| Debt | (8) Debt The Company’s outstanding debt is as follows:
September 30, 2024 December 31, 2023
Short-term debt:
Term Loan Facility $ 50 $ 93
Long-term debt:
Term Loan Facility $ 3,479 $ 4,860
Debt issuance costs - Term Loan Facility ( 94 ) ( 164 )
Term Loan Facility, net 3,385 4,696
Convertible Notes 1,400 —
Debt issuance costs - Convertible Notes ( 27 ) —
Convertible Notes, net 1,373 —
Total long-term debt, net $ 4,758 $ 4,696 Credit Facilities In connection with the completion of the Atotech Acquisition, on August 17, 2022 (the “Effective Date”) the Company entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, Barclays Bank PLC, and the lenders from time to time party thereto (the “Credit Agreement”). The Credit Agreement provided for (i) a senior secured term loan facility comprised of three tranches: a $ 1,000 loan (the “USD Tranche A”), a $ 3,600 loan (as further increased, refinanced and otherwise modified as described herein, the “USD Tranche B”) and a € 600 loan (as further increased and otherwise modified as described herein, the “Euro Tranche B” and together with the USD Tranche A and the USD Tranche B, the “Term Loan Facility”), each of which were borrowed in full on the Effective Date, and (ii) a senior secured revolving credit facility of $ 500 (as further increased and otherwise modified as described herein, the “Revolving Facility” and, together with the Term Loan Facility, the “Credit Facilities”), with the commitments under each of the foregoing facilities subject to increase from time to time subject to certain conditions. The proceeds of the Term Loan Facility were used on the Effective Date, among other things, to fund a portion of the consideration payable in connection with the Atotech Acquisition and to refinance the existing term loan and revolving credit facilities of the Company and certain indebtedness of Atotech. Initially, borrowings under the Credit Facilities bore interest at a rate per annum equal to, at the Company’s option, any of the following, plus, in each case, an applicable margin: (a) with respect to the USD Tranche A, the Revolving Facility and the USD Tranche B, (x) a base rate determined by reference to the highest of (1) the federal funds effective rate plus 0.50 %, (2) the prime rate quoted in The Wall Street Journal, or (3) a forward-looking term rate based on Term SOFR (plus an applicable credit spread adjustment) for an interest period of one month, plus 1.00 %; and (y) a Term SOFR rate (plus an applicable credit spread adjustment) for the interest period relevant to such borrowing, subject to a rate floor of (I) with respect to the USD Tranche B, 0.50 % and (II) with respect to the USD Tranche A and the Revolving Facility, 0.0 %; and (b) with respect to the Euro Tranche B, a Euro Interbank Offered Rate (“EURIBOR”) rate determined by reference to the costs of funds for Euro deposits for the interest period relevant to such borrowing adjusted for certain additional costs, subject to a EURIBOR rate floor of 0.0 % . Initially, the applicable margins for borrowings under the Credit Facilities were (i) under the USD Tranche A, 1.50 % with respect to base rate borrowings and 2.50 % with respect to Term SOFR borrowings, (ii) under the USD Tranche B, 1.75 % with respect to base rate borrowings and 2.75 % with respect to Term SOFR borrowings, (iii) under the Euro Tranche B, 3.00 % and (iv) under the Revolving Facility, 1.50 % with respect to base rate borrowings and 2.50 % with respect to Term SOFR borrowings. In addition to paying interest on outstanding principal under the Credit Facilities, the Company is required to pay a commitment fee in respect of the unutilized commitments under the Revolving Facility. The commitment fee is subject to adjustment based on the Company’s first lien net leverage ratio as of the end of the preceding fiscal quarter. The Company must also pay customary letter of credit fees and agency fees. As of September 30, 2024, the commitment fee was 0.25 % per annum, representing a downward adjustment from 0.375 % as of June 30, 2024. On October 3, 2023 (the “First Amendment Effective Date”), the Company entered into the First Amendment to Credit Agreement (the “First Amendment”), which refinanced all of the $ 3,564 outstanding USD Tranche B to (i) decrease the applicable margin for the USD Tranche B to 1.50 % with respect to base rate borrowings and 2.50 % with respect to Term SOFR borrowings and (ii) remove the credit spread adjustment applicable to Term SOFR borrowings of the USD Tranche B. On January 22, 2024 (the “Second Amendment Effective Date”), the Company entered into the Second Amendment to Credit Agreement (the “Second Amendment”), pursuant to which the Company (i) borrowed additional USD Tranche B loans in an aggregate principal amount of $ 490 and additional Euro Tranche B loans in an aggregate principal amount of € 250 (collectively, the “Incremental Tranche B Loans”) and (ii) used a portion of the proceeds of the Incremental Tranche B Loans to prepay the USD Tranche A in full in an aggregate principal amount of $ 744 . On February 13, 2024, the Company entered into the Third Amendment to Credit Agreement (the “Third Amendment”), pursuant to which the Company increased the available borrowing capacity under the Revolving Facility by $ 175 (the “Incremental Revolving Commitments”). As of September 30, 2024, the available borrowing capacity under the Revolving Facility was $ 675 . On July 23, 2024 (the “Fourth Amendment Effective Date”), the Company entered into the Fourth Amendment to Credit Agreement (the “Fourth Amendment”), pursuant to which the Company (i) refinanced its existing USD Tranche B loan and Euro Tranche B loan with a new $ 2,650 USD Tranche B loan and a new € 800 Euro Tranche B loan, (ii) decreased the applicable margin for the USD Tranche B from 2.50 % to 2.25 % with respect to Term SOFR borrowings and from 1.50 % to 1.25 % with respect to base rate borrowings and (iii) decreased the applicable margin for the Euro Tranche B from 3.00 % to 2.75 %. On July 23, 2024, immediately prior to the effectiveness of the Fourth Amendment, the Company made a voluntary prepayment of $ 110 aggregate principal amount under the Term Loan Facility, consisting of $ 69 principal amount of its USD Tranche B loan and € 38 principal amount of its Euro Tranche B loan. The USD Tranche B and the Euro Tranche B were issued on the Effective Date with original issue discount of 2.00 % of the principal amounts thereof. The USD Tranche B was issued on the First Amendment Effective Date with original issue discount of 0.25 % of the principal amount thereof. The Incremental Tranche B Loans were issued with original issue discount of 0.25 % of the principal amount thereof. The Company incurred $ 242 of deferred financing fees and original issue discount related to the term loans under the Term Loan Facility funded on the Effective Date, which are included in long-term debt, net in the accompanying consolidated balance sheets and are being amortized to interest expense over the estimated life of the term loans using the effective interest method. The Company incurred $ 11 of deferred financing fees and original issue discount related to the USD Tranche B funded on the First Amendment Effective Date, of which $ 9 is included in long-term debt, net in the accompanying consolidated balance sheets and is being amortized to interest expense over the estimated life of the term loans using the effective interest method. The Company recorded an $ 8 loss on extinguishment of debt in connection with the First Amendment. The Company incurred $ 5 of deferred financing fees and original issue discount related to the Incremental Tranche B Loans funded on the Second Amendment Effective Date, of which $ 2 is included in long-term debt, net in the accompanying consolidated balance sheets and is being amortized to interest expense over the estimated life of the term loans using the effective interest method. The Company recorded a $ 9 loss on extinguishment of debt in connection with the Second Amendment. The Company recorded a $ 5 loss on extinguishment of debt in connection with the Fourth Amendment as a result of the acceleration of deferred financing and original issue discounts. Under the Credit Agreement, the Company is required to prepay outstanding term loans, subject to certain exceptions, with portions of its annual excess cash flow as well as with the net cash proceeds of certain of its asset sales, certain casualty and condemnation events and the incurrence or issuances of certain debt. If at any time the aggregate amount of outstanding loans, unreimbursed letter of credit drawings and undrawn letters of credit under the Revolving Facility exceeds the aggregate commitments under the Revolving Facility, the Company is required to repay outstanding loans and/or cash collateralize letters of credit, with no reduction of the commitment amount. The Company may voluntarily prepay outstanding loans under the Credit Facilities from time to time, subject to certain conditions, without premium or penalty other than customary “breakage” costs with respect to Term SOFR or EURIBOR loans; provided, however, that subject to certain exceptions, if on or prior to the date that is six months after the Fourth Amendment Effective Date, the Company prepays any loans under the USD Tranche B or the Euro Tranche B in connection with a repricing transaction, the Company must pay a prepayment premium of 1.00 % of the aggregate principal amount of the loans so prepaid. Additionally, the Company may voluntarily reduce the unutilized portion of the commitment amount under the Revolving Facility. Prior to the repayment in full of the USD Tranche A, the Company was required to make scheduled quarterly payments each equal to 1.25 % of the original principal amount of the USD Tranche A. The Company is required to make scheduled quarterly payments each equal to approximately $ 10 with respect to the USD Tranche B and approximately € 2 with respect to the Euro Tranche B, in each case with the balance due thereunder on the seventh anniversary of the Effective Date. There is no scheduled amortization under the Revolving Facility. Any principal amount outstanding under the Revolving Facility is due and payable in full on the fifth anniversary of the Effective Date. All obligations under the Credit Facilities are guaranteed by certain of the Company’s wholly-owned domestic subsidiaries and are required to be guaranteed by certain of the Company’s future wholly-owned domestic subsidiaries, and are secured by substantially all of the Company’s assets and the assets of such subsidiaries, subject to certain exceptions and exclusions. Under the Credit Agreement, the Company has the ability to incur additional incremental debt facilities in an amount up to (x) the greater of (1) $ 1,011 and (2) 75 % of consolidated last twelve months earnings before interest, taxes, depreciation, and amortization (“EBITDA”), plus (y) an amount equal to the sum of all voluntary prepayments of term loans under the Term Loan Facility, plus (z) an additional unlimited amount subject to pro forma compliance with certain leverage ratio tests (based on the security and priority of such incremental debt) . Under the USD Tranche A and the Revolving Facility, so long as any USD Tranche A loans (or commitments in respect thereof) are outstanding as of the end of any fiscal quarter, the Company may not allow its total net leverage ratio as of the end of such fiscal quarter to be greater than 5.25 to 1.00 for the fiscal quarters ending December 31, 2023 through September 30, 2024, with an annual step-down of 0.25 :1.00 and subject to a step-up of 0.50 :1.00 for the four full fiscal quarter period following any material acquisition, not to exceed 5.50 to 1.00 . In addition, in the event there are no loans outstanding under the USD Tranche A, as of the end of any fiscal quarter of the Company when the aggregate amount of loans outstanding under the Revolving Facility (net of (a) all letters of credit (whether cash collateralized or not) and (b) unrestricted cash of the Company and its restricted subsidiaries) exceeds 35 % of the aggregate amount of all commitments under the Revolving Facility in effect as of such date, the Company may not allow its first lien net leverage ratio as of the end of each such fiscal quarter to be greater than 6.00 to 1.00 . The USD Tranche B and the Euro Tranche B are not subject to financial maintenance covenants. The Credit Agreement contains a number of negative covenants that, among other things and subject to certain exceptions, restrict the ability of the Company and each of its subsidiaries to: incur additional indebtedness; pay dividends on its capital stock or redeem, repurchase or retire its capital stock or its subordinated indebtedness; make investments, loans and acquisitions; create restrictions on the payment of dividends or other amounts to the Company from the Company’s restricted subsidiaries or restrictions on the ability of the Company’s restricted subsidiaries to incur liens; engage in transactions with its affiliates; sell assets, including capital stock of its subsidiaries; materially alter the business it conducts; consolidate or merge; incur liens; and engage in sale-leaseback transactions. The Credit Agreement also contains customary representations and warranties, affirmative covenants and provisions relating to events of default. If an event of default occurs, the lenders under the Credit Facilities will be entitled to take various actions, including the acceleration of amounts due under the Credit Facilities and all actions permitted to be taken by a secured creditor. As of September 30, 2024, the Company was in compliance with all covenants under the Credit Agreement. The Company paid certain customary fees to and expenses of (i) JPMorgan Chase Bank, N.A., Barclays Bank PLC, BofA Securities, Inc., Citibank, N.A., HSBC Securities (USA) Inc. and Mizuho Bank, Ltd. in their respective capacities as lead arrangers and bookrunners in connection with the Credit Facilities on the Effective Date, (ii) JPMorgan Chase Bank, N.A. in its capacity as lead arranger in connection with each of the First Amendment, the Second Amendment, the Third Amendment and the Fourth Amendment and (iii) the lenders providing the Incremental Revolving Commitments pursuant to the Third Amendment. As described further below under “Convertible Notes,” on May 16, 2024, the Company completed a private offering of convertible senior notes. A significant portion of the net proceeds from the offering was used to repay approximately $ 1,206 of the USD Tranche B. As a result of the repayment, the Company recorded a $ 38 loss on extinguishment of debt. As of September 30, 2024 , the weighted average interest rate of the Term Loan Facility was 6.9 %. The Revolving Facility has a maturity date in August 2027 while the USD Tranche B and Euro Tranche B have a maturity date in August 2029. As of September 30, 2024 , there were no borrowings under the Revolving Facility. Convertible Notes On May 16, 2024, the Company completed a private offering of $ 1,400 aggregate principal amount of its convertible senior notes due 2030 (the “Convertible Notes”). The Convertible Notes were sold in a private placement under a purchase agreement, dated as of May 13, 2024 (the “Purchase Agreement”), entered into by and between the Company and each of Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC, BofA Securities, Inc. and Mizuho Securities USA LLC, as representatives of the several initial purchasers named therein, for resale to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended . The aggregate principal amount of the Convertible Notes sold in the offering was $ 1,400 , which included $ 200 aggregate principal amount of the Convertible Notes issued pursuant to an option to purchase, within a 13-day period beginning on, and including, the date on which the Convertible Notes were first issued, which the initial purchasers exercised in full on May 14, 2024 and which additional purchase was also completed on May 16, 2024 . The net proceeds from the offering were approximately $ 1,374 after deducting the initial purchasers’ discounts and commissions and estimated offering expenses paid by the Company. The Company used approximately $ 167 of the net proceeds from the offering to pay the cost of the capped call transactions described below. The Company used the remaining net proceeds from the offering to repay approximately $ 1,206 in borrowings outstanding under the USD Tranche B, together with accrued interest, as well as for general corporate purposes . Indenture and the Convertible Notes On May 16, 2024, the Company entered into an indenture (the “Indenture”) with respect to the Convertible Notes with U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). Under the Indenture, the Convertible Notes are senior unsecured obligations of the Company and bear interest at a coupon rate of 1.25 % per annum, with interest payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2024. The Convertible Notes will mature on June 1, 2030 , unless earlier converted, redeemed or repurchased in accordance with their terms . Subject to certain conditions, on or after June 5, 2027, the Company may redeem for cash all or any portion of the Convertible Notes at a redemption price equal to 100 % of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date, if the last reported sale price of the Company’s common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the trading day immediately preceding the date the notice of redemption is sent . The conversion rate for the Convertible Notes is initially 6.4799 shares of the Company’s common stock per one thousand dollars principal amount of the Convertible Notes, which is equivalent to an initial conversion price of approximately $ 154.32 per share. The conversion rate is subject to adjustment upon the occurrence of certain events . Upon conversion, the Company will pay cash up to the aggregate principal amount of the Convertible Notes to be converted and pay or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election, in respect of the remainder, if any, of its conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted. Prior to March 1, 2030, noteholders may convert all or any portion of their Convertible Notes only upon the occurrence of certain events and during certain periods, and thereafter, at any time until the second scheduled trading day immediately preceding the maturity date. If the Company undergoes a fundamental change (as defined in the Indenture) prior to the maturity date of the Convertible Notes, holders may require the Company to repurchase for cash all or any portion of their Convertible Notes at a fundamental change repurchase price equal to 100 % of the principal amount of the Convertible Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date . The Indenture contains customary terms and covenants, including that upon certain events of default that are occurring and continuing, either the Trustee or the holders of at least 25 % in aggregate principal amount of the outstanding Convertible Notes may declare 100 % of the principal of, and accrued and unpaid interest, if any, on, all the Convertible Notes to be due and payable . As of September 30, 2024, the Convertible Notes are classified as a long-term liability, net of issuances costs, on the condensed consolidated balance sheet. The Convertible Notes were issued at par and costs associated with the issuance of the Convertible Notes are amortized to interest expense over the contractual term of the Convertible Notes. As of September 30, 2024, the effective interest rate of the Convertible Notes was 1.56 % . Capped Call Transactions On May 13, 2024, in connection with the pricing of the Convertible Notes, and on May 14, 2024, in connection with the exercise in full by the initial purchasers of their option to purchase additional Convertible Notes, the Company entered into privately negotiated capped call transactions with certain of the initial purchasers of the Convertible Notes or their respective affiliates and other financial institutions. The capped call transactions are expected generally to reduce the potential dilution to the Company’s common stock upon conversion of any Convertible Notes and/or offset any cash payments that the Company is required to make in excess of the principal amount of any converted Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap initially equal to $ 237.42 per share, which represents a premium of 100 % over the last reported sale price of $ 118.71 per share of the Company’s common stock on The Nasdaq Global Select Market on May 13, 2024, and is subject to customary adjustments under the terms of the capped call transactions. The Company evaluated the capped call transactions and determined that they should be accounted for separately from the Convertible Notes. The cost of $ 167 to purchase the capped call transactions was recorded as a reduction to additional paid-in capital in the condensed consolidated balance sheet as the capped call transactions are indexed to the Company’s own stock and met the criteria to be classified in stockholders' equity. The Company’s interest expense is as follows:
Three Months Ended September 30, Nine Months Ended September 30,
2024 2023 2024 2023
Term Loan Facility:
Contractual interest expense $ 67 $ 103 $ 244 $ 291
Amortization of debt issuance costs as interest expense 6 7 20 22
Total interest expense on Term Loan Facility $ 73 $ 110 $ 264 $ 313
Convertible Notes:
Contractual interest expense $ 4 $ — $ 7 $ —
Amortization of debt issuance costs as 1 — 2 —
Total interest expense on Convertible Notes $ 5 $ — $ 9 $ —
Other interest expense, net (1) $ ( 14 ) $ ( 17 ) $ ( 43 ) $ ( 47 )
Total interest expense $ 64 $ 93 $ 230 $ 266 (1) Other interest expense, net primarily consists of interest (income) expense related to the Company’s interest rate swap and interest rate cap agreements. Lines of Credit and Borrowing Arrangements Certain of the Company’s Japanese subsidiaries have lines of credit and a financing facility with various financial institutions, many of which generally expire and are renewed at three-month intervals with the remaining having no expiration date. The lines of credit and financing facility provided for aggregate borrowings as of September 30, 2024 and December 31, 2023 of up to an equivalent of $ 21 and $ 14 , respectively. There were no borrowings outstanding under these arrangements at September 30, 2024 and December 31, 2023. Contractual maturities of the Company’s debt obligations as of September 30, 2024 are as follows:
Year Amount
2024 (remaining) $ 13
2025 50
2026 50
2027 50
2028 50
2029 3,316
Thereafter 1,400 |
