11. Long-Term Debt
Long- term debt consisted of the following:
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September 30,
2011
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March 31, 2011
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9.500% Senior Secured Notes, due May 2017
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$
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143,410
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$
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210,000
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143,410
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210,000
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Less current portion
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—
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(21,000
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)
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$
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143,410
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$
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189,000
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Revolving Credit Facility and Senior Secured Notes
Revolving credit facility. Simultaneously with the closing of the CHS Transactions and the sale of our senior secured notes, our wholly owned subsidiary, Thermon Industries, Inc., entered into a five-year, $40.0 million senior secured revolving credit facility, which we refer to as our revolving credit facility, of which up to $20.0 million is available to our Canadian subsidiary, subject to borrowing base availability. Availability of funds under our revolving credit facility is determined by a borrowing base equal to the sum of 85% of eligible accounts receivable, plus 60% of eligible inventory, plus 85% of the net orderly liquidation value of eligible equipment, plus 50% of the fair market value of eligible owned real property. In no case shall availability under our revolving credit facility exceed the commitments thereunder. As of September 30, 2011, we had $32.9 million of capacity available under our revolving credit facility after taking into account the borrowing base, outstanding loan advances and letters of credit. In addition to our revolving credit facility, we have various short term revolving lines of credit available to us at our foreign affiliates. At September 30, 2011 we had $6.5 million of outstanding borrowings under the revolving credit facility with an interest rate of 5%.
The revolving credit facility will mature in 2015. Any borrowings on our revolving credit facility will incur interest expense that is variable in relation to the LIBOR rate. Borrowings denominated in Canadian Dollars under the Canadian facility bear interest at a variable rate in relation to the bankers’ acceptance rate, as set forth in the revolving credit facility. In addition to paying interest on outstanding borrowings under our revolving credit facility, we are required to pay a 0.75% per annum commitment fee to the lenders in respect of the unutilized commitments thereunder and letter of credit fees equal to the LIBOR margin or the bankers’ acceptance rate, as applicable, on the undrawn amount of all outstanding letters of credit.
Senior secured notes. As of September 30, 2011, we had $143.4 million of indebtedness outstanding under our senior secured notes with annual cash interest expense of approximately $13.6 million. Our senior secured notes mature on May 1, 2017 and accrue interest at a fixed rate of 9.500%. We pay interest in cash semi-annually on May and November 1 of each year. Our senior secured notes were issued in a Rule 144A exempt senior secured note offering to qualified institutional investors. The proceeds were used to fund the purchase price for the CHS Transactions and related transaction costs. In January 2011, we consummated an offer to exchange the old restricted senior secured notes for new, SEC-registered senior secured notes.
During the three and six months ended September 30, 2011, the Company made partial redemptions of the senior secured notes in the amount of $24,590 and $66,590, respectively. In connection with these redemptions, the Company paid cash premiums on redemption of $2,336 and $2,966 for the three and six months ended September 30, 2011, respectively. In addition, the Company accelerated deferred debt amortization of $1,051 and $2,922 for the three and six months ended September 30, 2011, respectively. These expenses were included in interest expense for the periods reported. See Note 19, “Subsequent Events” regarding the private purchase of additional senior secured notes in October 2011.
Guarantees; security. The obligations under our revolving credit facility and our senior secured notes are guaranteed on a senior secured basis by the Company and each of its existing and future domestic restricted subsidiaries, other than Thermon Industries, Inc., the issuer of the senior secured notes. The obligations under our revolving credit facility are secured by a first priority perfected security interest in substantially all of our and the guarantors’ assets, subject to certain exceptions, permitted liens and encumbrances reasonably acceptable to the agent under our revolving credit facility. Our senior secured notes and guarantees are also secured by liens on substantially all of our and the guarantors’ assets, subject to certain exceptions; provided, however, that the liens are contractually subordinated to the liens thereon that secure our revolving credit facility.
Restrictive covenants. The revolving credit facility and senior secured notes contain various restrictive covenants that include restrictions or limitations on our ability to: incur additional indebtedness or issue disqualified capital stock unless certain financial tests are satisfied; pay dividends, redeem subordinated debt or make other restricted payments; make certain investments or acquisitions; issue stock of subsidiaries; grant or permit certain liens on our assets; enter into certain transactions with affiliates; merge, consolidate or transfer substantially all of our assets; incur dividend or other payment restrictions affecting certain of our subsidiaries; transfer or sell assets, including capital stock of our subsidiaries; and change the business we conduct. However, all of these covenants are subject to customary exceptions.
Information about our long-term debt that is not measured at fair value follows:
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September 30, 2011
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March 31, 2011
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Carrying
Value
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Fair Value
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Carrying
Value
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Fair Value
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Valuation Technique
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Financial Liabilities
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Long-term debt
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$
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143,410
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$
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149,146
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$
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210,000
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$
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225,800
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Level 2 - Market Approach
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Differences between carrying value and fair value are primarily due to instruments that provide fixed interest rates or contain fixed interest rate elements. Inherently, such instruments are subject to fluctuations in fair value due to subsequent movements in interest rates.
Other Financial Assets and Liabilities
Financial assets and liabilities with the carrying amounts approximating fair value include cash and cash equivalents, accounts receivable, other current assets, current debt, accounts payable and other current liabilities.
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