Long-Term Debt | 3 Months Ended |
Dec. 31, 2013 |
Debt Disclosure [Abstract] | ' |
Long-Term Debt | ' |
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3. Long-Term Debt |
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As of December 31, 2013 and 2012, the Company’s long-term debt consisted of the following: |
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(in thousands) | | December 31, | | | September 30, | |
2013 | 2013 |
Term loan (including the Incremental Term Loan), principal and interest due in quarterly installments through February 9, 2017 | | $ | 545,125 | | | $ | 546,525 | |
Original issue discount on term loan, net of accumulated amortization | | | (4,071 | ) | | | (4,403 | ) |
Senior notes, due February 15, 2018; semi-annual cash interest payments due each February 15th and August 15th (interest rate of 12.50%) | | | 250,000 | | | | 250,000 | |
Original issue discount and initial purchase discount on senior notes, net of accumulated amortization | | | (6,601 | ) | | | (7,003 | ) |
Senior revolver, due February 9, 2016; quarterly cash interest payments at a variable interest rate | | | — | | | | — | |
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| | | 784,453 | | | | 785,119 | |
Less current portion | | | 5,600 | | | | 5,600 | |
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Long-term debt | | $ | 778,853 | | | $ | 779,519 | |
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Senior Secured Credit Facilities |
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The senior secured credit facilities were repaid and replaced with new senior secured credit facilities on January 31, 2014. See note 13 subsequent events. The following describes the senior credit agreement as in effect on December 31, 2013. |
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On February 9, 2011, the Company completed the February 2011 Refinancing, which included entering into a senior credit agreement (as amended, the “senior credit agreement”) for senior secured credit facilities, consisting of a (i) six-year $530.0 million term loan facility, of which $50.0 million was deposited in a cash collateral account in support of issuance of letters of credit under an institutional letter of credit facility (the “institutional letter of credit facility”) and a (ii) $75.0 million five-year senior secured revolving credit facility. The $530.0 million term loan was issued at a price equal to 98.5% of its face value and amortizes one percent per year, paid quarterly, with the remaining balance payable at maturity. The Company refers to these facilities, as amended on October 15, 2012, as the “senior secured credit facilities”. |
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On October 15, 2012, the Company entered into an Amendment Agreement (the “Amendment Agreement”), to amend and restate the senior credit agreement governing the senior secured credit facilities. The Amendment Agreement converted the existing term loan facility into a tranche B-1 term loan facility in aggregate principal amount of $522.1 million (the “term loan”). The proceeds were used to prepay the existing term loan facility. Total fees incurred related to the Amendment Agreement were $1.7 million of which a majority of the amount was being amortized over the life of the term loan. The Amendment Agreement also replaced the Company’s existing $75 million revolving credit facility and the borrowings thereunder with a new $75 million revolving credit facility (the “senior revolver”). The interest rates under the senior secured credit facilities were unchanged by the Amendment Agreement, except that the LIBOR floor applicable to borrowings under the senior secured credit facilities was reduced by 0.50%. |
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The interest rate on borrowings under the senior secured credit facilities was equal to (i) a rate equal to the greater of (a) the prime rate, (b) the federal funds rate plus 1/2 of 1% and (c) the Eurodollar rate for an interest period of one-month beginning on such day plus 100 basis points (subject to an ABR floor of 2.25% per annum), plus 4.25%; or (ii) the Eurodollar rate (subject to a LIBOR floor of 1.25% per annum), plus 5.25%, at the Company’s option. |
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Term loan |
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The original term loan was issued at a price equal to 98.5% of its face value. The senior credit agreement also included an annual provision for the prepayment of a portion of the outstanding term loan amounts beginning in fiscal 2011 equal to an amount ranging from 0 to 50% of a calculated amount, depending on the Company’s leverage ratio, if the Company generated certain levels of cash flow. The Company has not been required to make such a prepayment of its term loan to-date. The Company was required to repay the term loan in quarterly principal installments of 0.25% of the original principal amount, with the balance payable at maturity. |
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On February 4, 2013, the Company entered into an Incremental Amendment No. 1 (the “Incremental Amendment No. 1”) to the Amendment Agreement. The Incremental Amendment No. 1 provided for an additional $30.0 million term loan (the “incremental term loan”) under the Company’s existing term loan. The net proceeds of the incremental term loan were used to repay $29.8 million of outstanding borrowings under the senior revolver. Total fees incurred related to the Incremental Amendment No.1 were $0.4 million which were being amortized over the remaining period of the term loan. The Company was required to repay the incremental term loan in quarterly principal installments of 0.25% of the principal amount, with the balance payable at maturity of the term loan. All of the other terms of the incremental term loan were identical to the term loan. |
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At December 31, 2013, the Company had $545.1 million of borrowings under the term loan (including the incremental term loan). At December 31, 2013, the variable interest rate on the term loan was 6.5%. |
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Senior revolver |
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During the three months ended December 31, 2013, the Company drew $2.5 million under the senior revolver and repaid $2.5 million during the period. At December 31, 2013, the Company had no outstanding borrowings under the senior revolver and $75.0 million of availability under the senior revolver. The Company had $42.5 million of standby letters of credit issued under the institutional letter of credit facility primarily related to the Company’s workers’ compensation insurance coverage. The Company’s institutional letter of credit facility provided for the issuance of letters of credit up to the $50.0 million limit, and letters of credit in excess of that amount reduced availability under the Company’s senior revolver. The interest rate for borrowings under the senior revolver was 7.5% as of December 31, 2013. |
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The senior revolver included borrowing capacity available for borrowings on same-day notice, referred to as the “swingline loans.” Any swingline loans or other borrowings under the senior revolver, would have maturities less than one year, and would be reflected under Current portion of long-term debt on the Company’s consolidated balance sheets. |
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Senior Notes |
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In connection with the February 2011 Refinancing, the Company issued $250.0 million of 12.5% senior notes due 2018 (the “senior notes”) at a price equal to 97.7% of their face value, for net proceeds of $244.3 million. The net proceeds were further reduced by an initial purchasers’ discount of $5.6 million. The senior notes are the Company’s unsecured obligations and are guaranteed by certain of the Company’s existing subsidiaries. |
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Covenants |
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The senior credit agreement contained and the indenture governing the senior notes contains negative financial and non-financial covenants, including, among other things, limitations on the Company’s ability to incur additional debt, transfer or sell assets, pay dividends, redeem stock or make other distributions or investments, and engage in certain transactions with affiliates. In addition, the senior credit agreement governing the Company’s senior secured credit facilities contained financial covenants that required the Company to maintain a specified consolidated leverage ratio and consolidated interest coverage ratio. |
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The Company is restricted from paying dividends to NMH Holdings, LLC (“Parent”) in excess of $15.0 million, except for dividends used for the repurchase of equity from former officers and employees and for the payment of management fees, taxes, and certain other exceptions. |
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Derivatives |
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The Company entered into an interest rate swap in a notional amount of $400.0 million effective March 31, 2011, maturing on September 30, 2014. The Company entered into this interest rate swap to hedge the risk of changes in the floating rate of interest on borrowings under the term loan. Under the terms of the swap, the Company received from the counterparty a quarterly payment based on a rate equal to the greater of 3-month LIBOR and 1.75% per annum, and the Company made payments to the counterparty based on a fixed rate of 2.55% per annum, in each case on the notional amount of $400.0 million, settled on a net payment basis. |
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On October 15, 2012, the Company amended the terms of its interest rate swap agreement in connection with the amendment and restatement of the terms of the senior secured credit facilities. The notional amount of the interest rate swap of $400.0 million and maturity date of September 30, 2014 remained unchanged. Under the new terms of the interest rate swap, the Company receives from the counterparty a quarterly payment based on a rate equal to the greater of 3-month LIBOR and 1.25% per annum, and the Company makes payments to the counterparty based on a fixed rate of 2.08% per annum, in each case on the notional amount of $400.0 million, settled on a net payment basis. Based on the applicable margin of 5.25% under the Company’s term loan, this swap effectively fixed the Company’s cost of borrowing for $400.0 million of the term loan at 7.3% per annum for the term of the swap. As a result of the modification of the terms of the interest rate swap agreement, the fair value of the interest rate swap was increased by $68 thousand and the increase in fair value is being amortized into Other income (expense) over the remaining term of the interest rate swap agreement. |
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The Company accounts for the interest rate swap as a cash flow hedge and the effectiveness of the hedge relationship is assessed on a quarterly basis. The fair value of the swap agreement, representing the price that would be paid to transfer the liability in an orderly transaction between market participants, was $2.4 million, or $1.5 million after taxes, at December 31, 2013. The fair value was recorded in current liabilities (under Other accrued liabilities) and was determined based on pricing models and independent formulas using current assumptions. The change in fair market value is recorded in the consolidated statements of comprehensive loss. |
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The refinancing of the Company’s senior secured credit facilities as described in note 13 subsequent events did not affect the Company’s interest rate swap agreement. |