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Long-term debt | 9 Months Ended
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Sep. 30, 2024
Debt Disclosure [Abstract] |
Long-term debt | Long-term debt Long-term debt comprised the following:
|  |  |  |  |  |  | As of September 30, 2024
| September 30, 2024 |  | December 31, 2023 |  | Maturity date |  | Interest rate |  | Estimated fair value(1)
Senior Secured Credit Facilities: |  |  |  |  |  |  |  |  |
Term Loan A-1 | $ | 2,289,022 |  |  | $ | 1,234,375 |  |  | 4/28/2028 |  | Base +1.75%(2) |  | $ | 2,277,577 |
Term Loan B-1 | — |  |  | 2,603,786 |  |  | 8/12/2026 |  |  |  | $ | — |
Extended Term Loan B-1 | 1,640,251 |  |  |  |  | 5/9/2031 |  | SOFR + 2.00% |  | $ | 1,638,201 |
Revolving line of credit | — |  |  | — |  |  | 4/28/2028 |  | Base +1.75%(2) |  | $ | — |
Senior Notes: |  |  |  |  |  |  |  |  |
4.625% Senior Notes | 2,750,000 |  |  | 2,750,000 |  |  | 6/1/2030 |  | 4.625 | % |  | $ | 2,622,813 |
3.75% Senior Notes | 1,500,000 |  |  | 1,500,000 |  |  | 2/15/2031 |  | 3.75 | % |  | $ | 1,350,000 |
6.875% Senior Notes | 1,000,000 |  |  | — |  |  | 9/1/2032 |  | 6.875 | % |  | $ | 1,035,000 |
Acquisition obligations and other notes payable(3) | 87,945 |  |  | 102,328 |  |  | 2024-2036 |  | 6.55 | % |  | $ | 87,945 |
Financing lease obligations(4) | 236,722 |  |  | 255,491 |  |  | 2025-2040 |  | 4.62 | % |  |
CHC temporary funding assistance(5) | 119,814 |  |  |  |  |  |  | — | % |  | $ | 119,814 |
Total debt principal outstanding | 9,623,754 |  |  | 8,445,980 |  |  |  |  |  |  |
Discount, premium and deferred financing costs(6) | (67,168) |  |  | (54,347) |  |  |  |  |  |  |
| 9,556,586 |  |  | 8,391,633 |  |  |  |  |  |  |
Less current portion | (296,255) |  |  | (123,299) |  |  |  |  |  |  |
| $ | 9,260,331 |  |  | $ | 8,268,334 |  |  |  |  |  |  |
(1)For the Company's senior secured credit facilities, fair value estimates are based on bid and ask quotes, a level 2 input. For the Company's senior notes, fair value estimates are based on market level 1 inputs. For acquisition obligations and other notes payable, the carrying values presented here approximate their estimated fair values, based on estimates of their present values typically using level 2 interest rate inputs. For the CHC temporary funding assistance, the carrying value presented here approximates the estimated fair value based on the short-term nature of settlement. (2)The Company's senior secured credit facilities bear interest at Term SOFR, plus an interest rate margin, with certain portions also subject to a credit spread adjustment (CSA). Term SOFR plus CSA is referred to as "Base" in the table above. The Term Loan A-1 and revolving line of credit bear a CSA of 0.10%. (3)The interest rate presented for acquisition obligations and other notes payable is their weighted average interest rate based on the current fixed and variable interest rate components in effect as of September 30, 2024. (4)Financing lease obligations are measured at their approximate present values at inception. The interest rate presented is the weighted average discount rate embedded in financing leases outstanding. (5)The Change Healthcare (CHC) temporary funding assistance, as described below, is interest-free and amounts provided under this program are subject to repayment within 45 business days from a future date to be mutually agreed to by the parties. The balance is included in the Company's current portion of long-term debt as of September 30, 2024. (6)As of September 30, 2024, the carrying amount of the Company's senior secured credit facilities has been reduced by a discount of $8,410 and deferred financing costs of $30,740, and the carrying amount of the Company's senior notes has been reduced by deferred financing costs of $38,729 and increased by a debt premium of $10,711. As of December 31, 2023, the carrying amount of the Company's senior secured credit facilities was reduced by a discount of $2,487 and deferred financing costs of $32,498, and the carrying amount of the Company's senior notes was reduced by deferred financing costs of $31,491 and increased by a debt premium of $12,129. Scheduled maturities of long-term debt at September 30, 2024 were as follows:
2024 (remainder of the year) | $ | 163,416 |
2025 | $ | 177,412 |
2026 | $ | 187,944 |
2027 | $ | 204,790 |
2028 | $ | 1,924,071 |
2029 | $ | 41,185 |
Thereafter | $ | 6,924,936 |
On May 9, 2024 (the Fourth Amendment Effective Date), the Company entered into the Fourth Amendment (the Fourth Amendment) to its senior secured credit agreement dated as of August 12, 2019 (as amended, restated, supplemented or otherwise modified from time to time, the Credit Agreement). The Fourth Amendment modified the Credit Agreement to, among other things, extend the maturity date for a portion of its Term Loan B-1 in the aggregate principal amount of $911,598 and extend an additional incremental principal amount of $728,653 (together, referred to as the Extended Term Loan B-1). The Company used the incremental proceeds from the Extended Term Loan B-1 to prepay a proportionate amount of the principal balance still outstanding on its Term Loan B-1. The Extended Term Loan B-1 bears interest at the Company’s option, based on (i) the Base Rate (as defined below) plus the Applicable Margin (as defined below), or (ii) the forward-looking term rate based on the secured overnight financing rate that is published by CME Group Benchmark Administration Limited (Term SOFR) plus the Applicable Margin. The “Base Rate” is defined as the highest of (i) the Federal Funds Rate, as published by the Federal Reserve Bank of New York, plus 0.50%, (ii) the prime commercial lending rate of Wells Fargo as established from time to time and (iii) Term SOFR for an interest period of one month plus 1.00%; provided that if Term SOFR or the Base Rate is less than 0.00% such rate shall be deemed to be 0.00% for purposes of the Credit Agreement. The “Applicable Margin” for the Extended Term Loan B-1 is 2.00% in the case of Term SOFR loans, and 1.00% in the case of Base Rate loans. The Extended Term Loan B-1 requires quarterly principal payments beginning on December 31, 2024 of 0.25% of the aggregate principal amount of the Extended Term Loan B-1 outstanding on the Fourth Amendment Effective Date, with the balance due on May 9, 2031. As a result of the Fourth Amendment transaction described above, the Company recognized debt prepayment, extinguishment and modification costs of $9,732 in the second quarter of 2024 comprised partially of fees incurred for this transaction and partially of deferred financing costs and original issue discount written off for the portion of debt considered extinguished and reborrowed as a result of the Fourth Amendment. For the portion of the debt that was considered extinguished and reborrowed, the Company recognized constructive financing cash outflows and financing cash inflows on the statement of cash flows of $6,302 and $728,653 for the Extended Term Loan B-1, respectively, and constructive financing cash outflows of $722,351 for the prepayment of a portion of Term Loan B-1, even though no funds were actually paid or received. Another $13,282 of the debt considered extinguished related to the Extended Term Loan B-1 represented a non-cash financing activity. On August 13, 2024, the Company entered into the Sixth Amendment (the Sixth Amendment) to the Credit Agreement. The Sixth Amendment modified the Credit Agreement to extend an additional incremental principal amount of $1,100,000 on its Term Loan A-1 (together with the existing Term Loan A-1 balance, referred to as the Increased Term Loan A-1). The Sixth Amendment also incorporated the provisions of the Fifth Amendment to the Credit Agreement, dated as of August 7, 2024, which removed a cap on the amount of incremental term "A" loans the Company can incur under the Credit Agreement. The Company used a portion of the net proceeds from this transaction along with the net proceeds from the issuance of 6.875% Senior Notes due 2032, described below, to prepay the remainder of the balance outstanding on its Term Loan B-1 maturing 2026 in the amount of $949,819, the balance outstanding on its revolving line of credit and related accrued interest and fees. The remaining borrowings added cash to the balance sheet for general corporate purposes. The Increased Term Loan A-1 bears interest at Term SOFR, plus a CSA of 0.10% and an interest rate margin which is subject to adjustment depending upon the Company's leverage ratio under the Credit Agreement, and which can range from 1.25% to 2.25%, provided that this adjusted rate shall never be less than 0.00%. The Increased Term Loan A-1 requires amortizing quarterly principal payments that began on September 30, 2024 of $29,728 per quarter through June 30, 2027, and $44,591 per quarter from September 30, 2027 through March 31, 2028, with the balance due on April 28, 2028. As a result of the Sixth Amendment transaction described above, the Company recognized debt prepayment, extinguishment and modification costs of $10,081 in the third quarter of 2024 comprised partially of fees incurred for this transaction and partially of deferred financing costs and original issue discount written off for the extinguishment of the Term Loan B-1. Additionally, $861,282 of the debt considered extinguished and reborrowed related to the Increased Term Loan A-1 represented a non-cash financing activity. Borrowings under the Company's senior secured credit facilities are guaranteed and secured by substantially all of DaVita Inc.'s and certain of the Company’s domestic subsidiaries' assets and rank senior to all unsecured indebtedness. Borrowings under the Term Loan A-1, Extended Term Loan B-1 and revolving line of credit rank equal in priority for that security and related subsidiary guarantees. The Credit Agreement contains certain customary affirmative and negative covenants such as various restrictions or limitations on permitted amounts of investments (including acquisitions), share repurchases, payment of dividends, and redemptions and incurrence of other indebtedness. Many of these restrictions and limitations will not apply as long as the Company’s leverage ratio calculated in accordance with the Credit Agreement is below 4.00:1.00. In addition, the Credit Agreement requires compliance with a maximum leverage ratio covenant, tested quarterly, of 5.00:1.00 through June 30, 2026 and 4.50:1.00 thereafter (subject to an increase to 5.00:1.00 during the four fiscal quarters following a material acquisition). On August 13, 2024, the Company issued $1,000,000 aggregate principal amount of 6.875% senior notes due 2032 (the 6.875% Senior Notes) in a private offering pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended. The 6.875% Senior Notes pay interest on March 1 and September 1 of each year beginning March 1, 2025 and mature on September 1, 2032. The 6.875% Senior Notes are unsecured senior obligations and rank equally in right of payment with the Company's existing and future unsecured senior indebtedness. The 6.875% Senior Notes are guaranteed by each of the Company’s domestic subsidiaries that guarantee its senior secured credit facilities. The Company may redeem up to 40% of the aggregate principal amount of the 6.875% Senior Notes at any time prior to September 1, 2027 at 106.875% of the aggregate principal amount from the proceeds of one or more equity offerings, plus accrued and unpaid interest. On and after September 1, 2027, the Company may at its option redeem the 6.875% Senior Notes, in whole or from time to time in part, at certain redemption prices specified in the indenture governing these notes plus accrued and unpaid interest. If the Company experiences certain change of control events, the Company must offer to repurchase all of the 6.875% Senior Notes (unless otherwise redeemed) at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest. The 6.875% Senior Notes contain restrictive covenants that limit the ability of the Company and the subsidiary guarantors of the 6.875% Senior Notes to, among other things and subject to certain exceptions and qualifications, create certain liens, enter into certain sale/leaseback transactions, or merge with or into, or convey, transfer or lease all or substantially all of their assets. The 6.875% Senior Notes and related subsidiary guarantees do not have any registration or similar rights and are not expected to be registered for exchange on public markets. As of September 30, 2024, the Company incurred $11,187 in fees and other professional expenses associated with this transaction that were capitalized and will amortize over the term of the 6.875% Senior Notes. In addition to the prepayment of Term Loan B-1, as described above, during the first nine months of 2024, the Company made regularly scheduled principal payments under its senior secured credit facilities totaling $45,353 on Term Loan A-1 and $13,716 on Term Loan B-1. On March 1, 2024, Change Healthcare (CHC), a subsidiary of UnitedHealth Group, launched a temporary assistance funding program (CHC Funding) to help bridge the gap in short-term cash flow needs for providers impacted by the disruption of CHC's services. Under the program, CHC provides funding to providers for amounts that would otherwise have been received (with certain limitations), but for the disruption in processing electronic claims as a result of the outage. Amounts provided under this program are subject to repayment within 45 business days from a future date to be mutually agreed to by CHC and the Company. CHC has restored claims submission functionality and the Company has resumed claims submissions and billing processes through CHC’s information technology systems. Through a combination of CHC's platform and certain alternate billing processes, the Company is current on its primary claims submissions, but does continue to see delays in collections with some payors. As of September 30, 2024, the remaining CHC Funding amount outstanding was $119,814. The Company's 2019 interest rate cap agreements expired on June 30, 2024 and a portion of the Company's 2023 cap agreements became effective on or prior to June 30, 2024, as detailed in the table below. As of September 30, 2024, the effective portion of the Company's 2023 interest rate cap agreements have the economic effect of capping the Company's maximum exposure to SOFR variable interest rate changes on equivalent amounts of the Company's floating rate debt, including all of Extended Term Loan B-1 and a portion of Term Loan A-1. The remaining $429,273 outstanding principal balance of Term Loan A-1 is subject to SOFR-based interest rate volatility. These cap agreements are designated as cash flow hedges and, as a result, changes in their fair values are reported in other comprehensive income. The original premiums paid for the caps are amortized to debt expense on a straight-line basis over the term of each cap agreement starting from its effective date. These cap agreements do not contain credit risk-contingent features. During 2024 the Company entered into several forward interest rate cap agreements, described below, that have the economic effect of capping the Company's exposure to SOFR variable interest rate changes on specific portions of the Company's floating rate debt (2024 cap agreements). These 2024 cap agreements are designated as cash flow hedges and, as a result, changes in their fair values will be reported in other comprehensive income. These 2024 cap agreements do not contain credit-risk contingent features and become effective and expire as described in the table below. The following table summarizes the Company’s interest rate cap agreements outstanding during the nine months ended September 30, 2024:
Year cap agreements executed | Notional amount |  | SOFR maximum rate |  | Approximate effective date |  | Notional reduction or contractual maturity date At December 31 unless noted
|  |  | 2024(1) |  | 2025 |  | 2026 |  | 2027
2019 | $ | 3,500,000 |  |  | 2.00% |  | 6/30/2020 |  | $ | 3,500,000 |  |  |  |  |  |  |
2023 | $ | 1,000,000 |  |  | 3.75% |  | 6/30/2024 |  | $ | 500,000 |  |  | $ | 500,000 |  |  |  |  |
2023 | $ | 1,000,000 |  |  | 4.00%(2) |  | 6/30/2024 |  | $ | 250,000 |  |  | $ | 750,000 |  |  |  |  |
2023 | $ | 1,000,000 |  |  | 4.75%(3) |  | 6/30/2024 |  | $ | 250,000 |  |  | $ | 750,000 |  |  |  |  |
2023 | $ | 500,000 |  |  | 5.00%(4) |  | 6/30/2024 |  |  |  |  |  | $ | 500,000 |  |  |
2023 | $ | 250,000 |  |  | 4.50% |  | 12/31/2024 |  |  |  | $ | 250,000 |  |  |  |  |
2023 | $ | 750,000 |  |  | 4.00% |  | 12/31/2024 |  |  |  | $ | 250,000 |  |  | $ | 500,000 |  |  |
2024 | $ | 1,000,000 |  |  | 4.50%(5) |  | 12/31/2025 |  |  |  |  |  | $ | 500,000 |  |  | $ | 500,000 |
2024 | $ | 750,000 |  |  | 4.00%(6) |  | 12/31/2025 |  |  |  |  |  | $ | 250,000 |  |  | $ | 500,000 |
(1)The Company's 2019 cap agreements matured on June 30, 2024. (2)Effective January 1, 2025, the maximum rate of 4.00% decreases to 3.75% for these interest rate caps. (3)Effective January 1, 2025, the maximum rate of 4.75% decreases to 4.00% for these interest rate caps. (4)Effective January 1, 2025, the maximum rate of 5.00% decreases to 4.50% for these interest rate caps. (5)Effective December 31, 2026, the maximum rate of 4.50% increases to 4.75% for these interest rate caps. (6)Effective December 31, 2026, the maximum rate of 4.00% increases to 4.25% for these interest rate caps. The fair value of the Company's interest rate cap agreements, which are classified in other long-term assets on its consolidated balance sheet, was $17,312 and $79,805 as of September 30, 2024 and December 31, 2023, respectively. See Note 10 for further details on amounts reclassified from accumulated other comprehensive loss and recorded as debt expense (offset) related to the Company’s interest rate cap agreements for the three and nine months ended September 30, 2024 and 2023. As a result of the variable rate cap from the Company's 2023 interest rate cap agreements, the Company’s weighted average effective interest rate on its senior secured credit facilities at the end of the third quarter of 2024 was 7.01%, based on the current margins in effect for its senior secured credit facilities as of September 30, 2024, as detailed in the table above. The Company’s weighted average effective interest rate on all debt, including the effect of interest rate caps and amortization of debt discount, for the three and nine months ended September 30, 2024 was 5.69% and 4.84% and as of September 30, 2024 was 5.71%. As of September 30, 2024, the Company’s interest rates were fixed and economically fixed on approximately 59% and 95% of its total debt, respectively. As of September 30, 2024, the Company had an undrawn revolving line of credit under its senior secured credit facilities of $1,500,000. Credit available under this revolving line of credit is reduced by the amount of any letters of credit outstanding under the facility, of which there were none as of September 30, 2024. The Company also had letters of credit of approximately $154,474 outstanding under a separate bilateral secured letter of credit facility as of September 30, 2024.

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