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Long-Term Debt | 9 Months Ended
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Sep. 30, 2018
Long-term Debt, Unclassified [Abstract] |
Long-Term Debt | Long-Term Debt Long-term debt as of September 30, 2018 is as follows:
(dollars in millions) |  | Interest Rate |  | Principal |  | Unamortized Discount and Deferred Financing Fees |  | Total
Senior secured asset-based revolving credit facility |  | — | % |  | $ | — |  |  | $ | — |  |  | $ | — |
CDW UK revolving credit facility |  | 2.1 | % |  | 6.5 |  |  | — |  |  | 6.5 |
Senior secured term loan facility (1) |  | 3.8 | % |  | 1,456.9 |  |  | (2.7 | ) |  | 1,454.2 |
CDW UK term loan |  | 2.3 | % |  | 66.5 |  |  | (1.1 | ) |  | 65.4 |
Senior notes due 2023 |  | 5.0 | % |  | 525.0 |  |  | (3.8 | ) |  | 521.2 |
Senior notes due 2024 |  | 5.5 | % |  | 575.0 |  |  | (4.6 | ) |  | 570.4 |
Senior notes due 2025 |  | 5.0 | % |  | 600.0 |  |  | (6.6 | ) |  | 593.4 |
Other long-term obligations |  |  |  | 8.3 |  |  | — |  |  | 8.3 |
Total debt |  |  |  | 3,238.2 |  |  | (18.8 | ) |  | 3,219.4 |
Less current maturities |  |  |  | (32.0 | ) |  | — |  |  | (32.0 | )
Long-term debt, excluding current maturities |  |  |  | $ | 3,206.2 |  |  | $ | (18.8 | ) |  | $ | 3,187.4 |
(1) | The Senior secured term loan facility has a variable interest rate, which has effectively been capped through the use of an interest rate cap (see Note 5 (Financial Instruments)). The interest rate disclosed represents the variable interest rate in effect as of September 30, 2018.
Long-term debt as of December 31, 2017 is as follows:
(dollars in millions) |  | Interest Rate |  | Principal |  | Unamortized Discount and Deferred Financing Fees |  | Total
Senior secured asset-based revolving credit facility |  | — | % |  | $ | — |  |  | $ | — |  |  | $ | — |
CDW UK revolving credit facility |  | — | % |  | — |  |  | — |  |  | — |
Senior secured term loan facility (1) |  | 3.7 | % |  | 1,468.0 |  |  | (2.0 | ) |  | 1,466.0 |
CDW UK term loan |  | 1.9 | % |  | 75.7 |  |  | (1.4 | ) |  | 74.3 |
Senior notes due 2023 |  | 5.0 | % |  | 525.0 |  |  | (4.5 | ) |  | 520.5 |
Senior notes due 2024 |  | 5.5 | % |  | 575.0 |  |  | (5.2 | ) |  | 569.8 |
Senior notes due 2025 |  | 5.0 | % |  | 600.0 |  |  | (7.3 | ) |  | 592.7 |
Other long-term obligations |  |  |  | 12.2 |  |  | — |  |  | 12.2 |
Total debt |  |  |  | 3,255.9 |  |  | (20.4 | ) |  | 3,235.5 |
Less current maturities |  |  |  | (25.5 | ) |  | — |  |  | (25.5 | )
Long-term debt, excluding current maturities |  |  |  | $ | 3,230.4 |  |  | $ | (20.4 | ) |  | $ | 3,210.0 |
(1) | The Senior secured term loan facility has a variable interest rate, which has effectively been capped through the use of an interest rate cap (see Note 5 (Financial Instruments)). The interest rate disclosed represents the variable interest rate in effect as of December 31, 2017.
Senior Secured Asset-based Revolving Credit Facility ("Revolving Loan") As of September 30, 2018, the Company had no outstanding borrowings under the Revolving Loan, less than $1 million of undrawn letters of credit, $379 million reserved for the floorplan sub-facility and a borrowing base of $2.0 billion, which is based on the amount of eligible inventory and accounts receivable balances as of August 31, 2018. Borrowings under the Revolving Loan are limited by the borrowing base. As of September 30, 2018, the Company could have borrowed up to an additional $1.1 billion under the Revolving Loan. Borrowings are also limited by a minimum liquidity condition, which provides that, if excess cash availability is less than the lower of (i) $125 million and (ii) the greater of (a) 10.0% of the borrowing base, and (b) $100 million, the lenders are not required to lend additional amounts under the Revolving Loan unless the consolidated fixed charge coverage ratio, as defined, is at least 1.00 to 1.00. Borrowings under the Revolving Loan bear interest at a variable interest rate plus an applicable margin. The interest rate margin is based on one of two indices, either (i) LIBOR or (ii) the Alternate Base Rate ("ABR"), with the ABR being the greater of (a) the prime rate, (b) the federal funds effective rate plus 50 basis points or (c) the one-month LIBOR plus 1.00%. The applicable margin varies (1.25% to 1.75% for LIBOR borrowings and 0.25% to 0.75% for ABR borrowings) depending upon average daily excess cash availability under the agreement evidencing the Revolving Loan. During the nine months ended September 30, 2017, the Company amended, extended and increased its prior revolving loan ("Prior Revolving Loan") and recorded a loss on extinguishment of long-term debt of $1 million in the Consolidated Statement of Operations, representing a write-off of a portion of unamortized deferred financing fees. Fees of $4 million related to the Prior Revolving Loan were capitalized as deferred financing fees and are being amortized over the five-year term of the facility on a straight-line basis. These deferred financing fees are recorded in the Other assets line on the Consolidated Balance Sheets. Senior Secured Term Loan Facility ("Term Loan") On April 3, 2018, the Company amended the Term Loan, reducing interest margins by 25 basis points. Borrowings under the Term Loan continue to bear interest at either (i) LIBOR plus a margin or (ii) the Alternative Base Rate ("ABR"), with the ABR being the greater of (a) the prime rate, (b) the federal funds effective rate plus 50 basis points or (c) the one-month LIBOR plus a margin. The amended margin is 1.75% for LIBOR borrowings and 0.75% for ABR borrowings effective April 3, 2018. Additionally, the Company amended its covenant on restricted payments, such that the Company is permitted to make restricted payments so long as the total net leverage ratio is less than 3.75:1.00 on a pro forma basis. As of September 30, 2018, the outstanding principal amount of the Term Loan was $1.5 billion, excluding $3 million of deferred financing fees. Borrowings under the Term Loan are payable quarterly on the last day of each March, June, September and December. The Company is required to pay quarterly principal installments of $4 million with the remaining principal amount payable on the maturity date of August 17, 2023. During the nine months ended September 30, 2017, the Company amended its prior $1.5 billion senior secured term loan facility ("Prior Term Loan Facility") and recorded a loss on extinguishment of long-term debt of $14 million in the Consolidated Statement of Operations. This loss represented the write-off of a portion of the unamortized deferred financing fees of $5 million and unamortized discount related to the Prior Term Loan Facility of $9 million. In connection with the issuance of the Term Loan, the Company incurred and recorded $2 million in deferred financing fees. CDW UK Term Loan and Revolving Credit Facility As of September 30, 2018, the outstanding principal amount of the CDW UK Term Loan facility ("CDW UK Term Loan") was £51 million ($66 million at September 30, 2018), excluding £1 million ($1 million at September 30, 2018) of deferred financing fees. The Company is required to make annual principal installments of £5 million ($7 million at September 30, 2018), with the remaining principal amount payable on the maturity date of August 1, 2021. Borrowings under the CDW UK Term Loan bear interest at LIBOR plus a margin, payable quarterly on the last day of each March, June, September and December. As of September 30, 2018, an interest rate of 2.29% was in effect, which represents LIBOR plus a 1.40% margin. The CDW UK Term Loan also includes a separate £50 million ($65 million at September 30, 2018) revolving credit facility (the "CDW UK Revolving Credit Facility"). As of September 30, 2018, the Company had £5 million ($7 million at September 30, 2018) of outstanding borrowings under the CDW UK Revolving Credit Facility. 5.0% Senior Notes due 2023 ("2023 Senior Notes") As of September 30, 2018, the outstanding principal amount of the 2023 Senior Notes was $525 million. The 2023 Notes will mature on September 1, 2023 and bear interest at a rate of 5.0% per annum, payable semi-annually on March 1 and September 1 of each year. 5.5% Senior Notes due 2024 ("2024 Senior Notes") As of September 30, 2018, the outstanding principal amount of the 2024 Senior Notes was $575 million. The 2024 Senior Notes will mature on December 1, 2024 and bear interest at a rate of 5.5% per annum, payable semi-annually on June 1 and December 1 of each year. 5.0% Senior Notes due 2025 ("2025 Senior Notes") As of September 30, 2018, the outstanding principal amount of the 2025 Senior Notes was $600 million. The 2025 Senior Notes will mature on September 1, 2025 and bear interest at a rate of 5.0% per annum, payable semi-annually on March 1 and September 1 of each year. During the nine months ended September 30, 2017, the Company completed the issuance of the 2025 Senior Notes at par. The proceeds from the issuance of the 2025 Senior Notes along with cash on hand and proceeds from Revolving Loan borrowings were deposited to redeem all of the then remaining $600 million aggregate principal amount of the 2022 Senior Notes ("2022 Senior Notes"). In connection with this redemption, the Company recorded a loss on extinguishment of long-term debt of $43 million in the Consolidated Statement of Operations for the nine months ended September 30, 2017. This loss represents $37 million in redemption premium and $6 million for the write-off of the remaining deferred financing fees related to the 2022 Senior Notes. Debt Guarantors, Covenants and Restrictions CDW LLC is the borrower under the Term Loan and Revolving Loan. CDW LLC and CDW Finance Corporation are the co-issuers of the 2023, 2024 and 2025 Senior Notes ("Senior Notes"). The obligations under the Term Loan, the Revolving Loan and the Senior Notes are guaranteed by Parent and each of CDW LLC's direct and indirect, wholly owned, US subsidiaries (the "Guarantors"). The Revolving Loan is collateralized by a first priority interest in inventory (excluding inventory collateralized under the inventory floorplan arrangements as described in Note 3 (Inventory Financing Agreements)), deposits and accounts receivable and by a second priority interest in substantially all US assets. The Term Loan is collateralized by a second priority interest in substantially all inventory (excluding inventory collateralized under the inventory floorplan arrangements as described in Note 3 (Inventory Financing Agreements)), deposits and accounts receivable and by a first priority interest in substantially all other US assets. As of September 30, 2018, the Company remained in compliance with the covenants under its various credit agreements. The Term Loan contains negative covenants that, among other things, place restrictions and limitations on the ability of the Guarantors to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make distributions or other restricted payments, create liens, make equity or debt investments, make acquisitions, engage in mergers or consolidations or engage in certain transactions with affiliates. As of September 30, 2018, the amount of CDW's restricted payment capacity under the Term Loan was $1.4 billion. The total net leverage ratio was 2.33:1.00 as of September 30, 2018. Each of the Senior Notes indentures contain negative covenants that, among other things, place restrictions and limitations on the ability of the Guarantors to enter into sale and lease-back transactions, incur additional secured indebtedness and create liens. The indenture governing each of the Senior Notes do not contain any financial covenants. The CDW UK Term Loan imposes restrictions on CDW UK's ability to transfer funds to the Company through the payment of dividends, repayment of intercompany loans, advances or subordinated debt that require, among other things, the maintenance of a minimum net leverage ratio. As of September 30, 2018, the amount of restricted payment capacity under the CDW UK Term Loan was £117 million ($152 million at September 30, 2018). Fair Value The fair values of the Senior Notes were estimated using quoted market prices for identical liabilities that are traded in over-the-counter secondary markets that are not considered active. The fair value of the Term Loan was estimated using dealer quotes for identical liabilities in markets that are not considered active. The Senior Notes, Term Loan and the CDW UK Term Loan are classified as Level 2 within the fair value hierarchy. The carrying value of the Revolving Loan and the CDW UK Revolving Credit Facility approximate fair value if there are outstanding borrowings. As of September 30, 2018, the carrying value of the CDW UK Term Loan approximated fair value. The approximate fair values and related carrying values of the Company's long-term debt, including current maturities and excluding unamortized discount and unamortized deferred financing fees, were as follows:
(in millions) |  | September 30, 2018 |  | December 31, 2017
Fair value |  | $ | 3,275.3 |  |  | $ | 3,366.5 |
Carrying value |  | 3,238.2 |  |  | 3,255.9 |

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