| Borrowings | (9) Borrowings As of January 2, 2022 and January 3, 2021, the components of borrowings were:
January 2, 2022 January 3, 2021
Senior Secured Credit Facilities
Dollar Term Loan Facility $ 1,292.8 $ 2,185.5
Euro Term Loan Facility 335.8 408.9
Revolving Credit Facility — —
2028 Notes 405.0 675.0
2025 Notes 240.0 400.0
Accounts Receivable Financing — 75.0
Sale and Leaseback Financing — 20.5
Finance lease obligation 0.7 1.0
Other short-term borrowings — 0.9
Other long-term borrowings 2.6 3.9
Unamortized deferred financing costs ( 21.4 ) ( 40.9 )
Unamortized original issue discount ( 5.3 ) ( 11.3 )
Total borrowings 2,250.2 3,718.5
Less: Current portion ( 63.4 ) ( 160.0 )
Long-term borrowings $ 2,186.7 $ 3,558.5 Secured credit facilities The Company’s Senior Secured Credit Facilities consist of (i) the senior secured term loan facility in an amount of $ 2,325.0 million (the “Dollar Term Loan Facility”), (ii) the euro-denominated senior secured term loan facility in an amount equal to € 337.4 million (the “Euro Term Loan Facility”, as described below, and, together with the Dollar Term Loan Facility, the “Term Loan Facilities”), and (iii) the multi-currency senior secured revolving facility with commitments of $ 500.0 million (the “Revolving Credit Facility”) . On January 7, 2020, the Company entered into an amendment of its Senior Secured Credit Facilities, which amended the financial covenant contained in the credit agreement such that, after giving effect to the amendment, the financial covenant is tested when borrowings under the Revolving Credit Facility exceed 30% of the committed amount any period end reporting date that and provides that Holdings will not permit the First Lien Net Leverage Ratio as of the end of such fiscal quarter of the Lux Borrower and its Restricted Subsidiaries to be greater than (i) 5.50 :1.00 for each fiscal quarter ending after June 30, 2021 and on or prior to September 30, 2022 and (ii) 5.00 :1:00 for each fiscal quarter ending thereafter. On January 27, 2020, the Company entered into an additional amendment of its Senior Secured Credit Facilities, where the Company entered into the Euro Term Loan Facility in an amount equal to the euro-equivalent of $ 375 million, which bears interest at a rate of Euribor plus 350 basis points per annum. The Euro Term Loan Facility matures on June 30, 2025 and is being amortized in equal quarterly installments in an amount equal to 1.00 % per annum of the original aggregate principal amount thereof, with the remaining balance due at final maturity. On February 5, 2021, the Company entered an additional amendment of its Senior Secured Credit Facilities, which increased the Revolving Credit Facility contained in the credit agreement by $ 150 million to an aggregate amount of $ 500 million and extended the maturity date to February 5, 2026 , provided that such date may be accelerated subject to certain circumstances as set forth in the amendment. To the extent that the aggregate principal amount of the Dollar Term Loan Facility and Euro Term Loan Facility (and any Refinancing Indebtedness with respect thereto that matures on or prior to June 30, 2025) outstanding as of March 31, 2025 exceeds $ 500 million then the maturity date with respect to the Revolving Credit Facility shall be March 31, 2025. On December 24, 2021, the Company entered into an additional amendment to the Senior Secured Credit Facilities to account for the cessation of LIBOR for Sterling, Euros and Japanese Yen and the alternative replacement rates with respect to such currencies, as applicable. All other terms of the Senior Secured Credit Facilities remain substantially the same except as otherwise noted. All other terms of the Senior Secured Credit Facilities will remain substantially the same except as otherwise amended by this amendment. Costs related to the issuance of the Term Loan Facilities, including $ 5.4 million related to the Euro Term Loan Facility recorded during the fiscal year ended January 3, 2021, were recorded as a reduction of the principal amount of the borrowings and are being amortized using the effective interest method as a component of interest expense over the life of the Senior Secured Credit Facilities. As of January 2, 2022 and January 3, 2021, the remaining balance of deferred financing costs related to the Dollar Term Loan Facility was $ 8.1 million and $ 17.3 million, respectively. As of January 2, 2022 and January 3, 2021, the remaining balance of deferred financing costs related to the Euro Term Loan Facility was $ 3.6 million and $ 4.6 million, respectively. The effective interest rate of the Term Loan as of January 2, 2022 is 5.74 %. Costs related to the Revolving Credit Facility were recorded as Other assets and are being amortized on a straight-line basis over the term of the Revolving Credit Facility. As of January 2, 2022 and January 3, 2021 , the remaining unamortized balance related to the Revolving Credit Facility was $ 2.7 million and $ 3.4 million, respectively. Original issue discount related to the Senior Secured Credit Facilities was recorded as a reduction of the principal amount of the borrowings and is amortized using the effective interest method as a component of interest expense over the life of the Senior Secured Credit Facilities. As of January 2, 2022 and January 3, 2021 , the remaining unamortized balance was $ 5.3 million and $ 11.3 million, respectively. As of January 2, 2022, there was no outstanding balance under the Revolving Credit Facility and letters of credit issued under the Revolving Credit Facility totaled $ 46.3 million, which reduced the availability under the Revolving Credit Facility to $ 453.7 million. The Senior Secured Credit Facilities are subject to various covenants that may restrict the Company’s ability to borrow on available credit facilities and future financing arrangements or require the Company to remain below a specific credit coverage threshold as indicated in our debt agreements. In February 2021, the Company used a portion of the proceeds from its IPO to repay $ 892.7 million of borrowings under the Dollar Term Loan Facility and recognized a loss on extinguishment of debt of $ 11.4 million, which is recorded as a component of Other expense, net during the fiscal year ended January 2, 2022. Significant terms of the senior secured credit facilities The following table provides an overview of the significant terms of the Senior Secured Credit Facilities as of January 2, 2022:
Borrowers: Ortho-Clinical Diagnostics S.A., as “Lux Borrower”, and Ortho-Clinical Diagnostics, Inc., as “U.S. Borrower”
Facilities: Term Loan Facilities: $ 2,325.0 million Revolving Credit Facility: $ 500.0 million (multi-currency sublimit of $ 150.0 million and letter of credit sublimit of $ 100.0 million)
Incremental Facility Amount: An aggregate of (i) $ 375.0 million of incremental term or revolving facilities plus (ii) an unlimited amount so long as on a pro-forma basis First Lien Leverage Ratio (as defined in the Senior Secured Credit Facilities) does not exceed 4.00 : 1.00
Guarantors: Ortho-Clinical Diagnostics Holdings Luxembourg S.à r.l. (“Holdings”), the direct subsidiary of the Company, and each of Holdings’ current and future Restricted Subsidiaries (as defined in the Senior Secured Credit Facilities) (subject to local law and certain other exceptions)
Security: First priority lien on substantially all tangible and intangible assets of Holdings and each subsidiary guarantor (subject to certain exceptions)
Term (Maturity Date): Term Loan Facilities: June 30, 2025 Revolving Credit Facility: February 5, 2026
Interest on Euro- currency Rate Loans In the case of Eurocurrency Rate Loans (as defined in the Senior Secured Credit Facilities), the Adjusted Eurocurrency Rate (as defined in the Senior Secured Credit Facilities) applicable to the currency in which the Eurocurrency Rate Loan is incurred, plus an applicable rate as follows: · 3.00 % per annum—Dollar Term Loan Facility (including a 25 -basis point step down due to achievement of certain First Lien Leverage Ratio targets) · 2.50 % per annum—Revolver Loans (and Letters of Credit issued thereunder) (including a 50 -basis point step down due to achievement of certain First Lien Leverage Ratio targets)
Interest on Base Rate Loans In the case of Base Rate Loans (as defined in the Senior Secured Credit Facilities), the greater of (i) the Federal Funds Rate effective from time to time plus 1 / 2 of 1 %, (ii) the agent’s Prime Lending Rate (as defined in the Senior Secured Credit Facilities) in effect from time to time, (iii) the Adjusted Eurocurrency Rate (as defined in the Senior Secured Credit Facilities) for Eurocurrency Rate Loans denominated in US dollars plus 1 % and (iv) 2.00 %; plus an applicable rate as follows: · 2.00 % per annum—Dollar Term Loan Facility (including a 25 -basis point step down due to achievement of certain First Lien Leverage Ratio targets) · 1.50 % per annum—Revolver Loans (and Letters of Credit issued thereunder) (including a 50 -basis point step down due to achievement of certain First Lien Leverage Ratio targets)
Fees: Unused Revolving Credit Facility Commitment Fee: 0.375 % per annum (including a step down due to achievement of certain First Lien Net Leverage Ratio targets)
Repayment of Principal: Dollar Term Loan Facility: 0.625 % of initial principal amount on the last business day of each fiscal quarter through June 30, 2025 Euro Term Loan Facility: quarterly installments in an amount equal to 1.00 % per annum of the original aggregate principal amount thereof, with the remaining balance due June 30, 2025
Optional Prepayments: Indebtedness under the Senior Secured Credit Facilities may be voluntarily prepaid in whole or in part, in minimum amounts, subject to make whole provisions set forth in the Senior Secured Credit Facilities
Mandatory Prepayments: 100 % of net cash proceeds of asset sales in excess of $ 10.0 million or $ 25.0 million in any fiscal year, subject to reinvestment rights 100 % of debt issuances (not otherwise permitted by the Senior Secured Credit Facilities) 50 % of Excess Cash Flow (as defined in the Senior Secured Credit Facilities) with step downs to 25 % and 0 % when First Lien Leverage Ratio is less than 3.00 :1.00 and 2.50 :1.00, respectively
Financial Covenants: The Company must maintain a Maximum First Lien Leverage Ratio of (i) 5.50:1.00 for each fiscal quarter ending after June 30, 2021 and on or prior to September 30, 2022 and (ii) 5.00:1:00 for each fiscal quarter ending thereafter, if more than 30% of the Revolving Credit Facility (including letters of credit) is outstanding at the end of a fiscal quarter. Maximum First Lien leverage Ratio is calculated using consolidated funded first lien indebtedness (as defined in the Senior Secured Credit Facilities) of the Borrower Parties for such period divided by consolidated EBITDA (as defined in the Senior Secured Credit Facilities) of the Borrower Parties for the four fiscal quarter period most recently then ended for which financial statements have been delivered .
Negative Covenants: The Senior Secured Credit Facilities include certain negative covenants restricting or limiting the ability of the borrowers and their material subsidiaries to, among other things: declare dividends; repurchase equity interests of the parent or other restricted payments; prepay subordinated debt; make loans, acquisitions, capital contributions and other investments; engage in mergers, consolidations, liquidations and dissolutions; sell assets; incur additional debt; incur liens on property; dispose of assets; and enter into transactions with affiliates. 2025 Notes On June 11, 2020, the Lux Borrower, as “Lux Issuer,” and Ortho U.S., as “U.S. Issuer” (collectively, the “Issuers”), issued $ 400.0 million aggregate principal amount of the 2025 Notes, which bear interest at a rate of 7.375 % per annum, payable semi-annually in arrears on June 1 and December 1 of each year, commencing December 1, 2020. The 2025 Notes mature on June 1, 2025 . The 2025 Notes and the guarantees thereof are senior unsecured obligations and rank equally in right of payment with all of the Issuers’ and guarantors’ existing and future senior debt, including the 2028 Notes (as defined below). The 2025 Notes and the guarantees thereof are effectively subordinated to any of the Issuers’ and guarantors’ existing and future secured debt, including the Senior Secured Credit Facilities, to the extent of the value of the assets securing such debt. In addition, the 2025 Notes and the guarantees thereof rank senior in right of payment to all of the Issuers’ and guarantors’ future subordinated debt and will be structurally subordinated to the liabilities of the Issuers’ non-guarantor subsidiaries. The Company incurred deferred financing costs of $ 7.5 million related to the 2025 Notes, which were capitalized as deferred financing costs and are being amortized using the effective interest method as a component of interest expense over the life of the 2025 Notes. On or after June 1, 2022 , the Issuers have the option to redeem all or part of the 2025 Notes at the following redemption prices (expressed as percentages of principal amount):
Year Price
2022 103.688 %
2023 101.844 %
2024 and thereafter 100.000 % Notwithstanding the foregoing, at any time and from time to time prior to June 1, 2022, the Issuers may at their option redeem in the aggregate up to 100 % of the original aggregate principal amount of the 2025 Notes plus accrued and unpaid interest, if any to, but not including, the date of redemption, plus a “make-whole premium”. The Issuers may also, at their option, redeem up to 40 % of the principal amount of the 2025 Notes with the net cash proceeds of certain equity offerings at a redemption price of 107.375 % of the principal amount of the 2025 Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. On February 5, 2021, the Company used a portion of the proceeds from its IPO to redeem $ 160.0 million aggregate principal amount of the 2025 Notes, plus accrued interest thereon and $ 11.8 million of redemption premium, which was recorded as a component of Other expense, net during the fiscal year ended January 2, 2022. The redemption resulted in an extinguishment loss recognized of $ 14.5 million, which consisted of $ 2.7 million of unamortized deferred issuance costs and $ 11.8 million of redemption premium. As of January 2, 2022 and January 3, 2021, the remaining unamortized balance was $ 3.4 million and $ 7.0 million, respectively. The effective interest rate on the 2025 Notes is 8.03 %. 2028 Notes On January 27, 2020, the Issuers, issued $ 675.0 million aggregate principal amount of the 2028 Notes, which bear interest at a rate of 7.250 % per annum, payable semi-annually in arrears on February 1 and August 1 of each year, commencing August 1, 2020. The 2028 Notes mature on February 1, 2028 . The 2028 Notes and the guarantees thereof are senior unsecured obligations and rank equally in right of payment with all of the Issuers’ and guarantors’ existing and future senior debt, including the 2025 Notes. The 2028 Notes and the guarantees thereof are effectively subordinated to any of the Issuers’ and guarantors’ existing and future secured debt, including the Senior Secured Credit Facilities, to the extent of the value of the assets securing such debt. In addition, the 2028 Notes and the guarantees thereof rank senior in right of payment to all of the Issuers’ and guarantors’ future subordinated debt and will be structurally subordinated to the liabilities of the Issuers’ non-guarantor subsidiaries. The Company incurred deferred financing costs of $ 12.9 million related to the 2028 Notes, which were capitalized as deferred financing costs and are being amortized using the effective interest method as a component of interest expense over the life of the 2028 Notes . On or after February 1, 2023 , the Issuers have the option to redeem all or part of the 2028 Notes at the following redemption prices (expressed as percentages of principal amount):
Year Price
2023 103.625 %
2024 101.813 %
2025 and thereafter 100.000 % Notwithstanding the foregoing, at any time and from time to time prior to February 1, 2023, the Issuers may at their option redeem in the aggregate up to 100 % of the original aggregate principal amount of the 2028 Notes plus accrued and unpaid interest, if any to, but not including, the date of redemption, plus a “make-whole premium”. The Issuers may also, at their option, redeem up to 40 % of the principal amount of the 2028 Notes with the net cash proceeds of certain equity offerings at a redemption price of 107.25 % of the principal amount of the 2028 Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. On February 5, 2021, the Company used a portion of the proceeds from its IPO to redeem $ 270 million aggregate principal amount of the 2028 Notes, plus accrued interest thereon and $ 19.6 million of redemption premium. The redemption resulted in an extinguishment loss recognized of $ 24.3 million, which consisted of $ 4.7 million of unamortized deferred issuance costs and $ 19.6 million of the redemption premium, which is recorded as a component of Other expense, net during the fiscal year ended January 2, 2022. As of January 2, 2022 and January 3, 2021, the remaining unamortized balance was $ 6.4 million and $ 11.8 million, respectively. The effective interest rate on the Notes is 7.76 %. Concurrent with the issuance of the $ 675.0 million aggregate principal amount of 2028 Notes, the Company entered into U.S. Dollar to Japanese Yen cross currency swaps for a total notional amount of $ 350.0 million at a weighted average interest rate of 5.56 %, with a five-year term in order to lower interest expense on the 2028 Notes. The cross currency swaps were terminated during the fiscal year ended January 2, 2022. See Note 23–Derivatives and other hedging instruments for further information. 2022 Notes On January 28, 2020, the Company used the net proceeds from the issuance of the Euro Term Loan Facility and 2028 Notes, after payment of fees and expenses, to fund the redemption and discharge of $ 1.0 billion of $ 1.3 billion of Notes that were payable on May 15, 2022 (the “2022 Notes”). On June 12, 2020 the Company used the net proceeds from the issuance of the 2025 Notes, after payments of fees and expenses, to fund the redemption and discharge of the remaining $ 300.0 million of 2022 Notes. The redemption of the 2022 Notes was accounted for as an extinguishment of debt. During the fiscal year ended January 3, 2021, the Company recorded a $ 12.6 million loss on extinguishment of debt, primarily related to the unamortized deferred financings costs on the redeemed 2022 Notes, as a component of Other expense, net. Sale and Leaseback financing In June 2016, the Company entered into a sale-leaseback financing arrangement with a third-party financing company (the “Buyer-lessor”) related to specific property and equipment of the Company. The property and equipment were sold for $ 36.3 million and leased back over an initial term of two years . The monthly lease payments were $ 1.5 million until the equipment is repurchased or the lease is terminated. At the end of the initial term, the Company could repurchase the property and equipment at a price to be negotiated with the Buyer-lessor or terminate the lease arrangement, return the property or (possibly) enter into a new lease agreement. During the fiscal quarter ended July 1, 2018, the Company gave notice to the Buyer-lessor that it intends to negotiate with the Buyer-lessor the purchase of the property and equipment at the end of the initial term and had discussions on negotiating the repurchase price for the property and equipment. Pursuant to the sale-leaseback financing agreement, if the parties do not reach an agreement to purchase the property and equipment at the end of the initial term, the lease will automatically renew for another year, and afterwards the lease will automatically be renewed for successive six-month periods, provided that each of the Company and the Buyer-lessor have a right to terminate the lease 30 days prior to the end of each six month renewal period. A security deposit for the leaseback was retained by the third-party financing company, the balance of which was $ 9.1 million as of January 3, 2021 and was included in Other current assets in the consolidated balance sheet. The transaction did not meet the criteria for sale-leaseback accounting as the security deposit constituted a continuing involvement. Therefore, the Company accounted for this arrangement as a financing over 42 months and recorded a financing obligation amounting to $ 36.3 million at inception. On February 9, 2021, the Company and the Buyer-lessor agreed on a re-purchase price for the property and equipment, which included the outstanding balance of the financing plus accrued interest. The Company paid the full amount of the negotiated price during the fiscal year ended January 2, 2022. Accounts receivable financing In September 2016, the Company entered into an accounts receivable financing program (the “Financing Program”) with a financial institution. The Financing Program, which was fully paid off in June 2021 in connection with entry into the RPA (as defined below), was set to mature on January 24, 2022 , and was secured by receivables from the Company’s U.S. business that are sold or contributed to a wholly owned, consolidated, bankruptcy remote subsidiary. The bankruptcy remote subsidiary’s sole business consisted of the purchase or receipt of the receivables and subsequent granting of a security interest to the financial institution under the program, and its assets are available first to satisfy obligations and were not available to pay creditors of the Company’s other legal entities. Under the Financing Program, the Company could borrow up to the lower of $ 75.0 million or 85 % of the accounts receivable borrowing base. Interest on outstanding borrowing under the Financing Program was charged based on a per annum rate equal to London Interbank Offered Rate (the “LIBOR Rate”) (with a floor of zero percent and as defined in the agreement) plus the LIBOR Rate Margin ( 2.25 percentage points) if the related loan was a LIBOR Rate Loan. Otherwise, the per annum rate was equal to a Base Rate (as defined in the agreement) plus the Base Rate Margin ( 1.25 percentage points). Interest was due and payable, in arrears, on the first day of each month. The Financing Program was also subject to termination under standard events of default as defined. Outstanding borrowings under the Financing program bore interest at 2.77 % per annum as of January 3, 2021. On June 11, 2021, Ortho-Clinical Diagnostics FinanceCo I, LLC (“Ortho FinanceCo I”), a wholly owned receivables financing subsidiary of the Company, entered into a receivables purchase agreement (the “RPA”) with Wells Fargo Bank, N.A., as administrative agent (the “Agent”), and certain purchasers. Under the RPA, Ortho FinanceCo I may sell receivables in amounts up to a $ 75.0 million limit. Transfers of receivables under the RPA are accounted for as a sale by the Company, resulting in a reduction in accounts receivables on the consolidated balance sheet. The $ 75.0 million limit is subject to certain conditions, including that, at any date of determination, the aggregate capital paid to Ortho FinanceCo I does not exceed a “capital coverage amount,” equal to an adjusted net receivables pool balance minus a required reserve. Ortho FinanceCo I has guaranteed the prompt payment of the sold receivables, and to secure the prompt payment and performance of such guaranteed obligations, Ortho FinanceCo I has granted a security interest to the Agent, for the benefit of the purchasers, in all assets of Ortho FinanceCo I. The Company, in its capacity as master servicer under the RPA, is responsible for administering and collecting the receivables and has made customary representations, warranties, covenants and indemnities. The Company has also provided a performance guarantee for the benefit of Ortho FinanceCo I to cause the due and punctual performance by Ortho of its obligations as master servicer. The proceeds of the RPA were used, in part, to pay off the outstanding balance of the Financing Program. The impact on the Company’s consolidated statements of operations related to the RPA during the fiscal year ended January 2, 2022 was not material. The RPA is subject to customary events of termination for transactions of this type and, in addition, includes a financial covenant termination event if the First Lien Net Leverage Ratio, calculated as of the last day of each fiscal quarter, of the Company exceeds (i) 5.50 :1.00 for each fiscal quarter ending after June 30, 2021 and on or prior to September 30, 2022, and (ii) 5.00 :1:00 for each fiscal quarter ending thereafter. The RPA has a scheduled termination date which is the earlier of (i) June 11, 2024, and (ii) the date that is 90 days prior to the maturity of the indebtedness incurred under the Company’s Senior Secured Credit Facilities. As of January 2, 2022 , the Company was in full compliance with debt covenant requirements applicable to all of the borrowings and facilities mentioned above. Interest expense, net The following table provides the detail of interest expense, net for the fiscal years ended January 2, 2022, January 3, 2021 and December 29, 2019.
Fiscal Year Ended
January 2, 2022 January 3, 2021 December 29, 2019
Interest expense:
Dollar Term Loan Facility $ 45.2 $ 89.0 $ 128.6
Euro Term Loan Facility 13.3 12.7 —
Revolving Credit Facility 2.8 3.7 4.2
2028 Notes 30.9 45.8 —
2025 Notes 18.7 16.6 —
2022 Notes — 14.1 85.9
Accounts receivable financing 0.7 5.0 5.5
Amortization of:
Deferred financing costs 6.6 8.4 10.1
Original issue discount 1.4 2.3 2.3
Capital lease obligation and other — 1.9 2.9
Derivative instruments 26.4 ( 1.3 ) ( 8.0 )
Less: Capitalized interest — — ( 0.1 )
Interest expense, net $ 146.0 $ 198.2 $ 231.4 Future repayments The following table provides a schedule of required future repayments of all borrowings outstanding on January 2, 2022.
2022 $ 63.4
2023 63.0
2024 62.7
2025 1,682.8
2026 —
Thereafter 405.0
$ 2,276.9 Interest paid during the fiscal years ended January 2, 2022, January 3, 2021 and December 29, 2019 was $ 132.1 million, $ 191.8 million and $ 189.7 million, respectively. |
