| Debt | 10.
DEBT Total debt consisted of the following (in thousands):
Debt Description
Maturity
Interest rate at April 1, 2017
April 1, 2017
December 31, 2016
ABL Facility
October 20, 2020
3.32
%
$
50,000
$
30,000
2012 ABS Facility
September 30, 2018
2.04
675,000
645,000
Amended and Restated 2016 Term Loan (net of $12,612 and $13,318 of unamortized deferred financing costs)
June 27, 2023
3.53
2,170,888
2,175,682
2016 Senior Notes (net of $6,945 and $7,185 of unamortized deferred financing costs)
June 15, 2024
5.88
593,055
592,815
Obligations under capital leases
2018–2025
2.36 - 6.18
332,984
305,544
Other debt
2018–2031
5.75 - 9.00
32,577
32,672
Total debt
3,854,504
3,781,713
Current portion of long-term debt
(82,234
)
(75,962
)
Long-term debt
$
3,772,270
$
3,705,751
At April 1, 2017, $959 million of the total debt was at a fixed rate and $2,896 million was at a floating rate. Following is a description of each of USF’s debt instruments outstanding as of April 1, 2017: Revolving Credit Agreement – The Amended and Restated ABL Credit Agreement, dated October 20, 2015, as amended, is USF’s asset backed senior secured revolving loan facility (the “ABL Facility”) and provides for loans under its two tranches: ABL Tranche A-1 and ABL Tranche A, with its capacity limited by a borrowing base. The maximum borrowing available is $1,300 million with ABL Tranche A-1 at $100 million, and ABL Tranche A at $1,200 million. As of April 1, 2017, USF had $50 million in outstanding borrowings and had issued letters of credit totaling $370 million under the ABL Facility. Outstanding letters of credit included: (1) $61 million issued to secure USF’s obligations with respect to certain facility leases, (2) $306 million issued in favor of certain commercial insurers securing USF’s obligations with respect to its self-insurance program, and (3) $3 million in letters of credit for other obligations. There was available capacity on the ABL Facility of $878 million at April 1, 2017. As of April 1, 2017, on Tranche A-1 borrowings, USF can periodically elect to pay interest at an alternative base rate (“ABR”), as defined in USF’s credit agreements, plus 1.50% or the London Inter Bank Offered Rate (“LIBOR”) plus 2.50%. On Tranche A borrowings, USF can periodically elect to pay interest at ABR plus 0.25% or LIBOR plus 1.25%. The ABL Facility also carries letter of credit fees of 1.125% and an unused commitment fee of 0.125%. Accounts Receivable Financing Program –Under the 2012 ABS Facility, USF sells—on a revolving basis—its eligible receivables to the Receivables Company. See Note 5, Accounts Receivable Financing Program. The maximum capacity under the 2012 ABS Facility is $800 million. Borrowings under the 2012 ABS Facility were $675 million at April 1, 2017. USF, at its option, can request additional borrowings up to the maximum commitment, provided sufficient eligible receivables are available as collateral. There was available capacity on the 2012 ABS Facility of $55 million at April 1, 2017 based on eligible receivables as collateral. The portion of the 2012 ABS Facility held by the lenders who fund the 2012 ABS Facility with commercial paper bears interest at the lender’s commercial paper rate, plus any other costs associated with the issuance of commercial paper plus 1.00%, and an unused commitment fee of 0.35%. The portion of the 2012 ABS Facility held by lenders that do not fund the 2012 ABS Facility with commercial paper bears interest at LIBOR plus 1.00%, and an unused commitment fee of 0.35%. Amended and Restated 2016 Term Loan Agreement –The Amended and Restated 2016 Term Loan Credit Agreement, dated June 27, 2016, as amended (the “Amended and Restated 2016 Term Loan”), consists of a senior secured term loan with outstanding borrowings of $2,171 million at April 1, 2017, net of $13 million of unamortized deferred financing costs. On February 17, 2017, the Amended and Restated 2016 Term Loan was further amended, whereby the interest rate spread was reduced 25 basis points and fixed at ABR plus 1.75% or LIBOR plus 2.75%, with a LIBOR floor of 0.75%, based on USF’s periodic election. USF determined the terms of the February 17, 2017 amendment were not substantially different from the previous terms of the Amended and Restated 2016 Term Loan, for continuing lenders, and therefore substantially all of transaction was accounted for as a debt modification. The Company recorded the $0.4 million of third party costs related to the February 17, 2017 amendment, and a write-off of $0.2 million of unamortized deferred financing costs related to non-continuing lenders, in interest expense. Unamortized deferred financing costs of $13 million were carried forward and will be amortized through June 27, 2023, the maturity date of the Amended and Restated 2016 Term Loan. Principal repayments of $5.5 million are payable quarterly with the balance due at maturity. The debt may require mandatory repayments if certain assets are sold, as defined in the agreement. The interest rate for all borrowings was 3.53%— LIBOR of 0.78% plus 2.75%— at April 1, 2017. 2016 Senior Notes –The 2016 Senior Notes due 2024 (the “2016 Senior Notes”), with outstanding principal of $593 million at April 1, 2017, net of $7 million of unamortized deferred financing costs, bear interest at 5.875%. On or after June 15, 2019, this debt is redeemable, at USF’s option, in whole or in part at a price of 102.938% of the remaining principal, plus accrued and unpaid interest, if any, to the redemption date. On or after June 15, 2020 and June 15, 2021, the optional redemption price for the debt declines to 101.469% and 100.0%, respectively, of the remaining principal amount, plus accrued and unpaid interest, if any, to the redemption date. Prior to June 15, 2019, up to 40% of the debt may be redeemed with the aggregate proceeds from equity offerings, as defined in the Indenture, dated June 27, 2016, as supplemented, at a redemption premium of 105.875%. Other Debt –Obligations under capital leases of $333 million at April 1, 2017, consist of amounts due for transportation equipment and building leases. Other debt of $33 million at April 1, 2017 consists primarily of various state industrial revenue bonds. To obtain certain tax incentives related to the construction of a new distribution facility, USF and a wholly owned subsidiary entered into an industrial revenue bond agreement with a state in January 2015, for the issuance of a maximum of $40 million in taxable demand revenue bonds (the “TRBs”). The TRBs are self-funded as USF’s wholly owned subsidiary purchases the TRBs, and the state loans the proceeds back to USF. The TRBs, which mature January 1, 2030, can be prepaid without penalty one year after issuance. Interest on the TRBs and the loan is 6.25%. At April 1, 2017 and December 31, 2016, $22 million has been drawn on TRBs resulting in $22 million being recognized as a long-term asset and a corresponding long-term liability in the Company’s Consolidated Balance Sheets. Security Interests Substantially all of USF’s assets are pledged under the various debt agreements. Debt under the 2012 ABS Facility is secured by certain designated receivables and, in certain circumstances, by restricted cash. The ABL Facility is secured by certain other designated receivables not pledged under the 2012 ABS Facility, inventories and tractors and trailers owned by USF. Additionally, the ABL Facility has a third priority interest in the assets pledged under the 2012 ABS Facility and a second priority interest in the assets pledged under the Amended and Restated 2016 Term Loan. USF’s obligations under the Amended and Restated 2016 Term Loan are secured by all of the capital stock of its subsidiaries, each of the direct and indirect wholly owned domestic subsidiaries –as defined in the agreements– and are secured by substantially all assets of USF and its subsidiaries not pledged under the 2012 ABS Facility or the ABL Facility. Additionally, the Amended and Restated 2016 Term Loan has a second priority interest in the assets pledged under the ABL Facility and the 2012 ABS facility. Restrictive Covenants USF’s credit facilities, loan agreements and indentures contain customary covenants. These include, among other things, covenants that restrict USF’s ability to incur certain additional indebtedness, create or permit liens on assets, pay dividends, or engage in mergers or consolidations. As of April 1, 2017, USF had $515 million of restricted payment capacity under these covenants, and approximately $2,060 million of its net assets were restricted after taking into consideration the net deferred tax assets and intercompany balances that eliminate in consolidation. Certain debt agreements also contain customary events of default. Those include, without limitation, the failure to pay interest or principal when it is due under the agreements, cross default provisions, the failure of representations and warranties contained in the agreements to be true, and certain insolvency events. If a default event occurs and continues, the principal amounts outstanding—together with all accrued unpaid interest and other amounts owed—may be declared immediately due and payable by the lenders. Were such an event to occur, USF would be forced to seek new financing that may not be on as favorable terms as its current facilities. USF’s ability to refinance its indebtedness on favorable terms—or at all—is directly affected by the current economic and financial conditions. In addition, USF’s ability to incur secured indebtedness (which may enable it to achieve more favorable terms than the incurrence of unsecured indebtedness) depends in part on the value of its assets. This, in turn, relies on the strength of its cash flows, results of operations, economic and market conditions, and other factors. |
