COMPASS MINERALS INTERNATIONAL INCCMP
COMPASS MINERALS INTERNATIONAL INC Debt Disclosure
LONG TERM DEBT
Long-term debt consists of the following (in millions):
| September 30, 2023 | September 30, 2022 | |||||||||||||
4.875% Senior Notes due July 2024 | $ | — | $ | 250.0 | ||||||||||
| Term Loan due January 2025 | — | 16.9 | ||||||||||||
| Revolving Credit Facility due January 2025 | — | 151.5 | ||||||||||||
6.75% Senior Notes due December 2027 | 500.0 | 500.0 | ||||||||||||
Term Loan due May 2028 | 198.8 | — | ||||||||||||
Revolving Credit Facility due May 2028 | 81.5 | — | ||||||||||||
| AR Securitization Facility expires June 2025 | 30.9 | 37.5 | ||||||||||||
| 811.2 | 955.9 | |||||||||||||
| Less unamortized debt issuance costs | (5.9) | (8.3) | ||||||||||||
| Total debt | 805.3 | 947.6 | ||||||||||||
| Less current portion | (5.0) | — | ||||||||||||
| Long-term debt | $ | 800.3 | $ | 947.6 | ||||||||||
Credit Agreement
On May 5, 2023, the Company entered into an agreement to amend and restate the Company’s credit agreement entered into on November 26, 2019 (as amended, the “2019 Credit Agreement”, as in effect prior to such restatement, the “Existing Credit Agreement”) with a new $575 million senior secured credit agreement due May 5, 2028 (as amended, the “2023 Credit Agreement”), comprised of a $375 million revolving credit facility and a $200 million term loan. The term loan is payable in quarterly installments of interest and principal, which began September 30, 2023. The 2023 Credit Agreement increases the Applicable Margins by 25 basis points over those defined in the Existing Credit Agreement and added an additional level to the pricing grid at a consolidated total leverage ratio of greater than 4:00 to 1.00. The outstanding term loan can be prepaid at any time without penalty. Proceeds from the 2023 Credit Agreement were used by the Company to redeem its $250 million 4.875% Senior Notes due July 2024 (the “4.875% Notes”) on May 10, 2023 and pay off the Existing Credit Agreement term loan balance of $16.9 million.
As of September 30, 2023, the term loan and revolving credit facility under the 2023 Credit Agreement were secured by substantially all existing and future U.S. assets of the Company, the Goderich mine in Ontario, Canada and capital stock of certain subsidiaries. As of September 30, 2023, the weighted average interest rate was 7.8% on all borrowings outstanding under the 2023 Credit Agreement.
The 2023 Credit Agreement, among other things, amended and restated the Existing Credit Agreement to (i) increase the Revolving Commitments (as defined in the Existing Credit Agreement) from $300 million to $375 million and extend the maturity date of the Revolving Commitments to May 5, 2028, (ii) refinance the Term Loans (as defined in the Existing Credit Agreement) with a new tranche of term loans in an aggregate principal amount equal to $200 million having a maturity date of May 5, 2028, and (iii) amend certain other terms of the Existing Credit Agreement, including, but not limited to, (a) expressly permit “run rate” cost savings in “Consolidated Adjusted EBITDA” (as defined in the Existing Credit Agreement) and (b) revise select covenants in the Existing Credit Agreement to, among other things, allow for Lithium Transactions (as defined below).
The 2023 Credit Agreement will permit, on the terms and conditions set forth therein, the entry into, and consummation of, lithium development joint ventures, projects or similar arrangements by any Lithium Subsidiary (as defined below), and any related funding transactions in connection therewith (collectively, the “Lithium Transactions”). A “Lithium Subsidiary” shall mean (a) Compass Minerals Lithium Corp of America Inc., a Delaware corporation, or any successor thereto and (b) (x) any newly-formed domestic subsidiary that is a wholly-owned Subsidiary of the Company (each of which will become a Subsidiary Guarantor (as defined in the Existing Credit Agreement)) and/or (y) any newly-formed domestic subsidiary that is not a wholly-owned subsidiary of the Company (each of which may, but shall not be required to become, at the option of the Company, a Subsidiary Guarantor), in each case formed in order to effectuate the Lithium Transactions. The Term Loan requires the Company to maintain certain financial ratios, including a minimum interest coverage ratio and a maximum total net leverage ratio.
In connection with the 2023 Credit Agreement, the Company paid $4.3 million in fees ($3.9 million was capitalized as deferred financing costs with $0.4 million recorded as an expense). These capitalized costs are amortized over the term of the debt and are included as a component of interest expense in the Consolidated Statements of Operations. The Company incurred a loss on the extinguishment of debt of $1.0 million to write off previously capitalized deferred financing costs, which is included as a component of interest expense in the Consolidated Statements of Operations.
The 2023 Credit Agreement requires the Company to maintain certain financial ratios, including a minimum interest coverage ratio and a maximum total net leverage ratio. The total net leverage ratio represents the ratio of (a) consolidated total net debt to (b) consolidated adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”). Pursuant to the terms of the 2023 Credit Agreement, the maximum allowed consolidated total net leverage ratio (as defined and calculated under the terms of the 2023 Credit Agreement) is 5.0x as of the last day of any quarter through the fiscal quarter ended December 31, 2023, gradually stepping down to 4.5x for the fiscal quarter ended June 30, 2024 and thereafter. Consolidated total net debt includes the aggregate principal amount of total debt, net of unrestricted cash not to exceed $75.0 million. As of September 30, 2023, the Company was in compliance with each of its covenants under the 2023 Credit Agreement.
Under the current revolving credit facility, up to $40 million may be drawn in Canadian dollars and $10 million may be drawn in British pounds sterling. Additionally, the revolving credit facility includes a sub-limit for short-term letters of credit in an amount not to exceed $50 million. The Company incurs participation fees related to its outstanding letters of credit and commitment fees on its available borrowing capacity. The rates vary depending on the Company’s leverage ratio. Bank fees are not material.
During the quarter ended December 31, 2022, the Company paid off the outstanding revolving credit facility balance utilizing proceeds from a private placement of common stock. Refer to Note 16 for additional details.
In November 2022, the Company entered into the third amendment to the 2019 Credit Agreement, principally to affect a transition from the London Inter-Bank Offered Rate to the Secured Overnight Financing Rate pricing benchmark provisions.
In April 2022, the Company utilized earnout proceeds from the 2021 sale of its South America specialty plant nutrition business and proceeds from the April 2022 sale of the South America chemicals business to repay approximately $60.6 million of its term loan balance.
In July 2021, the Company utilized cash proceeds from the sale of a component of its North America micronutrient product business and its South America specialty plant nutrition business to repay amounts borrowed against its revolving credit facility of $35.0 million. The Company also utilized an additional $265.0 million of the proceeds to pay down its term loan balance as required by the Credit Agreement.
As of September 30, 2023, there was $81.5 million outstanding under the revolving credit facility and, after deducting outstanding letters of credit totaling $15.2 million, the Company’s borrowing availability was $278.3 million.
Senior Notes
In November 2019, the Company issued $500 million 6.75% Senior Notes due December 2027 (the “6.75% Notes”), which are subordinate to the 2019 Credit Agreement borrowings. The 6.75% Notes are unsecured obligations and are guaranteed by certain of the Company’s domestic subsidiaries. Interest on the 6.75% Notes is due semi-annually in June and December. The 6.75% Notes are subordinated to all existing and future indebtedness. In connection with the 6.75% Notes, the Company paid $8.2 million of fees, all of which were capitalized as deferred financing costs.
The 2023 Credit Agreement and the agreement governing the 6.75% Notes and other indebtedness contain covenants that limit the Company’s ability, among other things, to incur additional indebtedness or contingent obligations or grant liens; pay dividends or make distributions to stockholders; repurchase or redeem the Company’s stock; make investments or dispose of assets; prepay, or amend the terms of certain junior indebtedness; engage in sale and leaseback transactions; make changes to the Company’s organizational documents or fiscal periods; grant liens on the Company’s assets or make certain intercompany dividends, investments or asset transfers; enter into new lines of business; enter into transactions with the Company’s stockholders and affiliates; and acquire the assets of or merge or consolidate with other companies.
Securitization
On June 30, 2020, certain of the Company’s U.S. subsidiaries entered into a three-year committed revolving accounts receivable financing facility (the “AR Facility”) of up to $100.0 million with PNC Bank, National Association (“PNC”), as administrative agent and lender, and PNC Capital Markets, LLC, as structuring agent. On June 27, 2022, certain of the Company’s U.S. subsidiaries entered into an amendment to the AR Facility, extending the facility to June 2025. In January 2023, certain of the Company’s U.S. subsidiaries entered into the second amendment to the AR Securitization Facility with PNC Bank, which temporarily eased the restrictions of certain covenants contained in the agreement through March 2023. The amendment made certain adjustments to the financial tests including: (i) the default ratio and (ii) the delinquency ratio to make compliance with such tests more likely.
In connection with the AR Facility, one of the Company’s U.S. subsidiaries, from time to time, sells and contributes receivables and certain related assets to a special purposes entity and wholly-owned U.S. subsidiary of the Company (the “SPE”). The SPE finances its acquisition of the receivables by obtaining secured loans from PNC and the other lenders party to
a receivables financing agreement. A U.S. subsidiary of the Company services the receivables on behalf of the SPE for a fee. In addition, the Company has agreed to guarantee the performance by its subsidiaries. The Company and its subsidiaries do not guarantee the loan principal or interest under the receivables financing agreement or the collectability of the receivables under the AR Facility.
The purchase price for the sale of receivables consists of cash available to the SPE from loans under the AR Facility and from collections on previously sold receivables and, to the extent the SPE does not have funds available to pay the purchase price due on any day in cash, through an increase in the principal amount of a subordinated intercompany loan. The SPE pays monthly interest and fees with respect to amounts advanced by the lenders under the AR Facility.
The SPE’s sole business consists of the purchase or acceptance through capital contributions of the receivables and the subsequent granting of a security interest in these receivables and related rights to PNC on behalf of the lenders under the AR Facility. The SPE is a separate legal entity with its own separate creditors who will be entitled, upon its liquidation, to be satisfied out of the SPE’s assets prior to any assets or value in the SPE becoming available to the Company and the assets of the SPE are not available to pay creditors of the Company or any of its affiliates other than the SPE. The Company accounts for the securitization as a borrowing and the related receivables are included in the accounts receivable balance.
Future maturities of long-term debt are as follows (in millions):
| Fiscal Years Ending September 30: | Debt Maturity | |||||||
| 2024 | $ | 5.0 | ||||||
| 2025 | 38.4 | |||||||
| 2026 | 10.0 | |||||||
| 2027 | 10.0 | |||||||
| 2028 | 747.8 | |||||||
| Thereafter | — | |||||||
| Total | $ | 811.2 | ||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2023 | Nov 29, 2023 | Showing above |
| 2022 | Dec 14, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 26, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Mar 1, 2017 | |
| 2015 | Feb 22, 2016 | |
About Debt Disclosures
Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.
Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.