| Long-Term Obligations | Note 12 – Long-Term Obligations
Long-term obligations consisted of the following:
September 30, December 31,
$1,125,000 Old Term Loan $ 0 $ 1,089,242
$1,340,000 Term Loan 1,329,352 0
Capital lease obligations 2,465 3,274
Nextco Notes 0 347,316
$700,000 of 8.875% Old Senior Notes 0 700,000
$350,000 of 6.125% Senior Notes 350,000 0
Total long-term obligations 1,681,817 2,139,832
Less: current portion (14,267 ) (12,249 )
Long-term obligations, excluding current portion $ 1,667,550 $ 2,127,583
The Nextco Notes were redeemed during the three months ended
June 30, 2015. See Note 6 for further discussion.
During the three months ended September 30, 2015, PCHI
redeemed its $700,000 of 8.875% senior notes (“Old Senior
Notes”) and refinanced its existing $1,125,000 senior secured
term loan facility (“Old Term Loan Credit Agreement”)
and $400,000 asset-based revolving credit facility (“Old ABL
Facility”) with new indebtedness consisting of: (i) a
$1,340,000 senior secured term loan facility (“Term Loan
Credit Agreement”), (ii) a $540,000 asset-based
revolving credit facility (with a seasonal increase to $640,000
during a certain period of each calendar year) (“ABL
Facility”) and (iii) $350,000 of 6.125% senior notes
(“Senior Notes”).
As both the Old Term Loan Credit Agreement and the Term Loan Credit
Agreement are loan syndications, the Company assessed whether the
refinancing of the term loans should be accounted for as an
extinguishment on a creditor-by-creditor basis and wrote-off $2,036
of existing deferred financing costs, as well as a $786 related
original issue discount and $853 of the existing unamortized call
premium, all of which were recorded in other expense in the
Company’s condensed consolidated statement of operations and
comprehensive loss. The remaining deferred financing costs of
$9,308 and the remaining original discount of $3,592 will be
amortized over the life of the Term Loan Credit Agreement, using
the effective interest method. The remainder of the call premium,
$3,900, will also continue to be amortized over the life of the
Term Loan Credit Agreement. Finally, in conjunction with the
refinancing, the Company incurred $12,837 of banker and legal fees;
$9,758 of which was recorded in other expense. The rest of the
costs will be amortized over the life of the Term Loan Credit
Agreement. The write-offs of the deferred financing costs, original
issuance discount and call premium were included in amortization of
deferred financing costs and original issuance discount in the
Company’s condensed consolidated statement of cash flows.
Additionally, the Company compared the borrowing capacity under the
Old ABL Facility and the ABL Facility, on a creditor-by-creditor
basis, and concluded that $321 of existing deferred financing costs
should be written-off. Such amount was recorded in other expense in
the Company’s condensed consolidated statement of operations
and comprehensive loss and included in amortization of deferred
financing costs and original issuance discount in the
Company’s condensed consolidated statement of cash flows. The
remaining costs, $2,246, will be amortized over the term of the ABL
Facility.
The redemption price for the Old Senior Notes was 6.656 % of
the principal amount, aggregating $46,592. The Company recorded
such amount in other expense in the Company’s condensed
consolidated statement of operations and comprehensive loss.
Additionally, the Company wrote-off $18,664 of deferred financing
costs related to the Old Senior Notes. Such amount was also
recorded in other expense in the Company’s condensed
consolidated statement of operations and comprehensive loss and
included in amortization of deferred financing costs and original
issuance discount in the Company’s condensed consolidated
statement of cash flows.
Term Loan Credit Agreement
Loans outstanding under the Term Loan Credit Agreement were issued
with a 0.25% original issuance discount. Such amount, $3,350, has
been netted against the amount of the debt on the Company’s
condensed consolidated balance sheet and is being amortized over
the life of the debt, using the effective interest method.
Additionally, a portion of the existing original issuance discount
has been netted against the new debt and is being amortized
consistent with the new discount (see above for further
discussion).
The Term Loan Credit Agreement provides for two pricing options for
outstanding loans: (i) an ABR for any day, a rate per annum
equal to the greater of (a) the prime rate in effect on such
day, (b) the federal funds effective rate in effect on such
day plus 0.5%, (c) the adjusted LIBOR rate plus 1% and
(d) 2.00% or (ii) the LIBOR rate, with a LIBOR floor of
1.00%, in each case plus an applicable margin. The applicable
margin is 2.25% with respect to ABR borrowings and 3.25% with
respect to LIBOR borrowings. At September 30, 2015, all
outstanding borrowings were based on LIBOR and were at a rate of
4.25%.
Subsequent to February 19, 2016, the Company may voluntarily
prepay the term loans at any time without premium or penalty, other
than customary breakage costs with respect to loans based on the
LIBOR rate. Prior to such date, voluntary prepayments are subject
to a 1% premium. The term loans are subject to mandatory
prepayment, subject to certain exceptions, with (i) 100% of
net proceeds above a threshold amount of certain asset
sales/insurance proceeds, subject to reinvestment rights and
certain other exceptions, (ii) 100% of the net cash
proceeds of any incurrence of debt other than debt permitted under
the Term Loan Credit Agreement, (iii) 50% of Excess Cash Flow,
as defined in the agreement, if any (starting with the payment to
be made in 2017, the percentage will be reduced to 25% if
PCHI’s first lien leverage ratio (as defined in the
agreement) is less than 3.50 to 1.00, but greater than 2.50 to
1.00, and 0% if PCHI’s first lien leverage ratio is less than
2.50 to 1.00).
The term loans under the Term Loan Credit Agreement mature on
August 19, 2022. Starting on December 31, 2015, the
Company is required to repay installments on the loans in quarterly
principal amounts of 0.25%, with the remaining amount payable on
the maturity date.
All obligations under the agreement are jointly and severally
guaranteed by PC Intermediate, PCHI and each existing and future
domestic subsidiary of PCHI. PCHI and each guarantor has secured
its obligations, subject to certain exceptions and limitations, by
a first-priority lien on substantially all of its assets (other
than accounts receivable, inventory, cash and certain related
assets), including a pledge of all of the capital stock held by PC
Intermediate, PCHI and each guarantor, and a second-priority lien
on its accounts receivable, inventory, cash and certain related
assets.
The Term Loan Credit Agreement contains certain customary
affirmative covenants and events of default. Additionally, it
contains negative covenants which, among other things and subject
to certain exceptions, restrict the ability of PCHI to:
• incur additional indebtedness;
• pay dividends on capital stock or
redeem, repurchase or retire capital stock;
• make certain investments, loans,
advances and acquisitions;
• engage in transactions with
affiliates;
• create liens; and
• transfer or sell certain assets.
In connection with entering into the Term Loan Credit Agreement,
the Company incurred and capitalized $3,079 of third-party costs.
Additionally, certain existing deferred financing costs will
continue to be capitalized (see above for further discussion). All
capitalized costs are being amortized over the life of the new debt
using the effective interest method.
Senior Notes
The Senior Notes mature on August 15, 2023. Interest on the
notes is payable semi-annually in arrears on February 15 and
August 15 of each year.
The notes are guaranteed, jointly and severally, on a senior basis
by each of PCHI’s existing and future wholly-owned domestic
subsidiaries. The Senior Notes and the guarantees are general
unsecured senior obligations and are effectively subordinated to
all other secured debt to the extent of the assets securing such
secured debt.
The indenture governing the Senior Notes contains certain covenants
limiting, among other things and subject to certain exceptions,
PCHI’s ability to:
• incur additional indebtedness or
issue certain disqualified stock and preferred stock;
• pay dividends or distributions,
redeem or repurchase equity;
• prepay subordinated debt or make
certain investments;
• transfer and sell assets;
• engage in transactions with
affiliates;
• create liens; and
• consolidate, merge or transfer all or
substantially all of PCHI’s assets.
The indenture governing the notes also contains certain customary
affirmative covenants and events of default.
On or after August 15, 2018, the Company may redeem the Senior
Notes, in whole or in part, at the following (expressed as a
percentage of the principal amount to be redeemed):
Twelve-month period beginning on August 15, Percentage
2018 103.063 %
2019 101.531 %
2020 and thereafter 100.000 %
In addition, the Company may redeem up to 40% of the aggregate
principal amount outstanding on or before August 15, 2018 with
the net cash proceeds from certain equity offerings at a redemption
price of 106.125% of the principal amount. The Company may also
redeem some or all of the Senior Notes before August 15, 2018
at a redemption price of 100% of the principal amount plus a
premium that is defined in the indenture.
If the Company experiences certain types of change in control, as
defined, the Company may be required to offer to repurchase the
Senior Notes at 101% of their principal amount.
In connection with the issuance of the Senior Notes, the Company
incurred $6,485 of third-party costs that have been capitalized and
are being amortized over the life of the debt.
ABL Facility
The ABL Facility, which matures on August 19, 2020, provides
for (a) revolving loans in an aggregate principal amount at
any time outstanding not to exceed $540,000 (with a seasonal
increase to $640,000 during a certain period of each calendar
year), subject to a borrowing base described below, and
(b) letters of credit, in an aggregate face amount at any time
outstanding not to exceed $50,000.
Under the ABL Facility, the borrowing base at any time equals
(a) a percentage of eligible trade receivables, plus
(b) a percentage of eligible inventory, plus (c) a
percentage of eligible credit card receivables, less
(d) certain reserves.
The ABL Facility generally provides for two pricing options:
(i) an alternate base interest rate (“ABR”) equal
to the greater of (a) the prime rate, (b) the federal
funds rate plus 0.5% or (c) the LIBOR rate plus 1%, in each
case, on the date of such borrowing or (ii) a LIBOR based
interest rate, in each case plus an applicable margin. The
applicable margin ranges from 0.25% to 0.50% with respect to ABR
borrowings and from 1.25% to 1.50% with respect to LIBOR
borrowings.
In addition to paying interest on outstanding principal, the
Company is required to pay a commitment fee of 0.25% per annum
in respect of unutilized commitments. The Company must also pay
customary letter of credit fees.
All obligations under the ABL Facility are jointly and severally
guaranteed by PC Intermediate, PCHI and each existing and future
domestic subsidiary of PCHI. PCHI and each guarantor has secured
its obligations, subject to certain exceptions and limitations,
including obligations under its guaranty, as applicable, by a
first-priority lien on its accounts receivable, inventory, cash and
certain related assets and a second-priority lien on substantially
all of its other assets.
The facility contains negative covenants that, among other things
and subject to certain exceptions, restrict the ability of PCHI
to:
• incur additional indebtedness;
• pay dividends on capital stock or
redeem, repurchase or retire capital stock;
• make certain investments, loans,
advances and acquisitions;
• engage in transactions with
affiliates;
• create liens; and
• transfer or sell certain assets.
In addition, PCHI must comply with a fixed charge coverage ratio if
excess availability under the ABL Facility on any day is less than
the greater of: (a) 10% of the lesser of the aggregate
commitments and the then borrowing base under the ABL Facility and
(b) $40,000. The fixed charge coverage ratio is the ratio of
(i) Adjusted EBITDA (as defined in the facility) minus
maintenance-related capital expenditures (as defined in the
facility) to (ii) fixed charges (as defined in the
facility).
The ABL Facility also contains certain customary affirmative
covenants and events of default.
In connection with entering into the ABL Facility, the Company
incurred and capitalized $1,688 of third-party costs. Additionally,
certain existing deferred financing costs will continue to be
capitalized (see above for further discussion). All capitalized
costs are being amortized over the life of the new debt.
Amounts outstanding under the ABL Facility and the Old ABL Facility
are included in Loans and Notes Payable in the Company’s
condensed consolidated balance sheet. |
