 Class A Secured Railcar Equipment Notes (2023 Class A Notes) with a principal balance of $156.7 million as of August 31, 2024 and GBXL I Series 2023-1 Class B Secured Railcar Equipment Notes (2023 Class B Notes) with a principal balance of $19.4 million as of August 31, 2024, collectively the 2023 GBXL Notes. GBX Leasing used the net proceeds received from the issuance of the 2023 GBXL Notes to pay down the GBX Leasing warehouse credit facility. The 2022 GBXL Notes bear interest at fixed rates of 2.87% and 3.45% for the Class A Notes and Class B Notes, respectively. The 2022 GBXL Notes are payable monthly, with a contractual maturity date of February 20, 2052 and an anticipated repayment date of January 20, 2029. While the contractual maturity date is in 2052, the cash flows generated from the railcar assets will pay down the 2022 GBXL Notes in line with the agreement, which based on expected cash flow payments, would result in repayment in advance of the contractual maturity date. The 2023 GBXL Notes bear interest at fixed rates of 6.42% and 7.28% for the 2023 Class A Notes and 2023 Class B Notes, respectively. The 2023 GBXL Notes are payable monthly, with a contractual maturity date of November 20, 2053 and an anticipated repayment date of November 20, 2030. While the contractual maturity date is in 2053, the cash flows generated from the railcar assets will pay down the 2023 GBXL Notes in line with the agreement, which based on expected cash flow payments, would result in repayment in advance of the contractual maturity date. If the principal amount of the 2023 GBXL Notes and 2022 GBXL Notes has not been repaid in full by the anticipated repayment date, then the Issuer will also be required to pay additional interest to the holders at a rate equal to 4.00% per annum. The GBXL Notes are obligations of the Issuer only and are nonrecourse to Greenbrier. The GBXL Notes are subject to a Master Indenture between the Issuer and U.S. Bank Trust Company, National Association, as trustee, as supplemented by the Series 2022-1 Supplement dated February 9, 2022 and the Series 2023-1 Supplement dated November 20, 2023. The GBXL Notes may be subject to acceleration upon the occurrence of certain events of default. The following table summarizes the Issuer's net carrying amount of the assets transferred and the related debt.
|  | As of August 31, |
(In millions) |  | 2024 |  |  | 2023 |
Assets |  |  |  |  |  |
Restricted cash |  | $ | 0.3 |  |  | $ | 6.7 |
Equipment on operating leases, net |  |  | 651.0 |  |  |  | 388.9 |
Liabilities |  |  |  |  |  |
Notes payable, net |  | $ | 464.5 |  |  | $ | 302.1 |

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