HELIOS TECHNOLOGIES, INC. Debt Disclosure

9.  LONG-TERM DEBT

The Company has a credit agreement that provides a revolving line of credit of up to $300,000 that is available through November 22, 2021.  The credit agreement includes an accordion feature to increase the line of credit by up to an additional $100,000 in the form of additional revolving credit loans or in the form of term loans.  Borrowings under the line of credit bear interest at defined rates plus an applicable margin based on the Company’s leverage ratio.  At December 30, 2017 and December 31, 2016 the balance on the revolving line was $116,000 and $140,000, respectively. The interest rate in effect at December 30, 2017 was 3.15%.

The credit agreement requires the Company (together with its subsidiaries) to comply with certain financial tests, including a minimum interest coverage ratio (as defined) of 3.0 to 1.0 and a maximum leverage ratio of 3.5 to 1.0. As of the date of this filing, the Company was in compliance with all debt covenants related to the line of credit.

The credit agreement also requires the Company to comply with a number of restrictive covenants. These covenants limit, in certain circumstances, the Company’s ability to take a variety of actions, including but not limited to: incur indebtedness; create or maintain liens on its property or assets; make investments, loans and advances; repurchase shares of its Common Stock; engage in acquisitions, mergers, joint ventures, consolidations and asset sales; and pay dividends and distributions.

The line of credit is guaranteed by the Company’s U.S. domestic subsidiaries and requires any future U.S. domestic subsidiaries to join as guarantors.  In addition, the line of credit is required to be secured by substantially all of the assets of the Company and its current and any future U.S. domestic subsidiaries of the Company.  Accordingly, (i) the Company entered into a security agreement granting a security interest in substantially all of its respective assets, (ii) the Company entered into a pledge agreement granting a security interest in certain equity ownership in certain of its subsidiaries, and (iii) the Company and/or certain of its subsidiaries entered into certain other additional agreements further granting security interests in certain specific assets, including intellectual property rights, in each case to secure amounts borrowed under the credit agreement.

The credit agreement incorporates sub-facilities for swing loans up to $20,000 and issuances of letters of credit up to $10,000. Swing loans and letters of credit issued under the credit agreement decrease availability under the $300,000 revolving line of credit on a dollar for dollar basis.    

Total interest expense recognized on the credit agreement during 2017 and 2016 totaled $4,082 and $483, respectively.