Quarterly report pursuant to Section 13 or 15(d)

Long-Term Debt

v3.10.0.1
Long-Term Debt
9 Months Ended
Sep. 30, 2018
Long-Term Debt  
Long-Term Debt

4. LONG-TERM DEBT

 

On May 5, 2017, we and the Guarantors entered into a credit agreement with the Lenders.  All obligations under the credit agreement are guaranteed by the Guarantors, and all obligations under the credit agreement, including the guarantees of those obligations, are secured by substantially all of the assets of us and the Guarantors.

 

On March 28, 2018, we executed an amendment to our credit agreement, which primarily facilitated the acquisition of USI by (i) extending until August 29, 2018, the period during which the Company could access the $100.0 million delayed draw term loan feature and (ii) providing that the Company could issue up to $500.0 million of Senior Notes in connection with its acquisition of USI.  On May 1, 2018, we closed on our acquisition of USI.  The acquisition was funded through net proceeds from the issuance on April 25, 2018, of $400.0 million of 5.625% Senior Notes due in 2026 together with the net proceeds from the $100.0 million delayed draw term loan commitment accessed on May 1, 2018, under our Amended Credit Agreement.  These funds were also used for the payment of related fees and expenses, as well as for general corporate purposes.

 

The Senior Notes are our senior unsecured obligations and bear interest at 5.625% per year, payable semiannually in arrears on May 1 and November 1 of each year, beginning on November 1, 2018. The Senior Notes mature on May 1, 2026, unless redeemed early or repurchased.  We have the right to redeem the Senior Notes under certain circumstances, and, if we undergo a change in control, we must make an offer to repurchase all of the Senior Notes then outstanding at a repurchase price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest (if any) to, but not including, the repurchase date. 

 

Interest payable on borrowings under the Amended Credit Agreement is based on an applicable margin rate plus, at our option, either:

 

·

A base rate determined by reference to the highest of either (i) the federal funds rate plus 0.50 percent, (ii) Bank of America’s “prime rate,” or (iii) the LIBOR rate for U.S. dollar deposits with a term of one month, plus 1.00 percent; or

 

·

A LIBOR rate determined by reference to the costs of funds for deposits in U.S. dollars for the interest period relevant to such borrowings.

 

The applicable margin rate is determined based on our Secured Leverage Ratio.  In the case of base rate borrowings, the applicable margin rate ranges from 0.00 percent to 1.50 percent and in the case of LIBOR rate borrowings, the applicable margin ranges from 1.00 percent to 2.50 percent.

We are required to pay commitment fees to the Lenders in respect of any unutilized commitments.  The commitment fees range from 0.15 percent to 0.275 percent per year, depending on our Secured Leverage Ratio.  We must also pay customary fees on outstanding letters of credit.

 

The following table outlines the key terms of our Amended Credit Agreement, dollars in thousands:

 

 

 

 

 

Senior secured term loan facility (original borrowing) (a)

$

250,000

 

Additional delayed draw term loan (b)

$

100,000

 

 

 

 

 

Additional term loan and/or revolver capacity available under incremental facility (c)

$

200,000

 

 

 

 

 

Revolving Facility

$

250,000

 

Sublimit for issuance of letters of credit under Revolving Facility (d)

$

100,000

 

Sublimit for swingline loans under Revolving Facility (d)

$

20,000

 

 

 

 

 

Interest rate as of September 30, 2018

 

3.33

%

Scheduled maturity date

 

5/05/2022

 


(a)

The Amended Credit Agreement provides for a term loan limit of $350.0 million; $250.0 million was drawn on May 5, 2017.

(b)

On May 1, 2018, the net proceeds from the $100.0 million delayed draw term loan were used to partially fund the USI acquisition.

(c)

Additional borrowing capacity is available under the incremental facility, subject to certain terms and conditions (including existing or new lenders providing commitments in respect of such additional borrowing capacity).

(d)

Use of the sublimits for the issuance of letters of credit and swingline loans reduces the availability under the Revolving Facility.

 

Borrowings under the Amended Credit Agreement are prepayable at the Company’s option without premium or penalty.  The Company is required to make prepayments with the net cash proceeds of certain asset sales and certain extraordinary receipts.

 

Beginning in the first quarter of 2018, the Company executed various equipment notes for the purpose of financing the purchase of vehicles and equipment.  The following table summarizes equipment notes entered into during the respective periods, in thousands:

 

 

 

 

 

 

 

 

 

    

Three Months Ended September 30, 2018

    

Nine Months Ended September 30, 2018

Equipment notes

 

$

5,038

 

$

20,104

 

The following table sets forth our remaining principal payments for our outstanding Senior Notes, term loan and equipment notes as of September 30, 2018, in thousands:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payments Due by Period

 

2018

 

2019

 

2020

 

2021

 

2022

 

Thereafter

 

Total

Senior Notes

$

 —

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

$

400,000

 

$

400,000

Term loan

 

4,375

    

 

21,875

    

 

26,250

    

 

30,625

    

 

248,750

    

 

 —

    

 

331,875

Equipment notes

 

928

 

 

3,788

 

 

3,945

 

 

4,110

 

 

4,281

 

 

1,830

 

 

18,882

Total

$

5,303

 

$

25,663

 

$

30,195

 

$

34,735

 

$

253,031

 

$

401,830

 

$

750,757

 

The following table reconciles the principal balance of our outstanding debt to our Condensed Consolidated Balance Sheets, in thousands:

 

 

 

 

 

 

 

 

 

 

As of

 

    

September 30, 

    

December 31, 

Principal debt balances:

 

2018

    

2017

Current portion of long-term debt - term loan

 

$

19,688

 

$

12,500

Current portion of long-term debt - equipment notes

 

 

3,754

 

 

 —

Long-term portion of long-term debt - Senior Notes

 

 

400,000

 

 

 —

Long-term portion of long-term debt - term loan

 

 

312,187

 

 

231,250

Long-term portion of long-term debt - equipment notes

 

 

15,128

 

 

 —

Unamortized debt issuance costs

 

 

(8,870)

 

 

(1,863)

Total net debt

 

$

741,887

 

$

241,887

 

The Company has outstanding standby letters of credit that secure our financial obligations related to our workers’ compensation, general insurance, and auto liability programs.  These standby letters of credit, as well as any outstanding amount borrowed under our revolving credit facility, reduce the availability under the Revolving Facility.  The following table summarizes our availability under the Revolving Facility, in thousands:

 

 

 

 

 

 

 

 

 

 

As of

 

 

September 30, 

    

December 31, 

 

    

2018

    

2017

Revolving Facility

 

$

250,000

 

$

250,000

Less: standby letters of credit

 

 

(59,288)

 

 

(47,055)

Capacity under Revolving Facility

 

$

190,712

 

$

202,945

 

The indenture governing our Senior Notes contains customary restrictive covenants that, among other things, generally limit our ability to incur additional debt and issue preferred stock; to create liens; to pay dividends, acquire shares of capital stock, make payments on subordinated debt or make investments; to place limitations on distributions from certain subsidiaries; to issue guarantees; to issue or sell the capital stock of certain subsidiaries; to sell assets; to enter into transactions with affiliates; and to effect mergers.  The Senior Notes indenture also contains customary events of default, subject in certain cases to grace and cure periods. Generally, if an event of default occurs and is continuing, the trustee under the indenture or the holders of at least 25% in aggregate principal amount of the Senior Notes then outstanding may declare the principal of, premium, if any, and accrued interest on all the Senior Notes immediately due and payable.  The Senior Notes and related guarantees have not been registered under the Securities Act of 1933, and we are not required to register either the Senior Notes or the guarantees in the future.

 

The Amended Credit Agreement contains certain covenants that limit, among other things, the ability of the Company to incur additional indebtedness or liens; to make certain investments or loans; to make certain restricted payments; to enter into consolidations, mergers, sales of material assets, and other fundamental changes; to transact with affiliates; to enter into agreements restricting the ability of subsidiaries to incur liens or pay dividends; or to make certain accounting changes.  The Amended Credit Agreement contains customary affirmative covenants and events of default.

 

The Amended Credit Agreement requires us to maintain a Net Leverage Ratio and minimum FCCR throughout the term of the agreement.  The following table sets forth the maximum Net Leverage Ratios and minimum FCCR:

 

 

 

 

 

 

Quarter Ending

    

Maximum
Net Leverage Ratio

 

Minimum
FCCR

June 30, 2018 through September 30, 2018

 

3.75:1.00

 

1.25:1.00

December 31, 2018 through June 30, 2019

 

3.50:1.00

 

1.25:1.00

September 30, 2019 and each fiscal quarter end thereafter

 

3.25:1.00

 

1.25:1.00

 

We were in compliance with these key financial covenants under the Amended Credit Agreement as of September 30, 2018.