| DEBT | NOTE 6 — DEBT
2018 Refinancing Transactions
On October 22, 2018, HDS entered into a Sixth Amendment (the “Sixth Amendment”) to the credit agreement governing HDS’s existing Senior Term Facility, as defined below. Pursuant to the Sixth Amendment, HDS amended its existing Senior Term Facility, to, among other things, refinance all the outstanding term loans in an aggregate principal of $530 million due August 2021 (the “Term B-3 Loans”) and an aggregate principal of $540 million due October 2023 (the “Term B-4 Loans”) with a new tranche of term loans (the “Term B-5 Loans”) in an original aggregate principal of $1,070 million.
Pursuant to the Sixth Amendment, the Term B-5 Loans bear interest at the rate of London Interbank Offered Rate (“LIBOR”) plus 1.75% or base rate plus 0.75%. The Term B-5 Loans amortize in equal quarterly installments in aggregate annual amounts equal to 1.00% of the original principal amount and will mature on October 17, 2023.
The Sixth Amendment also provides for a prepayment premium equal to 1.00% of the aggregate principal of the applicable Term Loans, as defined below, being prepaid if, on or prior to April 22, 2019, the Company enters into certain repricing transactions.
In connection with the Sixth Amendment, the Company paid approximately $5 million in consent fees. The consent fees are reflected as deferred financing costs in the Consolidated Balance Sheets and will be amortized into interest expense over the term of the loans. The Company incurred a modification and extinguishment charge of approximately $5 million, which includes financing fees and other costs of approximately $3 million and the write-off of approximately $2 million of a portion of the related unamortized discount and deferred financing costs, in accordance with ASC 470-50, Debt-Modifications and Extinguishments.
On October 11, 2018, HDS issued $750 million of 5.375% Senior Unsecured Notes due 2026 (the “October 2018 Senior Unsecured Notes”) at par. HDS received approximately $741 million in proceeds, net of transaction fees. The transaction fees of $9 million are reflected as deferred financing costs in the Consolidated Balance Sheets and will be amortized into interest expense over the term of the October 2018 Senior Unsecured Notes.
HDS used the net proceeds from the October 2018 Senior Unsecured Notes issuance, together with available cash and borrowings on HDS’s Senior Asset Based Lending Facility due 2022 (the “Senior ABL Facility”), to redeem all of the outstanding $1,000 million aggregate principal of the 5.75% Senior Unsecured Notes due 2024 (the “April 2016 Senior Unsecured Notes”), pay a $56 million make-whole premium calculated in accordance with the terms of the indenture governing such notes and pay $28 million of accrued but unpaid interest. As a result, the Company incurred a $64 million loss on extinguishment of the debt, which includes the $56 million make-whole premium and write-off of $8 million of unamortized deferred financing costs, in accordance with ASC 470-50, Debt-Modifications and Extinguishments.
HDS’s long‑term debt as of February 3, 2019 and January 28, 2018 consisted of the following (dollars in millions):
February 3, 2019
January 28, 2018
Outstanding
Interest
Outstanding
Interest
Principal
Rate % (1)
Principal
Rate % (1)
Senior ABL Facility due 2022
$
348
3.83
$
58
2.86
Term B-3 Loans due 2021
—
—
534
3.94
Term B-4 Loans due 2023
—
—
544
4.19
Term B-5 Loans due 2023
1,067
4.25
—
—
October 2018 Senior Unsecured Notes due 2026
750
5.375
—
—
April 2016 Senior Unsecured Notes due 2024
—
—
1,000
5.75
Total gross long-term debt
$
2,165
$
2,136
Less unamortized discount
(4)
(6)
Less unamortized deferred financing costs
(21)
(29)
Total net long-term debt
$
2,140
$
2,101
Less current installments
(11)
(11)
Total net long-term debt, excluding current installments
$
2,129
$
2,090
(1)
Represents the stated rate of interest, without including the effect of discounts, premiums, or interest rate swap agreements.
Senior Credit Facilities
Asset Based Lending Facility
The Senior ABL Facility provides for senior secured revolving loans and letters of credit of up to a maximum aggregate principal amount of $1,000 million (subject to availability under a borrowing base). Extensions of credit under the Senior ABL Facility will be limited by a borrowing base calculated periodically based on specified percentages of the value of eligible inventory and eligible accounts receivable, subject to certain reserves and other adjustments. As of February 3, 2019, HDS had $558 million of Excess Availability (as defined in the Senior ABL Facility agreement) under the Senior ABL Facility (after giving effect to the borrowing base limitations and approximately $27 million in letters of credit issued and including $7 million of borrowings available on qualifying cash balances).
A portion of the Senior ABL Facility is available for letters of credit and swingline loans. The Senior ABL Facility also includes a sub -facility for loans and letters of credit in Canadian dollars. The Senior ABL Facility also permits HDS to add one or more incremental term loans, revolving or letter of credit facilities to be included in the Senior ABL Facility up to an aggregate maximum amount of $1,000 million for the total commitments under the Senior ABL Facility (including all incremental commitments).
At HDS’s option, the interest rates applicable to the loans under the Senior ABL Facility are based (i) in the case of U.S. dollar-denominated loans, either at LIBOR plus an applicable margin or Prime Rate plus an applicable margin and (ii) in the case of Canadian dollar-denominated loans, either the Banker’s Acceptance (“BA”) rate plus an applicable margin or the Canadian Prime Rate plus an applicable margin. The margins applicable for each elected interest rate are subject to a pricing grid, as defined in the agreement governing the Senior ABL Facility, based on average excess availability for the previous fiscal quarter. The Senior ABL Facility also contains a letter of credit fee computed at a rate per annum equal to the Applicable Margin (as defined in the agreement) then in effect for LIBOR Loans and an unused commitment fee subject to a pricing grid, included in the agreement governing the Senior ABL Facility agreement, based on Excess Availability.
Prepayments
The Senior ABL Facility may be prepaid at HDS’s option at any time without premium or penalty and will be subject to mandatory prepayment if the outstanding Senior ABL Facility exceeds either the aggregate commitments with respect thereto or the current borrowing base, in an amount equal to such excess. Mandatory prepayments do not result in a permanent reduction of the lenders’ commitments under the Senior ABL Facility.
Guarantees; Security
The Senior ABL Facility is senior secured indebtedness of HDS and ranks equal in right of payment with all of HDS’s existing and future senior indebtedness and senior in right of payment to all of HDS’s existing and future subordinated indebtedness.
HDS, and at HDS’s option, certain of HDS’s subsidiaries, including HDS Canada, Inc., a Canadian subsidiary (the “Canadian Borrower”), are the borrowers under the Senior ABL Facility. Each of HDS’s existing and future direct and indirect wholly-owned domestic subsidiaries, in each case to the extent permitted by applicable law, regulation and contractual provision and subject to certain exceptions (the “Subsidiary Guarantors”) guarantees HDS’s payment obligations under the Senior ABL Facility (and, in the case of Canadian obligations, each existing and future direct and indirect wholly-owned Canadian subsidiary, in each case to the extent permitted by applicable law, regulation and contractual provision and subject to certain exceptions (the “Canadian Guarantors”) guarantee the Canadian Borrower’s payment obligations under the Senior ABL Facility).
HDS’s obligations under the Senior ABL Facility and the guarantees thereof are secured in favor of the U.S. ABL collateral agent (i) on a first-priority basis by substantially all accounts receivable, inventory and other related assets owned by HDS and each Subsidiary Guarantor and all proceeds thereof, in each case to the extent permitted by applicable law and subject to certain exceptions (the “ABL Priority Collateral”), subject to permitted liens, and (ii) (x) all of the capital stock of HDS, all capital stock of all domestic subsidiaries directly owned by HDS and the Subsidiary Guarantors and 65% of the capital stock of any foreign subsidiary held directly by HDS or any Subsidiary Guarantor (with foreign subsidiary holding companies being deemed foreign subsidiaries) and (y) substantially all tangible and intangible assets owned by HDS and each Subsidiary Guarantor, other than the ABL Priority Collateral, and all proceeds thereof, in each case to the extent permitted by applicable law and subject to certain exceptions (the “Cash Flow Priority Collateral” and, together with the ABL Priority Collateral, the “Collateral”); in each case, subject to the priority of liens among the Term Loan Facility (as defined below) and the Senior ABL Facility.
The Canadian obligations under the Senior ABL Facility are also secured by liens on substantially all assets of the Canadian Borrower and the Canadian Guarantors, subject to certain exceptions.
Covenants
The Senior ABL Facility contains a number of covenants that, among other things, limit or restrict HDS’s ability and, in certain cases, HDS’s subsidiaries to make acquisitions, mergers, consolidations, dividends, and to prepay certain indebtedness, in each case to the extent any such transaction would reduce availability under the Senior ABL Facility below a specified amount.
In addition, if HDS’s specified excess availability (including an amount by which HDS’s borrowing base exceeds the existing commitments) under the Senior ABL Facility falls below the greater of $100 million and 10% of the lesser of (A) the Borrowing Base and (B) the Total Facility Commitment (a “Liquidity Event”), HDS will be required to maintain a Fixed Charge Coverage Ratio of at least 1.0:1.0, as defined in the credit agreement governing the Senior ABL Facility.
The Senior ABL Facility also contains certain affirmative covenants, including financial and other reporting requirements. HDS is in compliance with all such covenants.
Senior Term Loan Facility
HDS’s Senior Term Facility (the “Senior Term Facility”) consists of a senior secured term loan facility (the “Term Loan Facility,” and the term loans thereunder, the “Term Loans”) providing for Term Loans in an original aggregate principal amount of $1,070 million. The Term B-5 Loans will mature on October 17, 2023. The Term B-5 Loans amortize in equal quarterly installments in aggregate principal amounts equal to 1.00% of the original principal amount of the Term Loans with the balances payable at the maturity date. The Term B-5 Loans bear interest at the applicable margin for borrowings of 1.75% for LIBOR borrowings and 0.75% for base rate borrowings.
In accordance with the Sixth Amendment, annual excess cash flow (“ECF”) provisions are applicable beginning with the fiscal year ending on January 28, 2018 (fiscal 2017) and each fiscal year thereafter. No payment was required to be offered for fiscal 2018, in accordance with the ECF provisions.
The Term Loan Facility is senior secured indebtedness of HDS and ranks equal in right of payment with all of HDS’s existing and future senior indebtedness and senior in right of payment to all of HDS’s existing and future subordinated indebtedness.
The Term Loan Facility is guaranteed, on a senior secured basis, by the Subsidiary Guarantors. These guarantees are subject to release under customary circumstances. The guarantee of each Subsidiary Guarantor is a senior secured obligation of that Subsidiary Guarantor and ranks equal in right of payment with all existing and future senior indebtedness of that Subsidiary Guarantor and senior in right of payment to all existing and future subordinated indebtedness of such Subsidiary Guarantor.
Collateral
The Term Loan Facility and the related guarantees are secured by a first-priority security interest in substantially all of the tangible and intangible assets of HDS and the Subsidiary Guarantors (other than the ABL Priority Collateral, in which the Term Loan Facility and the related guarantees have a second priority security interest), including pledges of all Capital Stock of the Restricted Subsidiaries directly owned by HDS and the Subsidiary Guarantors (but only up to 65% of each series of Capital Stock of each direct foreign subsidiary owned by HDS or any Subsidiary Guarantor), subject to certain thresholds, exceptions and permitted liens, and excluding any Excluded Assets (as defined in the credit agreement governing the Term Loan Facility (the “Term Loan Credit Agreement”)) and Excluded Subsidiary Securities (as defined in the Term Loan Credit Agreement) (the “Cash Flow Priority Collateral”), subject to permitted liens. In addition, the Term Loan Facility and the related guarantees are secured by a second -priority security interest in the ABL Priority Collateral, subject to permitted liens.
Prepayment
The Sixth Amendment provides for a prepayment premium equal to 1.00% of the aggregate principal amount of the applicable term loans being prepaid if, on or prior to April 22, 2019, the Company enters into certain repricing transactions. Under certain circumstances and subject to certain exceptions, the Term Loan Facility will be subject to mandatory prepayment in an amount equal to:
·
100% of the net proceeds (other than those that are used to purchase certain assets or to repay certain other indebtedness) of certain asset sales and certain insurance recovery events; and
·
50% of annual excess cash flow for any fiscal year, such percentage to decrease to 0% depending on the attainment of a secured leverage ratio target.
Guarantee
HDS is the borrower under the Term Loan Facility. The Subsidiary Guarantors guarantee HDS’s payment obligations under the Term Loan Facility.
HDS’s obligations under the Term Loan Facility and the guarantees thereof are secured in favor of the collateral agent by (i) all of the capital stock of HDS, all capital stock of all domestic subsidiaries directly owned by HDS and the Subsidiary Guarantors and 65% of the capital stock of any foreign subsidiary owned directly by HDS or any Subsidiary Guarantors (it being understood that a foreign subsidiary holding company will be deemed a foreign subsidiary) and (ii) substantially all other tangible and intangible assets owned by HDS and each Subsidiary Guarantor, in each case to the extent permitted by applicable law and subject to certain exceptions and subject to the priority of liens between the Term Loan Facility and the Senior ABL Facility.
Covenants
The Term Loan Facility contains a number of covenants that, among other things, limit the ability of HDS and its restricted subsidiaries, as described in the Term Loan Credit Agreement, to: incur more indebtedness; pay dividends, redeem stock or make other distributions; make investments; create restrictions on the ability of HDS’s restricted subsidiaries to pay dividends to HDS or make other intercompany transfers; create liens securing indebtedness; transfer or sell assets; merge or consolidate; enter into certain transactions with HDS’s affiliates; and prepay or amend the terms of certain indebtedness.
The Term Loan Facility also contains certain affirmative covenants, including financial and other reporting requirements. HDS is in compliance with all such covenants.
Events of Default under the Senior ABL Facility and Term Loan Facility
The Senior ABL Facility and Term Loan Facility also provide for customary events of default, including non‑payment of principal, interest or fees, violation of covenants, material inaccuracy of representations or warranties, specified cross default and cross acceleration to other material indebtedness, certain bankruptcy events, certain ERISA events, material invalidity of guarantees or security interest, material judgments and changes of control.
Unsecured Notes
5.375% Senior Unsecured Notes due 2026
HDS issued $750 million aggregate principal of the October 2018 Senior Unsecured Notes under an Indenture, dated as of October 11, 2018 (the “October 2018 Senior Unsecured Notes Indenture”) among HDS, the Subsidiary Guarantors, and the Trustee. The October 2018 Senior Unsecured Notes bear interest at a rate of 5.375% per annum and will mature on October 15, 2026. Interest is paid semi-annually on April 15th and October 15th of each year with the first interest payment due April 15, 2019.
The October 2018 Senior Unsecured Notes are unsecured senior indebtedness of HDS and rank equal in right of payment with all of HDS’s existing and future senior indebtedness, senior in right of payment to all of HDS’s existing and future subordinated indebtedness, and effectively subordinated to all of HDS’s existing and future secured indebtedness, including, without limitation, indebtedness under the Senior Credit Facilities, to the extent of the value of the collateral securing each indebtedness. The October 2018 Senior Unsecured Notes are structurally subordinated to all indebtedness and other liabilities of HDS’s non-guarantor subsidiaries, including all of HDS’s foreign subsidiaries.
The October 2018 Senior Unsecured Notes are guaranteed, on a senior unsecured basis, by each of HDS’s direct and indirect domestic existing and future subsidiaries that is a wholly-owned domestic subsidiary (other than certain excluded subsidiaries), and by each domestic subsidiary that is a borrower under the Senior ABL Facility or that guarantees HDS’s obligation under any credit facility or capital market securities. These guarantees are subject to release under customary circumstances as stipulated in the October 2018 Senior Unsecured Notes Indenture.
Redemption
HDS may redeem the October 2018 Senior Unsecured Notes, in whole or in part, at any time (1) prior to October 15, 2021, at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, plus the applicable make-whole premium set forth in the October 2018 Senior Unsecured Notes Indenture and (2) on and after October 15, 2021, at the applicable redemption price set forth below (expressed as a percentage of principal amount), plus accrued and unpaid interest, if any, to the relevant redemption date, if redeemed during the 12-month period commencing on October 15 of the year set forth below:
Year
Percentage
2021
102.688
%
2022
101.344
%
2023 and thereafter
100.000
%
In addition, at any time prior to October 15, 2021, HDS may redeem on one or more occasions up to 40% of the aggregate principal amount of the October 2018 Senior Unsecured Notes with the proceeds of certain equity offerings at a redemption price of 105.375% of the principal amount in respect of the October 2018 Senior Unsecured Notes being redeemed, plus accrued and unpaid interest to the redemption date, provided, however, that if the October 2018 Senior Unsecured Notes are redeemed, an aggregate principal amount of the October 2018 Senior Unsecured Notes equal to at least 50% of the original aggregate principal amount of the October 2018 Senior Unsecured Notes must remain outstanding immediately after each such redemption of the October 2018 Senior Unsecured Notes.
5.75% Senior Unsecured Notes due 2024
HDS’s April 2016 Senior Unsecured Notes bore interest at a rate of 5.75% per annum with a maturity date of April 15, 2024. Interest was paid semi-annually in arrears on April 15 th and October 15 th of each year, prior to the October 11, 2018 redemption of all of the outstanding $1,000 million aggregate principal amount of the April 2016 Senior Unsecured Notes described above under “2018 Refinancing Transactions.”
Debt Maturities
Maturities of long‑term debt outstanding, in principal amounts, at February 3, 2019 are summarized below (amounts in millions):
Fiscal Year
2019
2020
2021
2022
2023
Thereafter
Total
Principal maturities
$
11
$
11
$
11
$
358
$
1,024
$
750
$
2,165
Fiscal 2017 and Fiscal 2016 Transactions
On December 28, 2017, HDS reduced its U.S. borrowing capacity under its Senior ABL Facility, as defined below, by $500 million. The total borrowing capacity under the Senior ABL Facility is now $1,000 million (subject to availability under a borrowing base). As a result, the Company incurred a $3 million loss on extinguishment of debt for the write-off of unamortized deferred financing costs, in accordance with ASC 470-50, Debt-Modifications and Extinguishments.
On September 1, 2017, HDS used a portion of the net proceeds from the sale of the Waterworks business to redeem all of the outstanding $1,250 million in aggregate principal amount of 5.25% Senior Secured First Priority Notes due 2021 (the “December 2014 First Priority Notes”) for an aggregate redemption price of approximately $1,325 million. The redemption price included an approximately $62 million make-whole premium calculated in accordance with terms of the indenture governing the December 2014 First Priority Notes (“the 2014 indenture”) and $14 million of accrued but unpaid interest to the redemption date. In connection with the redemption, the 2014 indenture, was satisfied and discharged and the liens securing the December 2014 First Priority Notes were released in accordance with the terms of the 2014 indenture. As a result of the redemption, the Company incurred a $73 million loss on extinguishment of debt, which includes the $62 million make-whole premium and the write-off of $11 million of unamortized deferred financing costs, in accordance with ASC 470-50, Debt-Modifications and Extinguishments.
On August 31, 2017, HDS entered into a Fifth Amendment (the “Fifth Amendment”) to the credit agreement governing HDS’s existing Term Loan Facility. Pursuant to the Fifth Amendment, HDS amended its existing Term Loan Facility to, among other things, (i) refinance all the outstanding term loans in an original aggregate principal amount of $842 million (the “Term B-1 Loans”) with a new tranche of term loans (the Term B-3 Loans) in an aggregate principal amount of $535 million, (ii) refinance all the outstanding term loans in an original aggregate principal of $550 million (the “Term B-2 Loans”) with a new tranche of term loans (the Term B-4 Loans) in an aggregate principal amount of $546 million, and (iii) amend the definition of “Permitted Payments” contained in the credit agreement to permit an additional category of Permitted Payments permitting Restricted Payments (as defined in the credit agreement) at any time in an aggregate amount not to exceed (x) $500,000,000 and (y) thereafter, upon full use of such capacity set forth in clause (x), an additional amount, if any, such that, after giving pro forma effect to such Restricted Payment, the Company’s Consolidated Total Leverage Ratio (as defined in the credit agreement) does not exceed 3.00 to 1.00.
In connection with the Fifth Amendment, the Company paid approximately $1 million in consent fees and incurred a modification and extinguishment charge of approximately $3 million, which includes financing fees and other costs of approximately $1 million and the write-off of approximately $2 million of a portion of the related unamortized original issue discount and deferred financing costs, in accordance with ASC 470-50, Debt-Modifications and Extinguishments.
On August 25, 2017, HDS entered into the Second Supplemental Indenture (the “Second Supplemental Indenture”) which governs the April 2016 Senior Unsecured Notes and amends and supplements the Indenture, dated as of April 11, 2016, as amended and supplemented by the First Supplemental Indenture, dated as of April 11, 2016 (together, the “2016 indenture”). Holders of a majority in aggregate principal amount of the outstanding April 2016 Senior Unsecured Notes consented to the proposed amendments included in the Second Supplemental Indenture.
The Second Supplemental Indenture (a) amends the definition of “Permitted Payments” contained in the 2016 indenture to permit an additional category of Permitted Payments permitting Restricted Payments (as defined in the Indenture) at any time in an aggregate amount not to exceed (x) $500,000,000 and (y) thereafter, upon full use of such capacity set forth in clause (x), an additional amount, if any, such that, after giving pro forma effect to such Restricted Payment, the Company’s Consolidated Total Leverage Ratio (as defined in the Indenture) does not exceed 3.00 to 1.00; (b) increase the interest rate for the April 2016 Senior Unsecured Notes to 7.00% per annum commencing April 15, 2019, to the extent the April 2016 Senior Unsecured Notes remain outstanding after April 15, 2019; (c) amend the definition of “Net Available Cash” contained in the Indenture to provide that proceeds from the sale of the Waterworks business unit consummated on August 1, 2017 (other than proceeds to be applied to redeem the December 2014 First Priority Notes) shall be excluded and accordingly, the Company will not be required to apply the remaining net proceeds in accordance with the provision of the “Sale of Assets” covenant of the Indenture, and (d) amend the definition of “Consolidated EBITDA” contained in the 2016 indenture to provide that while the Company may continue to include in the calculation thereof projected cost savings, it may only do so with respect those realized as a result of actions taken or to be taken in connection with a purchase of assets from, or a sale of assets to, a third party (excluding the Waterworks Sale (as defined in the Second Supplemental Indenture)).
As a result of entering into the Second Supplemental Indenture, the Company paid approximately $15 million in consent fees to holders of the outstanding April 2016 Senior Unsecured Notes, which are capitalized as deferred financing costs and amortized over the expected life of the April 2016 Senior Unsecured Notes. Additionally, the Company incurred a modification charge of approximately $3 million for financing fees, in accordance with ASC 470-50, Debt-Modifications and Extinguishments.
On April 18, 2017, HDS used cash and available borrowings under its Senior ABL Facility to repay $100 million aggregate principal of its Term B-1 Loans. As a result, the Company incurred a $2 million loss on extinguishment of debt, which included write-offs of unamortized original issue discount and unamortized deferred financing costs for $1 million each, in accordance with ASC 470-50, Debt-Modifications and Extinguishments.
On April 5, 2017, HDS entered into a Third Amendment (the “Third Amendment”) to the credit agreement governing its existing Senior ABL Facility. The Third Amendment, among other things, reduced the applicable margin for borrowings under the Senior ABL Facility, reduced the applicable commitment fee, and extended the maturity date of the Senior ABL Facility until April 5, 2022. As a result, the Company recorded a $1 million loss on extinguishment of debt, in accordance with ASC 470-50, Debt-Modifications and Extinguishments, for the write-off of $1 million of unamortized deferred financing costs
On January 26, 2017, HDS used cash and available borrowings under its Senior ABL Facility, to repay $200 million aggregate principal of its Term B-1 Loans. As a result, the Company incurred a $5 million loss on extinguishment of debt, which includes write-offs of $2 million and $3 million of unamortized original issue discount and unamortized deferred financing costs, respectively, in accordance with ASC 470-50, Debt-Modifications and Extinguishments.
On October 14, 2016, HDS entered into the Fourth Amendment to the credit agreement governing its existing Term Loan Facility. Pursuant to the Fourth Amendment, HDS amended its existing Term Loan Facility to, among other things, reduce its LIBOR floor to zero by means of a replacement tranche that replaced all of the Company’s outstanding term loans in an aggregate principal amount of approximately $842 million (the “Term B-1 Loans”) and issue a new tranche of term loans in an aggregate principal amount of $550 million (the “Term B-2 Loans”).
Pursuant to the Fourth Amendment, the Term B-1 Loans bore interest at the applicable margin for borrowings of 2.75% for LIBOR borrowings and 1.75% for base rate borrowings, with a LIBOR floor of zero. The Term B-1 Loans amortized in equal quarterly installments in aggregate annual amounts equal to 1.00% of the original principal amount of the replaced tranche with the balance payable on the maturity date, August 13, 2021.
The Term B-2 Loans bore interest at the applicable margin for borrowings of 2.75% for LIBOR borrowings and 1.75% for base rate borrowings, with a LIBOR floor of zero. The Term Loan Facility allowed for a reduction in the applicable margin on the Term B-2 Loans from 2.75% per annum to 2.50% per annum upon the Company reaching a consolidated total leverage ratio, as defined in the agreement, of 3.0x or less. The Term B-2 Loans amortized in equal quarterly installments in aggregate annual amounts equal to 1.00% of the original principal amount and had a maturity date of October 17, 2023.
On October 17, 2016, HDS used the proceeds from the Term B-2 Loans, together with available cash and available borrowings under its Senior ABL Facility, to redeem all of the outstanding $1,275 million aggregate principal of its 7.5% Senior Unsecured Notes due 2020, and pay a $48 million premium in accordance with the terms of the indenture governing such notes. As a result, the Company incurred a $59 million loss on extinguishment of debt, which includes the $48 million premium and write-off of $11 million of unamortized deferred financing costs, in accordance with ASC 470-50, Debt-Modifications and Extinguishments.
On April 11, 2016, HDS issued $1,000 million of 5.75% Senior Unsecured Notes due 2024 at par. HDS received approximately $985 million, net of transaction fees. The transaction fees of $15 million are reflected as deferred financing costs on the Consolidated Balance Sheets and will be amortized into interest expense over the term of the notes.
On April 27, 2016, HDS used the net proceeds from the April 2016 Senior Unsecured Notes issuance, together with available cash, to redeem all of the outstanding $1,000 million aggregate principal of its 11.5% Senior Unsecured Notes due 2020, and pay a $106 million make-whole premium calculated in accordance with the terms of the indenture governing such notes and pay $4 million of accrued but unpaid interest to the redemption date. As a result, the Company incurred a $115 million loss on extinguishment of debt, which includes the $106 million make-whole premium and the write-off of $9 million of unamortized deferred financing costs, in accordance with ASC 470-50, Debt-Modifications and Extinguishments. |
