mrc20220331_10q.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	FOR THE QUARTERLY PERIOD ENDED March 31, 2022

	OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______

Commission file number: 001-35479

MRC GLOBAL INC.

(Exact name of registrant as specified in its charter)

Delaware	20-5956993
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

1301 McKinney Street, Suite 2300 Houston, Texas	77010
(Address of Principal Executive Offices)	(Zip Code)

(877) 294-7574
(Registrant’s Telephone Number, including Area Code)

________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01	MRC	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer ☒ Accelerated Filer ☐ Non-Accelerated Filer ☐ Smaller Reporting Company ☐ Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 83,483,465 shares of the registrant’s common stock (excluding 119,782 unvested restricted shares), par value $0.01 per share, issued and outstanding as of May 3, 2022.

Table of Contents

INDEX TO QUARTERLY REPORT ON FORM 10-Q

Page
PART I – FINANCIAL INFORMATION

ITEM 1.	financial statements (UNAUDITED)	3

	Condensed Consolidated Balance Sheets – March 31, 2022 AND DECEMBER 31, 2021	3

	cONdENSED cONSOLIDATED STATEMENTS OF OPERATIONS – THREE MONTHS ENDED March 31, 2022 AND March 31, 2021	4

	Condensed Consolidated Statements of cOMPREHENSIVE INCOME (LOSS) – three months ended March 31, 2022 AND March 31, 2021	5

	Condensed CONSOLIDATED STATEMENTS OF STOCKHOLDERs’ EQUITY – three MONTHS ENDED March 31, 2022 AND March 31, 2021	6

	Condensed CONSOLIDATED STATEMENTS OF cash flows – three MONTHS ENDEd March 31, 2022 AND March 31, 2021	7

	Notes to the Condensed Consolidated Financial Statements – March 31, 2022	8

ITEM 2.	management’s discussion and analysis of financial condition and results of operations	15

ITEM 3.	quantitative and qualitative disclosures about market risk	24

ITEM 4.	controls and procedures	25

PART II – OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	26

ITEM 1a.	RISK FACTORS	26

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	26

ITEM 3.	Defaults Upon Senior Securities	26

ITEM 4.	MINING SAFETY DISCLOSURES	27

ITEM 5.	other information	27

ITEM 6.	Exhibits	28

Table of Contents

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

MRC GLOBAL INC.

(in millions, except per share amounts)

	*March 31,*			*December 31,*
	*2022*			*2021*

Assets
Current assets:
Cash	$	31		$	48
Accounts receivable, net		453			379
Inventories, net		500			453
Other current assets		28			19
Total current assets		1,012			899

Long-term assets:
Operating lease assets		200			191
Property, plant and equipment, net		88			91
Other assets		23			22

Intangible assets:
Goodwill, net		264			264
Other intangible assets, net		199			204
	$	1,786		$	1,671

Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable	$	400		$	321
Accrued expenses and other current liabilities		87			80
Operating lease liabilities		35			33
Current portion of long-term debt		3			2
Total current liabilities		525			436

Long-term liabilities:
Long-term debt, net		300			295
Operating lease liabilities		184			177
Deferred income taxes		57			53
Other liabilities		26			32

Commitments and contingencies

6.5% Series A Convertible Perpetual Preferred Stock, $0.01 par value; authorized 363,000 shares; 363,000 shares issued and outstanding		355			355

Stockholders' equity:
Common stock, $0.01 par value per share: 500 million shares authorized, 107,699,795 and 107,284,171 issued, respectively		1			1
Additional paid-in capital		1,748			1,747
Retained deficit		(809	)		(819	)
Less: Treasury stock at cost: 24,216,330 shares		(375	)		(375	)
Accumulated other comprehensive loss		(226	)		(231	)
		339			323
	$	1,786		$	1,671

See notes to condensed consolidated financial statements.

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

MRC GLOBAL INC.

(in millions, except per share amounts)

	*Three Months Ended*
	*March 31,*			*March 31,*
	*2022*			*2021*

Sales	$	742		$	609
Cost of sales		606			506
Gross profit		136			103
Selling, general and administrative expenses		107			100
Operating income		29			3
Other expense:
Interest expense		(6	)		(6	)
Income (loss) before income taxes		23			(3	)
Income tax expense		7			-
Net income (loss)		16			(3	)
Series A preferred stock dividends		6			6
Net income (loss) attributable to common stockholders	$	10		$	(9	)


Basic earnings (loss) per common share	$	0.12		$	(0.11	)
Diluted earnings (loss) per common share	$	0.12		$	(0.11	)
Weighted-average common shares, basic		83.3			82.3
Weighted-average common shares, diluted		84.3			82.3

See notes to condensed consolidated financial statements.

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

MRC GLOBAL INC.

(in millions)

	*Three Months Ended*
	*March 31,*		*March 31,*
	*2022*		*2021*

Net income (loss)	$	16	$	(3	)

Other comprehensive income (loss)
Foreign currency translation adjustments		2		(1	)
Hedge accounting adjustments, net of tax		3		1
Total other comprehensive income, net of tax		5		—
Comprehensive income (loss)	$	21	$	(3	)

See notes to condensed consolidated financial statements.

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

MRC GLOBAL INC.

(in millions)

	*Three Months Ended March 31, 2022*
																	*Accumulated*
					*Additional*												*Other*			*Total*
	*Common Stock*				*Paid-in*			*Retained*			*Treasury Stock*						*Comprehensive*			*Stockholders'*
	*Shares*		*Amount*		*Capital*			*(Deficit)*			*Shares*			*Amount*			*(Loss)*			*Equity*
Balance at December 31, 2021		106	$	1	$	1,747		$	(819	)		(24	)	$	(375	)	$	(231	)	$	323
Net income		-		-		-			16			-			-			-			16
Foreign currency translation		-		-		-			-			-			-			2			2
Hedge accounting adjustments		-		-		-			-			-			-			3			3
Shares withheld for taxes		-		-		(2	)		-			-			-			-			(2	)
Vesting of stock awards		2		-		-			-			-			-			-			-
Equity-based compensation expense		-		-		3			-			-			-			-			3
Dividends declared on preferred stock		-		-		-			(6	)		-			-			-			(6	)
Balance at March 31, 2022		108	$	1	$	1,748		$	(809	)		(24	)	$	(375	)	$	(226	)	$	339

	*Three Months Ended March 31, 2021*
																	*Accumulated*
					*Additional*												*Other*			*Total*
	*Common Stock*				*Paid-in*			*Retained*			*Treasury Stock*						*Comprehensive*			*Stockholders'*
	*Shares*		*Amount*		*Capital*			*(Deficit)*			*Shares*			*Amount*			*(Loss)*			*Equity*
Balance at December 31, 2020		106	$	1	$	1,739		$	(781	)		(24	)	$	(375	)	$	(234	)	$	350
Net loss		-		-		-			(3	)		-			-			-			(3	)
Foreign currency translation		-		-		-			-			-			-			(1	)		(1	)
Hedge accounting adjustments		-		-		-			-			-			-			1			1
Shares withheld for taxes		-		-		(2	)		-			-			-			-			(2	)
Vesting of stock awards		1		-		-			-			-			-			-			-
Equity-based compensation expense		-		-		5			-			-			-			-			5
Dividends declared on preferred stock		-		-		-			(6	)		-			-			-			(6	)
Balance at March 31, 2021		107	$	1	$	1,742		$	(790	)		(24	)	$	(375	)	$	(234	)	$	344

See notes to condensed consolidated financial statements.

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

MRC GLOBAL INC.

(in millions)

	*Three Months Ended*
	*March 31,*			*March 31,*
	*2022*			*2021*

Operating activities
Net income (loss)	$	16		$	(3	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operations:
Depreciation and amortization		5			5
Amortization of intangibles		5			6
Equity-based compensation expense		3			5
Deferred income tax expense		1			-
Increase in LIFO reserve		6			4
Changes in operating assets and liabilities:
Accounts receivable		(74	)		(50	)
Inventories		(52	)		-
Other current assets		(9	)		(6	)
Accounts payable		78			75
Accrued expenses and other current liabilities		8			(12	)
Net cash (used in) provided by operations		(13	)		24

Investing activities
Purchases of property, plant and equipment		(2	)		(2	)
Other investing activities		-			1
Net cash used in investing activities		(2	)		(1	)

Financing activities
Payments on revolving credit facilities		(107	)		(2	)
Proceeds from revolving credit facilities		113			2
Payments on long-term obligations		-			(1	)
Dividends paid on preferred stock		(6	)		(6	)
Repurchases of shares to satisfy tax withholdings		(2	)		(2	)
Net cash used in financing activities		(2	)		(9	)

(Decrease) increase in cash		(17	)		14
Effect of foreign exchange rate on cash		-			(1	)
Cash -- beginning of period		48			119
Cash -- end of period	$	31		$	132

Supplemental disclosures of cash flow information:
Cash paid for interest	$	5		$	6
Cash paid for income taxes	$	1		$	2

See notes to condensed consolidated financial statements.

Table of Contents

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MRC GLOBAL INC.

NOTE 1 – BACKGROUND AND BASIS OF PRESENTATION

Business Operations: MRC Global Inc. is a holding company headquartered in Houston, Texas. Our wholly owned subsidiaries are global distributors of pipe, valves, fittings (“PVF”) and infrastructure products and services across each of the following sectors:

●		gas utilities (storage and distribution of natural gas)
●		downstream, industrial and energy transition (crude oil refining, petrochemical and chemical processing, general industrials and energy transition projects)
●		upstream production (exploration, production and extraction of underground oil and gas)
●		midstream pipeline (gathering, processing and transmission of oil and gas)

We have service centers in principal industrial, chemical, gas distribution and hydrocarbon producing and refining areas throughout the United States, Canada, Europe, Asia, Australasia, and the Middle East. We obtain products from a broad range of suppliers.

Basis of Presentation: We have prepared our unaudited condensed consolidated financial statements in accordance with Rule 10-01 of Regulation S-X for interim financial statements. These statements do not include all information and footnotes that generally accepted accounting principles require for complete annual financial statements. However, the information in these statements reflects all normal recurring adjustments which are, in our opinion, necessary for a fair presentation of the results for the interim periods. The results of operations for the three months ended March 31, 2022, are not necessarily indicative of the results that will be realized for the fiscal year ending December 31, 2022. We have derived our condensed consolidated balance sheet as of December 31, 2021, from the audited consolidated financial statements for the year ended December 31, 2021. You should read these condensed consolidated financial statements in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2021.

The consolidated financial statements include the accounts of MRC Global Inc. and its wholly owned and majority owned subsidiaries (collectively referred to as the “Company” or by terms such as “we,” “our” or “us”). All material intercompany balances and transactions have been eliminated in consolidation.

Recently Issued Accounting Pronouncements: In March 2020, the FASB issued Accounting Standards Update ASU 2020-04, Reference Rate Reform (Topic 848) ("ASU 2020-04"), which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions that the discontinuation of certain reference rates, including the London Interbank Offered Rate ("LIBOR"), impacts. The update was effective upon issuance and the expedients and exceptions may be applied prospectively to contract modifications and hedging relationships entered into or evaluated through December 31, 2022. We are currently evaluating the impacts of the provisions of ASU 2020-04 on our consolidated financial statements, however, with respect to existing transactions, we do not believe the update will have a material impact.

Adoption of New Accounting Standards: In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt – Debt with Conversion and Other Options and Derivative Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) ("ASU 2020-06"), which simplifies guidance on the topics of convertible instruments, derivative contracts and earnings per share ("EPS") calculations. This accounting standard update, which we adopted as of January 1, 2022, did not have a material impact on our consolidated financial statements.

Table of Contents

NOTE 2 – REVENUE RECOGNITION

We recognize revenue when we transfer control of promised goods or services to our customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. We recognize substantially all of our revenue when products are shipped or delivered to our customers, and payment is due from our customers at the time of billing with a majority of our customers having 30-day terms. We estimate and record returns as a reduction of revenue. Amounts received in advance of shipment are deferred and recognized when the performance obligations are satisfied. Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and, therefore, we exclude these taxes from sales in the accompanying consolidated statements of operations. Cost of sales includes the cost of inventory sold and related items, such as vendor rebates, inventory allowances and reserves and shipping and handling costs associated with inbound and outbound freight, as well as depreciation and amortization of intangible assets. In some cases, particularly with third-party pipe shipments, we consider shipping and handling costs to be separate performance obligations, and as such, we record the revenue and cost of sales when the performance obligation is fulfilled.

Our contracts with customers ordinarily involve performance obligations that are one year or less. Therefore, we have applied the optional exemption that permits the omission of information about our unfulfilled performance obligations as of the balance sheet dates.

Contract Balances: Variations in the timing of revenue recognition, invoicing and receipt of payment result in categories of assets and liabilities that include invoiced accounts receivable, uninvoiced accounts receivable, contract assets and deferred revenue (contract liabilities) on the consolidated balance sheets.

Generally, revenue recognition and invoicing occur simultaneously as we transfer control of promised goods or services to our customers. We consider contract assets to be accounts receivable when we have an unconditional right to consideration and only the passage of time is required before payment is due. In certain cases, particularly those involving customer-specific documentation requirements, we delay invoicing until we are able to meet the documentation requirements. In these cases, we recognize a contract asset separate from accounts receivable until those requirements are met, and we are able to invoice the customer. Our contract asset balance associated with these requirements as of March 31, 2022, and December 31, 2021, was $10 million and $12 million, respectively. These contract asset balances are included within accounts receivable in the accompanying consolidated balance sheets.

We record contract liabilities, or deferred revenue, when we receive cash payments from customers in advance of our performance, including amounts that are refundable. The deferred revenue balance at March 31, 2022 and December 31, 2021 was $8 million and $4 million, respectively. During the three months ended March 31, 2022, we recognized $2 million of revenue that was deferred as of December 31, 2021. During the three months ended March 31, 2021, we recognized $3 million of revenue that was deferred as of December 31, 2020. Deferred revenue balances are included within accrued expenses and other current liabilities in the accompanying consolidated balance sheets.

Disaggregated Revenue:

Our disaggregated revenue represents our business of selling PVF to the energy and industrial sectors across each of the gas utilities (storage and distribution of natural gas), downstream, industrial and energy transition (crude oil refining, petrochemical and chemical processing, general industrials and energy transition projects), upstream production (exploration, production and extraction of underground oil and gas) and midstream pipeline (gathering, processing and transmission of oil and gas) sectors, in each of our reportable segments. Varying factors, including macroeconomic environment, commodity prices, maintenance and capital spending and exploration and production activity impact and influence each of our end market sectors and geographical reportable segments. As such, we believe that this information is important in depicting the nature, amount, timing and uncertainty of our contracts with customers.

The following table presents our revenue disaggregated by revenue source (in millions):

*Three Months Ended*
*March 31,*

	*U.S.*		*Canada*		*International*		*Total*
2022:
Gas utilities	$	268	$	3	$	—	$	271
Downstream, Industrial & Energy Transition		169		7		50		226
Upstream production		101		29		28		158
Midstream pipeline		80		4		3		87
	$	618	$	43	$	81	$	742
2021:
Gas utilities	$	209	$	1	$	—	$	210
Downstream, Industrial & Energy Transition		138		4		52		194
Upstream production		68		23		36		127
Midstream pipeline		69		4		5		78
	$	484	$	32	$	93	$	609

Table of Contents

NOTE 3 – INVENTORIES

The composition of our inventory is as follows (in millions):

	*March 31,*			*December 31,*
	*2022*			*2021*
Finished goods inventory at average cost:
Valves, automation, measurement and instrumentation	$	242		$	240
Carbon steel pipe, fittings and flanges		167			151
Gas products		201			184
All other products		131			110
		741			685
Less: Excess of average cost over LIFO cost (LIFO reserve)		(219	)		(213	)
Less: Other inventory reserves		(22	)		(19	)
	$	500		$	453

The Company uses the last-in, first-out (“LIFO”) method of valuing U.S. inventories. The use of the LIFO method has the effect of reducing net income during periods of rising inventory costs (inflationary periods) and increasing net income during periods of falling inventory costs (deflationary periods). Valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, we base interim LIFO calculations on management’s estimates of expected year-end inventory levels and costs and these estimates are subject to the final year-end LIFO inventory determination.

NOTE 4 – LEASES

We lease certain distribution centers, warehouses, office space, land and equipment. Substantially all of these leases are classified as operating leases. We recognize lease expense on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet.

Many of our facility leases include one or more options to renew, with renewal terms that can extend the lease term from one year to 15 years with a maximum lease term of 30 years, including renewals. The exercise of lease renewal options is at our sole discretion; therefore, renewals to extend the terms of most leases are not included in our right of use (“ROU”) assets and lease liabilities as they are not reasonably certain of exercise. In the case of our regional distribution centers and certain corporate offices, where the renewal is reasonably certain of exercise, we include the renewal period in our lease term. Leases with escalation adjustments based on an index, such as the consumer price index, are expensed based on current rates. Leases with specified escalation steps are expensed based on the total lease obligation ratably over the life of the lease. Leasehold improvements are depreciated over the expected lease term. Non-lease components, such as payment of real estate taxes, maintenance, insurance and other operating expenses, have been excluded from the determination of our lease liability.

As most of our leases do not provide an implicit rate, we use an incremental borrowing rate based on the information available at the commencement date in determining the present value of the lease payments using a portfolio approach. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Expense associated with our operating leases was $10 million for the three months ended March 31, 2022, and $9 million for the three months ended March 31, 2021, which we have classified in selling, general and administrative expenses. Cash paid for leases recognized as liabilities was $10 million for the three months ended March 31, 2022, and $11 million for the three months ended March 31, 2021.

The maturity of lease liabilities is as follows (in millions):

Maturity of Operating Lease Liabilities
Remainder of 2022	$	31
2023		36
2024		31
2025		25
2026		22
After 2026		193
Total lease payments		338
Less: Interest		(119	)
Present value of lease liabilities	$	219

The term and discount rate associated with leases are as follows:

	*March 31,*
Operating Lease Term and Discount Rate	*2022*
Weighted-average remaining lease term (years)		13
Weighted-average discount rate		6.6	%

Amounts maturing after 2026 include expected renewals for leases of regional distribution centers and certain corporate offices through dates up to 2048. Excluding optional renewals, our weighted-average remaining lease term is 7 years.

Table of Contents

NOTE 5 – LONG-TERM DEBT

The components of our long-term debt are as follows (in millions):

	*March 31,*		*December 31,*
	*2022*		*2021*
Senior Secured Term Loan B, net of discount and issuance costs of $1	$	297	$	297
Global ABL Facility		6		—
		303		297
Less: current portion		3		2
	$	300	$	295

Senior Secured Term Loan B: We have a Senior Secured Term Loan B (the “Term Loan”) with an original principal amount of $400 million, which amortizes in equal quarterly installments of 1% per year with the balance payable in September 2024, when the facility matures. The Term Loan has an applicable interest rate margin of 300 basis points in the case of loans incurring interest based on LIBOR, and 200 basis points in the case of loans incurring interest based on the base rate. The Term Loan allows for incremental increases in facility size by up to an aggregate of $200 million, plus an additional amount such that the Company’s first lien leverage ratio (as defined under the Term Loan) would not exceed 4.00 to 1.00. MRC Global (US) Inc. is the borrower under this facility, which MRC Global Inc. as well as all of its wholly owned U.S. subsidiaries guarantees. In addition, the Term Loan is secured by a second lien on the assets securing our Global ABL Facility, defined below (which includes accounts receivable and inventory) and a first lien on substantially all of the other assets of MRC Global Inc. and those of its U.S. subsidiaries as well as a pledge of all of the capital stock of our domestic subsidiaries and 65% of the capital stock of first tier, non-U.S. subsidiaries. In addition, the Term Loan contains a number of customary restrictive covenants. We are required to repay the Term Loan with the proceeds from certain asset sales and certain insurance proceeds. In addition, on an annual basis, we are required to repay an amount equal to 50% of excess cash flow, as defined in the Term Loan, reducing to 25% if our first lien leverage ratio is no more than 2.75 to 1.00. No payment of excess cash flow is required if the first lien leverage ratio is less than or equal 2.50 to 1.00. The amount of cash used in the determination of the senior secured leverage ratio is limited to $75 million.

Global ABL Facility:

In September 2021, the Company entered into a Fourth Amended and Restated Loan, Security and Guarantee Agreement (the “Global ABL Facility”) by and among the Company, certain of its subsidiaries, its lenders and Bank of America, N.A. as administrative agent, security trustee and collateral agent. As part of the amendment, the multi-currency global asset-based revolving credit facility was reduced to $750 million from $800 million and the maturity was extended to September 2026 from September 2022. The Global ABL Facility is comprised of $705 million in revolver commitments in the United States, which includes a $30 million sub-limit for Canada, $12 million in Norway, $10 million in Australia, $10.5 million in the Netherlands, $7.5 million in the United Kingdom and $5 million in Belgium. The Global ABL Facility contains an accordion feature that allows us to increase the principal amount of the facility by up to $250 million, subject to securing additional lender commitments. MRC Global Inc. and each of its current and future wholly owned material U.S. subsidiaries guarantee the obligations of our borrower subsidiaries under the Global ABL Facility. Additionally, each of our non-U.S. borrower subsidiaries guarantees the obligations of our other non-U.S. borrower subsidiaries under the Global ABL Facility. Outstanding obligations are generally secured by a first priority security interest in accounts receivable, inventory and related assets. U.S. borrowings under the facility bear interest at LIBOR plus a margin varying between 1.25% and 1.75% based on our fixed charge coverage ratio. Canadian borrowings under the facility bear interest at the Canadian Dollar Bankers' Acceptances Rate ("BA Rate") plus a margin varying between 1.25% and 1.75% based on our fixed charge coverage ratio. Borrowings under our foreign borrower subsidiaries bear interest at a benchmark rate, which varies based on the currency in which such borrowings are made, plus a margin varying between 1.25% and 1.75% based on our fixed charge coverage ratio. Availability is dependent on a borrowing base comprised of a percentage of eligible accounts receivable and inventory, which is subject to redetermination from time to time. Excess Availability, as defined under our Global ABL Facility, was $514 million as of March 31, 2022.

Interest on Borrowings: The interest rates on our outstanding borrowings at March 31, 2022 and December 31, 2021, including a floating to fixed interest rate swap, are set forth below:

	*March 31,*			*December 31,*
	*2022*			*2021*
Senior Secured Term Loan B		5.47	%		5.41	%
Global ABL Facility		4.00	%		-	%
Weighted average interest rate		5.45	%		5.41	%

Table of Contents

NOTE 6 – REDEEMABLE PREFERRED STOCK

Preferred Stock Issuance

In June 2015, we issued 363,000 shares of Series A Convertible Perpetual Preferred Stock (the “Preferred Stock”) and received gross proceeds of $363 million. The Preferred Stock ranks senior to our common stock with respect to dividend rights and rights on liquidation, winding-up and dissolution. The Preferred Stock has a stated value of $1,000 per share, and holders of Preferred Stock are entitled to cumulative dividends payable quarterly in cash at a rate of 6.50% per annum. In June 2018, the holders of Preferred Stock designated one member to our board of directors. If we fail to declare and pay the quarterly dividend for an amount equal to six or more dividend periods, the holders of the Preferred Stock would be entitled to designate an additional member to our board of directors. Holders of Preferred Stock are entitled to vote together with the holders of the common stock as a single class, in each case, on an as-converted basis, except where law requires a separate class vote of the common stockholders. Holders of Preferred Stock have certain limited special approval rights, including with respect to the issuance of pari passu or senior equity securities of the Company.

The Preferred Stock is convertible at the option of the holders into shares of common stock at an initial conversion rate of 55.9284 shares of common stock for each share of Preferred Stock, which represents an initial conversion price of $17.88 per share of common stock, subject to adjustment. The Company currently has the option to redeem, in whole but not in part, all the outstanding shares of Preferred Stock at 105% of par value, subject to certain redemption price adjustments. On or after June 10, 2022, the Company will have the option to redeem, in whole but not in part, all of the outstanding shares of Preferred Stock at par value, subject to certain redemption price adjustments. We may elect to convert the Preferred

SEC Form 10-Q filed by MRC Global Inc.