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Debt | 9 Months Ended
--- | ---
Sep. 30, 2021
Debt Disclosure [Abstract] |
Debt | Debt Debt for the Company consists of the following:
| September 30, 2021 |  | December 31, 2020 |  |
(in millions, except percentages) | Amount |  | Rate |  | Amount |  | Rate |  | Maturity Date
2019 Credit Agreement: |  |  |  |  |  |  |  |  |
Term A Facility | $ | 684.1 |  |  | (1) |  | $ | 409.1 |  |  | (2) |  | October 16, 2024
Revolver | — |  |  | (1) |  | — |  |  | (2) |  | October 16, 2024
2031 Senior Notes | 800.0 |  |  | 3.875% |  | — |  |  | N/A |  | October 15, 2031
2029 Senior Notes | 800.0 |  |  | 4.000% |  | — |  |  | N/A |  | April 15, 2029
2026 Senior Notes | — |  |  | N/A |  | 600.0 |  |  | 5.500% |  | June 15, 2026
2023 Senior Notes | — |  |  | N/A |  | 250.0 |  |  | 5.625% |  | October 15, 2023
Securitized debt | — |  |  | (3) |  | 33.9 |  |  | (4) |  | April 6, 2023
Finance lease obligations (5) | 74.5 |  |  |  |  | 71.4 |  |  |  |  | Various
Other | 3.1 |  |  |  |  | 5.9 |  |  |  |  | Various
Total debt | 2,361.7 |  |  |  |  | 1,370.3 |  |  |  |  |
Less: Deferred financing costs | 22.9 |  |  |  |  | 3.4 |  |  |  |  |
Total debt, net | 2,338.8 |  |  |  |  | 1,366.9 |  |  |  |  |
Less: Current portion | 53.0 |  |  |  |  | 43.9 |  |  |  |  |
Total long-term debt, net | $ | 2,285.8 |  |  |  |  | $ | 1,323.0 |  |  |  |  |
(1) | Interest at LIBOR plus applicable margin of 1.250% as of September 30, 2021.
(2) | Interest at LIBOR plus applicable margin of 1.250% as of December 31, 2020.
(3) | Interest at one month LIBOR index plus 70 basis points.
(4) | Interest at one month LIBOR index plus 80 basis points.
(5) | New finance lease obligations are a non-cash financing activity. Refer to Note 6, "Leases".
As of September 30, 2021, the Company was in compliance with all applicable debt covenants. 2019 Credit Agreement On October 16, 2019, the Company entered into the 2019 Credit Agreement with a syndicate of banks. The 2019 Credit Agreement provides for a $425.0 million revolving credit facility, a $425.0 million term loan facility, and an incremental facility in an aggregate amount of up to $550.0 million plus the amount of certain prepayments plus an additional unlimited amount subject to compliance with a maximum consolidated secured leverage ratio test. The 2019 Credit Agreement has a $60.0 million sub-facility for the issuance of letters of credit. On February 2, 2021, the Company entered into an amendment to the 2019 Credit Agreement. The amendment increased the revolving credit facility from $425.0 million to $725.0 million. As of September 30, 2021, total availability under the revolving credit facility was $724.9 million after a $0.1 million reduction for outstanding letters of credit. On May 26, 2021, the Company entered into an additional amendment to the 2019 Credit Agreement. The amendment provides for a $300.0 million delayed draw term loan. On July 30, 2021 the Company drew down the full $300.0 million available under the delayed draw term loan to fund, in part, the Dreams acquisition. The delayed draw term loan has the same terms and conditions as the Company's existing term loans under the 2019 Credit Agreement. On September 21, 2021, the Company entered into an additional amendment to the 2019 Credit Agreement to remove the limit to the amount of netted cash that may be deducted from indebtedness for purposes of calculating certain leverage ratios. Securitized Debt The Company and certain of its subsidiaries are party to a securitization transaction with respect to certain accounts receivable due to the Company and certain of its subsidiaries (as amended, the "Accounts Receivable Securitization"). On April 6, 2021, the Company and certain of its subsidiaries entered into a new amendment to the Accounts Receivable Securitization. The amendment, among other things, extended the maturity date of the Accounts Receivable Securitization to April 6, 2023 and increased the overall limit from $120.0 million to $200.0 million. While subject to a $200.0 million overall limit, the availability of revolving loans varies over the course of the year based on the seasonality of the Company's accounts receivable. As of September 30, 2021, total availability under the Accounts Receivable Securitization was $169.1 million. 2031 Senior Notes On September 24, 2021, Tempur Sealy International issued $800.0 million in aggregate principal amount of 3.875% senior notes due 2031 (the "2031 Senior Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended (the "Securities Act"), and to certain non-U.S. persons in accordance with Regulation S under the Securities Act. The 2031 Senior Notes were issued pursuant to an indenture, dated as of September 24, 2021 (the "2031 Indenture"), among Tempur Sealy International, certain subsidiaries of Tempur Sealy International as guarantors (the "Guarantors"), and The Bank of New York Mellon Trust Company, N.A., as trustee. The 2031 Senior Notes are general unsecured senior obligations of Tempur Sealy International and are guaranteed on a senior unsecured basis by the Guarantors. The 2031 Senior Notes mature on October 15, 2031, and interest is payable semi-annually in arrears on each April 15 and October 15, beginning on April 15, 2022. Tempur Sealy International has the option to redeem all or a portion of the 2031 Senior Notes at any time on or after October 15, 2026. The initial redemption price is 101.938% of the principal amount, plus accrued and unpaid interest, if any. The redemption price will decline each year after 2026 until it becomes 100.0% of the principal amount beginning on October 15, 2029. In addition, Tempur Sealy International has the option at any time prior to October 15, 2026 to redeem some or all of the 2031 Senior Notes at 100.0% of the original principal amount plus a “make-whole” premium and accrued and unpaid interest, if any. Tempur Sealy International may also redeem up to 40.0% of the 2031 Senior Notes prior to October 15, 2024, under certain circumstances with the net cash proceeds from certain equity offerings, at 103.875% of the principal amount plus accrued and unpaid interest, if any. Tempur Sealy International may make such redemptions as described in the preceding sentence only if, after any such redemption, at least 60.0% of the original aggregate principal amount of the 2031 Senior Notes issued remains outstanding. The 2031 Indenture restricts the ability of Tempur Sealy International and the ability of certain of its subsidiaries to, among other things: (i) incur, directly or indirectly, debt; (ii) make, directly or indirectly, certain investments and restricted payments; (iii) incur or suffer to exist, directly or indirectly, liens on its properties or assets; (iv) sell or otherwise dispose of, directly or indirectly, assets; (v) create or otherwise cause or suffer to exist any consensual restriction on the right of certain of the subsidiaries of Tempur Sealy International to pay dividends or make any other distributions on or in respect of their capital stock; and (vi) enter into transactions with affiliates. These covenants are subject to a number of exceptions and qualifications. As a result of the issuance of the 2031 Senior Notes, $11.4 million of deferred financing costs were capitalized in the third quarter of 2021 and will be amortized as interest expense over the respective debt instrument period, 10 years, using the effective interest method. 2029 Senior Notes On March 25, 2021, Tempur Sealy International issued $800.0 million in aggregate principal amount of 4.00% senior notes due 2029 (the "2029 Senior Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A of the Securities Act, and to certain non-U.S. persons in accordance with Regulation S under the Securities Act. The 2029 Senior Notes were issued pursuant to an indenture, dated as of March 25, 2021 (the "2029 Indenture"), among Tempur Sealy International, the Guarantors, and The Bank of New York Mellon Trust Company, N.A., as trustee. The 2029 Senior Notes are general unsecured senior obligations of Tempur Sealy International and are guaranteed on a senior unsecured basis by the Guarantors. The 2029 Senior Notes mature on April 15, 2029, and interest is payable semi-annually in arrears on each April 15 and October 15, beginning on October 15, 2021. Tempur Sealy International has the option to redeem all or a portion of the 2029 Senior Notes at any time on or after April 15, 2024. The initial redemption price is 102.00% of the principal amount, plus accrued and unpaid interest, if any. The redemption price will decline each year after 2024 until it becomes 100.0% of the principal amount beginning on April 15, 2026. In addition, Tempur Sealy International has the option at any time prior to April 15, 2024 to redeem some or all of the 2029 Senior Notes at 100.0% of the original principal amount plus a “make-whole” premium and accrued and unpaid interest, if any. Tempur Sealy International may also redeem up to 40.0% of the 2029 Senior Notes prior to April 15, 2024, under certain circumstances with the net cash proceeds from certain equity offerings, at 104.00% of the principal amount plus accrued and unpaid interest, if any. Tempur Sealy International may make such redemptions as described in the preceding sentence only if, after any such redemption, at least 60.0% of the original aggregate principal amount of the 2029 Senior Notes issued remains outstanding. The 2029 Indenture restricts the ability of Tempur Sealy International and the ability of certain of its subsidiaries to, among other things: (i) incur, directly or indirectly, debt; (ii) make, directly or indirectly, certain investments and restricted payments; (iii) incur or suffer to exist, directly or indirectly, liens on its properties or assets; (iv) sell or otherwise dispose of, directly or indirectly, assets; (v) create or otherwise cause or suffer to exist any consensual restriction on the right of certain of the subsidiaries of Tempur Sealy International to pay dividends or make any other distributions on or in respect of their capital stock; and (vi) enter into transactions with affiliates. These covenants are subject to a number of exceptions and qualifications. As a result of the issuance of the 2029 Senior Notes, $11.4 million of deferred financing costs were capitalized in the first quarter of 2021 and will be amortized as interest expense over the respective debt instrument period, 8 years, using the effective interest method. 2026 Senior Notes On June 15, 2021, the Company redeemed its $600.0 million issued and outstanding 2026 Senior Notes, in full, at 102.75% of their principal amount, plus the accrued and unpaid interest. The Company used net proceeds from the 2029 Senior Notes primarily to fund the redemption. As a result of the Company's redemption of the 2026 Senior Notes, the Company incurred $18.0 million of loss on extinguishment of debt which includes a prepayment premium of $16.5 million and the write-off of $1.5 million of unamortized deferred financing costs. Additionally, the Company incurred $5.2 million of overlapping interest expense for the final 83 day period between the issuance of the 2029 Senior Notes and redemption of the 2026 Senior Notes. 2023 Senior Notes On November 9, 2020, the Company redeemed the first $200.0 million of the issued and outstanding 2023 Senior Notes at 101.406% of the principal amount, plus the accrued and unpaid interest. During the first quarter of 2021, the Company redeemed the remaining $250.0 million of the issued and outstanding 2023 Senior Notes at 101.406% of the principal amount, plus the accrued and unpaid interest. In the first quarter of 2021, the Company recognized $5.0 million of loss on extinguishment of debt, which includes a prepayment premium of $3.5 million and the write-off of $1.5 million of unamortized deferred financing costs, associated with the redemption of the remaining amount outstanding of the 2023 Senior Notes. Fair Value of Financial Instruments Financial instruments, although not recorded at fair value on a recurring basis, include cash and cash equivalents, accounts receivable, accounts payable and the Company's debt obligations. The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short-term maturity of those instruments. Borrowings under the 2019 Credit Agreement and the securitized debt are at variable interest rates and accordingly their carrying amounts approximate fair value. The fair value of the following material financial instruments were based on observable inputs estimated using discounted cash flows and market-based expectations for interest rates, credit risk and the contractual terms of debt instruments. The fair values of these material financial instruments are as follows:
|  | Fair Value
(in millions) |  | September 30, 2021 |  | December 31, 2020
2023 Senior Notes |  | $ | — |  |  | $ | 255.1 |
2026 Senior Notes |  | — |  |  | 625.4 |
2029 Senior Notes |  | 825.4 |  |  | — |
2031 Senior Notes |  | 803.0 |  |  | — |

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