SEC Document

 

under our Revolving Credit Facility were used to fund the initial trust payment of $450 million, which is classified as long-term debt in our Consolidated Balance Sheets.  The Trust was funded with $450 million in cash and a promissory note, bearing no interest and maturing on or before December 23, 2018 (the “Bankruptcy Note”). There is one remaining trust payment due. The Bankruptcy Plan, and Bankruptcy Note, provide that on or before December 23, 2018, a final payment of $125 million in cash, RPM common stock or a combination thereof will be deposited into the Trust. The net present value of the Bankruptcy Note, or $122.4 million, is classified as other current liabilities in our consolidated financial statements at February 28, 2018.  A portion of the payments due under the Bankruptcy Note is secured by a right to the equity of SPHC, Republic and Bondex.  

All past and future contributions to the Trust are deductible for U.S. income tax purposes.  

Accounts Receivable Securitization Program

On May 9, 2017, we entered into a new, three-year, $200.0 million accounts receivable securitization facility (the “AR Program”). The maximum availability under the AR Program is $200.0 million. Availability is further subject to changes in the credit ratings of our customers, customer concentration levels or certain characteristics of the accounts receivable being transferred and, therefore, at certain times, we may not be able to fully access the $200.0 million of funding available under the AR Program.

As of February 28, 2018, there was no outstanding balance under the AR Program, which compares with the maximum availability on that date of $150.0 million.  The interest rate under the Purchase Agreement is based on the Alternate Base Rate, LIBOR Market Index Rate, one-month LIBOR or LIBOR for a specified tranche period, as selected by us, plus in each case, a margin of 0.80%. In addition, we are obligated to pay a monthly unused commitment fee based on the daily amount of unused commitments under the Agreement, which fee ranges from 0.30% to 0.50% based on usage.  The AR Program contains various customary affirmative and negative covenants and also contains customary default and termination provisions.

Our failure to comply with the covenants described above and other covenants contained in the Revolving Credit Facility could result in an event of default under that agreement, entitling the lenders to, among other things, declare the entire amount outstanding under the Revolving Credit Facility to be due and payable. The instruments governing our other outstanding indebtedness generally include cross-default provisions that provide that under certain circumstances, an event of default that results in acceleration of our indebtedness under the Revolving Credit Facility will entitle the holders of such other indebtedness to declare amounts outstanding immediately due and payable.

2.25% Convertible Senior Notes due 2020

On December 9, 2013, we issued $205 million of 2.25% convertible senior notes due 2020 (the “Convertible Notes”).  We pay interest on the Convertible Notes semi-annually on June 15th and December 15th of each year.  

The Convertible Notes will be convertible under certain circumstances and during certain periods at an initial conversion rate of 18.8905 shares of RPM common stock per $1,000 principal amount of notes (representing an initial conversion price of approximately $52.94 per share of common stock), subject to adjustment in certain circumstances.  In October 2017, we declared a dividend in excess of $0.24 per share, and consequently, the adjusted conversion rate at February 28, 2018 was 19.128496.  The initial conversion price represents a conversion premium of approximately 37% over the last reported sale price of RPM common stock of $38.64 on December 3, 2013.  Prior to June 15, 2020, the Convertible Notes may be converted only upon specified events, and, thereafter, at any time.  Upon conversion, the Convertible Notes may be settled, at RPM’s election, in cash, shares of RPM common stock, or a combination of cash and shares of RPM common stock.  The indenture governing this indebtedness includes cross-acceleration provisions. Under certain circumstances, where an event of default under our other instruments results in acceleration of the indebtedness under such instruments, holders of the indebtedness under the indenture are entitled to declare amounts outstanding immediately due and payable.

We account for the liability and equity components of the Convertible Notes separately, and in a manner that will reflect our nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. The effective interest rate on the liability component is 3.92%.  Contractual interest was $1.2 million for the third quarter of fiscal 2018 and 2017, while the amortization of the debt discount was $0.8 million and $0.7 million for the third quarter of fiscal 2018 and 2017, respectively. Contractual interest was $3.5 million for the first nine months of fiscal 2018 and 2017, while amortization of the debt discount was $2.3 million and $2.2 million for the first nine months of fiscal 2018 and 2017, respectively.  At February 28, 2018, the remaining period over which the debt discount will be amortized was 2.75 years, the unamortized debt discount was $8.9 million, and the carrying amount of the equity component was $20.7 million.

32



©2018 RPM International Inc. Terms of Use | Privacy Policy 2628 Pearl Road - P.O. Box 777 - Medina, Ohio 44258 | Phone: 330.273.5090 | Email: info@RPMinc.com