Debt

6 Months Ended

Jun. 27, 2020

Debt:

The following table summarizes the Company’s outstanding debt as of the dates indicated (in millions):


	June 27, 2020		December 28, 2019		June 29, 2019
Senior Notes	$	150.0	$	150.0	$	150.0
Senior Credit Facility:
February 2016 Term Loan	135.0		145.0		150.0
June 2017 Term Loan	82.5		87.5		90.0
March 2020 Term Loan	200.0		—		—
April 2020 Term Loan	350.0		—		—
Revolving credit loans	—		15.0		100.0
Total outstanding borrowings	917.5		397.5		490.0
Less: unamortized debt issuance costs	(1.4)		(1.0)		(1.2)
Total debt	916.1		396.5		488.8
Less: current portion of long-term debt	(380.0)		(30.0)		(22.5)
Long-term debt	$	536.1	$	366.5	$	466.3

Outstanding letters of credit	$	52.4	$	32.0	$	37.3

Senior Notes

On August 14, 2017, the Company entered into a note purchase and private shelf agreement (the “Note Purchase Agreement”), pursuant to which the Company agreed to sell $150 million aggregate principal amount of senior unsecured notes due August 14, 2029 (the “2029 Notes”) in a private placement. The 2029 Notes bear interest at 3.70% per annum with interest payable semi-annually in arrears on each annual and semi-annual anniversary of the issuance date. The obligations under the Note Purchase Agreement are unsecured, but guaranteed by each of the Company’s material subsidiaries.

The Company may from time to time issue and sell additional senior unsecured notes (the “Shelf Notes”) pursuant to the Note Purchase Agreement, in an aggregate principal amount of up to $150 million. The Shelf Notes will have a maturity date of no more than 12 years after the date of original issuance and may be issued through August 14, 2020, unless earlier terminated in accordance with the terms of the Note Purchase Agreement.

Pursuant to the Note Purchase Agreement, the 2029 Notes and any Shelf Notes (collectively, the “Notes”) are redeemable by the Company, in whole at any time or in part from time to time, at 100% of the principal amount of the Notes being redeemed, together with accrued and unpaid interest thereon and a make whole amount calculated by discounting all remaining scheduled payments on the Notes by the yield on the U.S. Treasury security with a maturity equal to the remaining average life of the Notes plus 0.50%.

Senior Credit Facility

On February 19, 2016, the Company entered into a senior credit facility (the “2016 Senior Credit Facility”), as amended from time to time, which provides borrowing capacity under term loan agreements as well as a revolving credit facility. Proceeds from the 2016 Senior Credit Facility may be used for working capital, capital expenditures, dividends, share repurchases, and other matters. There are no compensating balance requirements associated with the 2016 Senior Credit Facility.

The 2016 Senior Credit Facility contains a $500 million revolving credit facility (the “Revolver”) with a sublimit of $50 million for swingline loans. This agreement is unsecured and matures on February 19, 2022. Borrowings under the Revolver bear interest either at the bank’s base rate (3.250% at June 27, 2020) or at the London Inter-Bank Offer Rate (“LIBOR”) (0.178% at June 27, 2020) plus an additional amount ranging from 0.500% to 1.125% per annum (0.750% at June 27, 2020), adjusted quarterly based on our leverage ratio. The Company is also required to pay, quarterly in arrears, a commitment fee for unused capacity ranging from 0.075% to 0.200% per annum (0.125% at June 27, 2020), adjusted quarterly based on the Company’s leverage ratio.

On February 19, 2016, at the inception of the 2016 Senior Credit Facility, the Company entered into a $200 million term loan (the “February 2016 Term Loan”). This agreement is unsecured and matures on February 19, 2022. The February 2016 Term Loan of $200 million requires quarterly payments totaling $10 million per year in years one and two and $20 million per year in years three through the maturity date, with the remaining balance due in full on the maturity date of February 19, 2022. Borrowings under the February 2016 Term Loan bear interest either at the bank’s base rate (3.250% at June 27, 2020) or at LIBOR (0.178% at June 27, 2020) plus an additional amount ranging from 0.500% to 1.125% per annum (0.750% at June 27, 2020), adjusted quarterly based on our leverage ratio.

On June 15, 2017, pursuant to an accordion feature available under the 2016 Senior Credit Facility, the Company entered into an incremental term loan agreement (the “June 2017 Term Loan”) which increased the term loan capacity under the 2016 Senior Credit Facility by $100 million. This agreement is unsecured and matures on June 15, 2022. The June 2017 Term Loan of $100 million requires quarterly payments totaling $5 million per year in years one and two and $10 million per year in years three through the maturity date, with the remaining balance due in full on the maturity date of June 15, 2022. Borrowings under the June 2017 Term Loan bear interest either at the bank’s base rate (3.250% at June 27, 2020) or at LIBOR (0.178% at June 27, 2020) plus an additional 1.000% per annum.

On March 12, 2020, pursuant to an accordion feature available under the 2016 Senior Credit Facility, the Company entered into an incremental term loan agreement (the “March 2020 Term Loan”) which increased the term loan capacity under the 2016 Senior Credit Facility by $200 million. This agreement is unsecured and matures with the amount due in full on March 16, 2022. Borrowings under the March 2020 Term Loan bear interest either at the bank’s base rate (3.250% at June 27, 2020) or at LIBOR (0.178% at June 27, 2020) plus an additional 0.750% per annum.

On April 22, 2020, the Company entered into a second amendment to the 2016 Senior Credit Facility (the “Second Amendment”) to, among other things, increase the option to increase the aggregate principal amount of Revolving Loan

Commitments and Incremental Term Loans (as defined in the 2016 Senior Credit Facility) up to an amount not to exceed $650 million. Simultaneously with the Second Amendment, the Company entered into an incremental term loan agreement (the “April 2020 Term Loan”) in the amount of $350 million, which is in addition to the 2016 Senior Credit Facility’s existing term loan and revolving credit facility. This agreement is unsecured and matures with the amount due in full on April 21, 2021. Borrowings under the April 2020 Term Loan bear interest either at the bank’s base rate (3.250% at June 27, 2020) plus an additional amount ranging from 0.250% to 1.500% per annum (0.750% at June 27, 2020) or at LIBOR (0.178% at June 27, 2020), with a floor of 0.750%, plus an additional amount ranging from 1.250% to 2.500% per annum (1.750% at June 27, 2020), adjusted quarterly based on our leverage ratio.

As further described in Note 6 to the Condensed Consolidated Financial Statements, the Company has entered into interest rate swap agreements in order to hedge our exposure to variable rate interest payments associated with each of the term loans under the 2016 Senior Credit Facility other than the April 2020 Term Loan.

Covenants and Default Provisions of the Debt Agreements

The 2016 Senior Credit Facility and the Note Purchase Agreement (collectively, the “Debt Agreements”) require quarterly compliance with respect to two material covenants: a fixed charge coverage ratio and a leverage ratio. Both ratios are calculated on a trailing twelve-month basis at the end of each fiscal quarter. The fixed charge coverage ratio compares earnings before interest, taxes, depreciation, amortization, share-based compensation, and rent expense (“consolidated EBITDAR”) to the sum of interest paid and rental expense (excluding any straight-line rent adjustments). The fixed charge coverage ratio shall be greater than or equal to 2.00 to 1.0 as of the last day of each fiscal quarter. The leverage ratio compares rental expense (excluding any straight-line rent adjustments) multiplied by a factor of six plus total debt to consolidated EBITDAR. The leverage ratio shall be less than or equal to 4.00 to 1.0 as of the last day of each fiscal quarter. The Debt Agreements also contain certain other restrictions regarding additional indebtedness, capital expenditures, business operations, guarantees, investments, mergers, consolidations and sales of assets, prepayment of debts, transactions with subsidiaries or affiliates, and liens. As of June 27, 2020, the Company was in compliance with all debt covenants.

The Debt Agreements contain customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, certain events of bankruptcy and insolvency, material judgments, certain ERISA events, and invalidity of loan documents. Upon certain changes of control, payment under the Debt Agreements could become due and payable. In addition, under the Note Purchase Agreement, upon an event of default or change of control, the make whole payment described above may become due and payable.

The Note Purchase Agreement also requires that, in the event the Company amends its 2016 Senior Credit Facility, or any subsequent credit facility of $100 million or greater, such that it contains covenant or default provisions that are not provided in the Note Purchase Agreement or that are similar to those contained in the Note Purchase Agreement but which contain percentages, amounts, formulas or grace periods that are more restrictive than those set forth in the Note Purchase Agreement or are otherwise more beneficial to the lenders thereunder, the Note Purchase Agreement shall be automatically amended to include such additional or amended covenants and/or default provisions.