4. Borrowings |
11
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements - (continued)
4. Borrowings
Long Term Debt
Long term debt was as follows:
September 30,
March 31,
2020 Rates (a)
Maturities
2020
2020
(Unaudited)
(In thousands)
Real estate loan (amortizing term)
1.66
%
2023
$
87,913
$
92,913
Senior mortgages
3.11
%
-
6.62
%
2021
-
2038
2,098,659
2,029,878
Real estate loans (revolving credit)
1.56
%
-
3.25
%
2022
-
2025
535,000
519,000
Fleet loans (amortizing term)
2.04
%
-
4.66
%
2020
-
2027
184,861
224,089
Fleet loans (revolving credit)
1.31
%
-
2.36
%
2022
-
2024
510,000
567,000
Finance/capital leases (rental equipment)
1.92
%
-
5.04
%
2020
-
2026
612,150
734,870
Finance liability (rental equipment)
1.60
%
-
4.22
%
2020
-
2028
528,702
398,834
Other obligations
2.50
%
-
8.00
%
2020
-
2049
174,483
84,484
Notes, loans and finance/capital leases payable
4,731,768
4,651,068
Less: Debt issuance costs
(30,543)
(29,777)
Total notes, loans and finance/capital leases payable, net
$
4,701,225
$
4,621,291
(a) Interest rates as of September 30, 2020, including the effect of applicable hedging instruments.
Real Estate Backed Loans
Real Estate Loan
Real Estate and certain of its subsidiaries and U-Haul Company of Florida are borrowers under a real estate loan (the “Real Estate Loan”).
The Real Estate Loan requires monthly principal and interest payments, with the unpaid loan balance and accrued and unpaid interest due at maturity. The Real Estate Loan is secured by various properties owned by the borrowers.
The interest rate, per the provisions of the amended loan agreement, is the applicable London Inter-Bank Offer Rate (“LIBOR”) plus the applicable margin. As of September 30, 2020, the applicable LIBOR was
0.16
% and the applicable margin was
1.50
%, the sum of which was
1.66
%. The default provisions of the Real Estate Loan include non-payment of principal or interest and other standard reporting and change-in-control covenants. There are limited restrictions regarding our use of the funds.
Senior Mortgages
Various subsidiaries of Real Estate and U-Haul are borrowers under certain senior mortgages. The senior mortgages require monthly principal and interest payments. The senior mortgages are secured by certain properties owned by the borrowers. The fixed interest rates, per the provisions of the senior mortgages, range between
3.11
% and
6.62
%.
The weighted average interest rate of these loans as of September 30, 2020 was
4.32
%.
Certain senior mortgages have an anticipated repayment date and a maturity date. If these senior mortgages are not repaid by the anticipated repayment date, the interest rate on these mortgages would increase from the current fixed rate. We are using the anticipated repayment date for our maturity schedule. Real Estate and U-Haul have provided limited guarantees of the senior mortgages. The default provisions of the senior mortgages include non-payment of principal or interest and other standard reporting and change-in-control covenants. There are limited restrictions regarding our use of the funds.
12
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements - (continued)
Real Estate Loans (Revolving Credit)
Various subsidiaries of Real Estate are borrowers under asset-backed real estate loans with an aggregate borrowing capacity of $
385.0
million. As of September 30, 2020, the outstanding balance of these loans in the aggregate was $
385.0
million. These loans are secured by certain properties owned by the borrowers. The loan agreements provide for term loans, subject to the terms of the loan agreements. The final maturity of the loans is between
June 2022
and
March 2025
. The loans require monthly interest payments with the unpaid loan balance and accrued and unpaid interest due at maturity. The interest rate, per the provision of the loan agreements, is the applicable LIBOR plus the applicable margin. As of September 30, 2020, the applicable LIBOR was
0.16
% and the margin was between
1.25
% and
1.50
%, the sum of which was between
1.41
% and
1.66
%. Certain loans have interest rate swaps fixing the rate between
3.03
% and
3.14
% based on current margins. AMERCO is the guarantor of these loans. The default provisions of the loan include non-payment of principal or interest and other standard reporting and change-in-control covenants.
AMERCO is a borrower under a real estate loan. The current maximum credit commitment is $
200.0
million, which can be increased to $
300.0
million by bringing in other lenders. As of September 30, 2020, the outstanding balance was $
150.0
million. This loan agreement provides for revolving loans, subject to the terms of the loan agreement. The final maturity of this loan is
April 2023
. This loan requires monthly interest payments with the unpaid loan balance and accrued and unpaid interest due at maturity. As of September 30, 2020, the applicable LIBOR was
1.00
% and the margin was
2.25
%, the sum of which was
3.25
%. The default provisions of the loan include non-payment of principal or interest and other standard reporting and change-in-control covenants. There is a
0.30
% fee charged for unused capacity.
Fleet Loans
Rental Truck Amortizing Loans
The amortizing loans require monthly principal and interest payments, with the unpaid loan balance and accrued and unpaid interest due at maturity. These loans were used to purchase new trucks. The interest rates, per the provision of the loan agreements, are carried at fixed rates ranging between
2.04
% and
4.66
%.
AMERCO, and in some cases U-Haul, is guarantor of these loans. The default provisions of these loans include non-payment of principal or interest and other standard reporting and change-in-control covenants.
Rental Truck Revolvers
Various subsidiaries of U-Haul entered into three revolving fleet loans with an aggregate borrowing capacity of $
590.0
million. The interest rates, per the provision of the loan agreements, are the applicable LIBOR plus the applicable margin, $
100.0
million of this debt amount is fixed at a rate of
2.36
%. As of September 30, 2020, the applicable LIBOR was
0.16
%, and the margin was
1.15
%, the sum of which was
1.31
%. Only interest is paid on the loans until the last nine months of the respective loan terms when principal becomes due monthly.
Finance/Capital Leases
The Finance/Capital Lease balance represents our sale-leaseback transactions of rental equipment that were entered into and classified as capital leases prior to the adoption of ASC 842. The historical capital lease balance was reclassified to Right-of-Use (“ROU”) assets-finance, net. The agreements are generally seven
(7) year terms
with interest rates ranging from
1.92
% to
5.04
%.
All of our finance leases are collateralized by our rental fleet. There were no new financing leases, as assessed under the new leasing guidance, entered into during the six months ended September 30, 2020.
13
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements - (continued)
Finance Liabilities
Finance liabilities represent our rental equipment financing transactions that have historically been accounted for as capital leases prior to the adoption of Accounting Standards Codification (“ASC”) 842, which substantially changed the accounting for sale-leasebacks going forward. In accordance with the new leasing guidance, we assess if sale-leaseback transactions qualify as a sale at initiation by determining if a transfer of ownership occurs.
We have determined that our equipment sale-leasebacks do not qualify as a sale, as the buyer-lessors do not obtain control of the assets in our ongoing sale-leaseback arrangements. As a result, we expect future sale-leasebacks to be accounted for as a financial liability and the leased assets will be capitalized at cost.
Our finance liabilities have an average term of seven
(7) years
and interest rates ranging from
1.60
% to
4.22
%. These finance liabilities are collateralized by our rental fleet.
Other Obligations
In May 2020, AMERCO, entered into a $
200.0
million secured credit facility with PNC Bank, as agent and lead arranger of a syndicate of lenders.
The interest rate, per the provision of the loan agreement, is the applicable LIBOR plus the applicable margin.
As of September 30, 2020, the applicable LIBOR was
0.50
% and the margin was
2.00
%, the sum of which was
2.50
%. The LIBOR has a floor of
0.50
%. As of September 30, 2020, the balance of this note was $
90.7
million. The final maturity of this loan is May 2021. This loan was paid off in October 2020.
In February 2011, AMERCO and U.S. Bank, NA (the “Trustee”) entered into the U-Haul Investors Club
®
Indenture.
AMERCO and the Trustee entered into this indenture to provide for the issuance of notes by us directly to investors over our proprietary website, uhaulinvestorsclub.com (“U-Notes
®
”). The U-Notes
®
are secured by various types of collateral, including, but not limited to, rental equipment and real estate.
U-Notes
®
are issued in smaller series that vary as to principal amount, interest rate and maturity.
U-Notes
®
are obligations of the Company and secured by the associated collateral; they are not guaranteed by any of the Company's affiliates or subsidiaries.
As of September 30, 2020, the aggregate outstanding principal balance of the U-Notes
®
issued was $
86.4
million, of which $
2.6
million is held by our insurance subsidiaries and eliminated in consolidation. Interest rates range between
2.5
% and
8.00
% and maturity dates range between
2020
and
2049
.
Oxford is a member of the Federal Home Loan Bank (“FHLB”) and, as such, the FHLB has made deposits with Oxford. As of June 30, 2020, the deposits had an aggregate balance of $
70.0
million, for which Oxford pays fixed interest rates between
0.00
% and
2.95
% with maturities between September 28, 2020 and March 29, 2025. As of March 31, 2020, available-for-sale investments held with the FHLB totaled $
181.4
million, of which $
77.7
million were pledged as collateral to secure the outstanding deposits. The balances of these deposits are included within Liabilities from investment contracts on the condensed consolidated balance sheets.
Annual Maturities of Notes, Loans and Finance/Capital Leases Payable
The annual maturities of our notes, loans and finance/capital leases payable, as of September 30, 2020 for the next five years and thereafter are as follows:
Year Ended September 30,
2021
2022
2023
2024
2025
Thereafter
(Unaudited)
(In thousands)
Notes, loans and finance/capital leases payable, secured
$
575,971
$
840,903
$
703,945
$
780,395
$
264,733
$
1,565,821
14
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements - (continued)
Interest on Borrowings
Interest Expense
Components of interest expense include the following:
Quarter Ended September 30,
2020
2019
(Unaudited)
(In thousands)
Interest expense
$
41,600
$
44,743
Capitalized interest
(3,494)
(6,669)
Amortization of transaction costs
1,458
1,047
Interest expense resulting from cash flow hedges
961
1
Total interest expense
$
40,525
$
39,122
Six Months Ended September 30,
2020
2019
(Unaudited)
(In thousands)
Interest expense
$
83,511
$
88,074
Capitalized interest
(7,928)
(12,168)
Amortization of transaction costs
2,755
2,100
Interest expense resulting from cash flow hedges
1,708
4
Total interest expense
$
80,046
$
78,010
Interest paid in cash, including payments related to derivative contracts, amounted to $
39.1
million and $
45.4
million for the second quarter of fiscal 2021 and 2020, respectively, and $
78.5
million and $
85.9
million for the first six months of fiscal 2021 and 2020, respectively.
Interest Rates
Interest rates and Company borrowings were as follows:
Revolving Credit Activity
Quarter Ended September 30,
2020
2019
(Unaudited)
(In thousands, except interest rates)
Weighted average interest rate during the quarter
1.67
%
3.50
%
Interest rate at the end of the quarter
1.67
%
3.36
%
Maximum amount outstanding during the quarter
$
1,105,000
$
1,015,000
Average amount outstanding during the quarter
$
1,059,130
$
1,004,348
Facility fees
$
90
$
45
15
amerco and consolidated subsidiaries
notes to condensed consolidated financial statements - (continued)
Revolving Credit Activity
Six Months Ended September 30,
2020
2019
(Unaudited)
(In thousands, except interest rates)
Weighted average interest rate during the period
1.67
%
3.61
%
Interest rate at the end of the period
1.67
%
3.36
%
Maximum amount outstanding during the period
$
1,175,000
$
1,015,000
Average amount outstanding during the period
$
1,109,978
$
985,954
Facility fees
$
94
$
107
5. Derivatives
We manage exposure to changes in market interest rates. Our use of derivative instruments is limited to highly effective interest rate swaps to hedge the risk of changes in cash flows (future interest payments) attributable to changes in LIBOR swap rates with the designated benchmark interest rate being hedged on certain of our LIBOR indexed variable rate debt and a variable rate operating lease. The interest rate swaps effectively fix our interest payments on certain LIBOR indexed variable rate debt. We monitor our positions and the credit ratings of our counterparties and do not currently anticipate non-performance by the counterparties. Interest rate swap agreements are not entered into for trading purposes. These fair values are determined using pricing valuation models which include broker quotes for which significant inputs are observable.
They include adjustments for counterparty credit quality and other deal-specific factors, where appropriate and are classified as Level 2 in the fair value hierarchy.
The derivative fair values reflected in prepaid expense and accounts payable and accrued expenses in the balance sheet were as follows:
Derivatives Fair Values as of
September 30, 2020
March 31, 2020
(Unaudited)
(In thousands)
Interest rate contracts designated as hedging instruments:
Assets
$
-
$
-
Liabilities
$
7,165
$
8,214
Notional amount
$
235,000
$
235,000
The Effect of Interest Rate Contracts on the Statements of Operations for the Quarters Ended
September 30, 2020
September 30, 2019
(Unaudited)
(In thousands)
(Gain) loss recognized in AOCI on interest rate contracts
$
(1,007)
$
1,206
(Gain) loss reclassified from AOCI into income
$
(961)
$
366
Gains or losses recognized in income on derivatives are recorded as interest expense in the condensed consolidated statements of operations. During the first six months of fiscal 2021, we recognized a decrease in the fair value of our cash flow hedges of $
0.5
million, net of taxes. During the first six months of fiscal 2021 we reclassified $1.7 million from AOCI to interest expense. As of September 30, 2020, we expect to reclassify $
3.8
million of net gains on interest rate contracts from AOCI to earnings as interest expense over the next twelve months.
16
|