Debt

6 Months Ended

Jun. 30, 2020

Debt as of June 30, 2020 and December 31, 2019 was comprised of the following:


(in thousands)					Balance as of
Debt Description	Issued	Maturity	Interest Rate	Interest Payable	June 30, 2020		December 31, 2019

First Lien Term Loan due 2026	9/23/2019	9/23/2026	Adj. LIBOR +3.25%	Quarterly	$	3,086,675	$	3,102,225

Second Lien Notes due 2028	1/28/2020	1/15/2028	6.250%	1/15 and 7/15	1,300,000		—
Prime Notes	5/2/2016	5/15/2023	9.250%	5/15 and 11/15	—		1,246,000
First Lien Notes due 2024	4/4/2019	4/15/2024	5.250%	2/15 and 8/15	750,000		750,000
First Lien Notes due 2026	4/4/2019	4/15/2026	5.750%	3/15 and 9/15	1,350,000		1,350,000

ADT Notes due 2021	10/1/2013	10/15/2021	6.250%	4/15 and 10/15	1,000,000		1,000,000
ADT Notes due 2022	7/5/2012	7/15/2022	3.500%	1/15 and 7/15	1,000,000		1,000,000
ADT Notes due 2023	1/14/2013	6/15/2023	4.125%	6/15 and 12/15	700,000		700,000
ADT Notes due 2032	5/2/2016	7/15/2032	4.875%	1/15 and 7/15	728,016		728,016
ADT Notes due 2042	7/5/2012	7/15/2042	4.875%	1/15 and 7/15	21,896		21,896
Receivables Facility	3/5/2020	5/20/2025	LIBOR +1.00%	Monthly	19,429		—
Finance lease obligations	N/A	N/A	N/A	N/A	66,856		74,784
Less: Unamortized debt discount, net									(25,056)	(26,840)
Less: Unamortized deferred financing costs									(61,197)	(58,075)
Less: Unamortized purchase accounting fair value adjustment and other									(188,268)	(195,731)
Total debt					9,748,351		9,692,275
Less: Current maturities of long-term debt									(63,029)	(58,049)
Long-term debt					$	9,685,322	$	9,634,226

__________________

N/A—Not applicable

Significant changes in the Company’s debt during the six months ended June 30, 2020 were as follows:

First Lien Credit Agreement

As of June 30, 2020, the Company had an available borrowing capacity of $400 million under a first lien revolving credit facility (the “First Lien Revolving Credit Facility”), with no borrowings outstanding.

Second Lien Notes due 2028

During January 2020, the Company issued $1.3 billion aggregate principal amount of 6.250% second-priority senior secured notes due 2028 (the “Second Lien Notes due 2028”). The proceeds from the Second Lien Notes due 2028, along with cash on hand and borrowings under the First Lien Revolving Credit Facility, were used to redeem the outstanding $1.2 billion aggregate principal amount of the Company’s 9.250% second-priority senior secured notes due 2023 (the “Prime Notes”) and pay any related fees and expenses, including the call premium on the outstanding Prime Notes. The deferred financing costs incurred in connection with the issuance of the Second Lien Notes due 2028 were not material.

The Second Lien Notes due 2028 are due at maturity, however, may be redeemed at the Company’s option as follows:

•Prior to January 15, 2023, in whole at any time or in part from time to time, (a) at a redemption price equal to 100% of the principal amount of the Second Lien Notes due 2028 redeemed, plus a make-whole premium and accrued and unpaid interest as of, but excluding, the redemption date or (b) for up to 40% of the original aggregate principal amount of the Second Lien Notes due 2028 and in an aggregate amount equal to the net cash proceeds of any equity offerings, at a redemption price equal to 106.250%, plus accrued and unpaid interest, so long as at least 50% of the original aggregate principal amount of the Second Lien Notes due 2028 shall remain outstanding after each such redemption.

•On or after January 15, 2023, in whole at any time or in part from time to time, at a redemption price equal to 103.125% of the principal amount of the Second Lien Notes due 2028 redeemed and accrued and unpaid interest as of, but excluding, the redemption date. The redemption price decreases to 101.563% on or after January 15, 2024 and decreases to 100% on or after January 15, 2025.

The Company’s obligations relating to the Second Lien Notes due 2028 are guaranteed, jointly and severally, on a senior secured second-priority basis, by each of the Company’s domestic subsidiaries that guarantees its First Lien Credit Agreement and by each of the Company’s future domestic subsidiaries that guarantees certain of the Company’s debt and the related guarantees are secured by second-priority security interests in substantially all of the tangible and intangible assets of the Company’s domestic subsidiaries, subject to certain permitted liens and exceptions. Additionally, upon the occurrence of specified change of control events, the Company must offer to repurchase the Second Lien Notes due 2028 at 101% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date. The indenture governing the Second Lien Notes due 2028 also provides for customary events of default.

Prime Notes

The indenture underlying the outstanding $1.2 billion aggregate principal amount of the Prime Notes was discharged during January 2020 and the Prime Notes were redeemed during February 2020 for a total redemption price of approximately $1.3 billion, which included the related call premium.

Receivables Facility

During March 2020, the Company entered into the Receivables Facility. Under the terms of the Receivables Facility, the Company may receive up to $200 million of financing secured by retail installment contract receivables from transactions involving security systems that were sold under a customer-owned model. During April 2020, the Company amended the Receivables Facility to also permit financing secured by retail installment contract receivables from transactions occurring under a Company-owned model. The Receivables Facility has a one year revolving period until March 5, 2021, which may be extended, and bears interest at a variable rate. If the revolving period is not extended, the Company is required to repay the Receivables Facility in a manner consistent with the contractual collections of the underlying retail installment contract receivables. The Company may make voluntary prepayments on the Receivables Facility at any time prior to maturity at par.

The Company obtains financing by selling or contributing certain retail installment contract receivables to the Company’s wholly-owned consolidated bankruptcy-remote special purpose entity (the “SPE”), which, pursuant to the Receivables Facility, borrows funds secured by the transferred retail installment contract receivables. The SPE is a separate legal entity with its own creditors who will be entitled, prior to and upon the liquidation of the SPE, to be satisfied out of the SPE’s assets prior to any assets in the SPE becoming available to the Company (other than the SPE). Accordingly, the assets of the SPE are not available to pay creditors of the Company (other than the SPE), although collections from the transferred retail installment contract receivables in excess of amounts required to repay the SPE’s creditors may be remitted to the Company during and after the term of the Receivables Facility. The SPE’s creditors have legal recourse to the transferred retail installment contract receivables owned by the SPE, but do not have any recourse to the Company (other than the SPE) for the payment of principal and interest on the SPE’s financing.

The Company services the transferred retail installment contract receivables and is responsible for ensuring that amounts collected from the transferred retail installment contract receivables are remitted to the SPE. The Company is required to deposit payments received from the transferred retail installment contract receivables into a segregated account maintained by a third party. On a monthly basis, the segregated account is utilized to make required principal, interest, and other payments due under the Receivables Facility. The segregated account is considered restricted cash and is reflected in prepaid expenses and other current assets in the Company’s Condensed Consolidated Balance Sheets.

Borrowings under the Receivables Facility along with the transferred retail installment contract receivables are included in the Condensed Consolidated Balance Sheets. Borrowings and repayments under the Receivables Facility are reflected as cash flows from financing activities in the Condensed Consolidated Statements of Cash Flows.

During the three and six months ended June 30, 2020, the Company received proceeds of $20 million under the Receivables Facility and repaid $423 thousand. As of June 30, 2020, the Company had an outstanding balance of $19 million and an uncommitted available borrowing capacity of $181 million under the Receivables Facility. The Receivables Facility did not have a material impact to the Condensed Consolidated Statements of Operations.

Variable Interest Entity

The SPE, as described above, meets the definition of a variable interest entity (“VIE”) for which the Company is the primary beneficiary as it has the power to direct the SPE’s activities and the obligation to absorb losses or the right to receive benefits of the SPE. As such, the assets, liabilities and financial results of operations of the SPE are consolidated in the Company’s condensed consolidated financial statements. As of June 30, 2020, the SPE’s assets and liabilities primarily consisted of unbilled retail installment contract receivables, net, of $25 million and borrowings under the Receivables Facility of $19 million.

Loss on Extinguishment of Debt

During the six months ended June 30, 2020, loss on extinguishment of debt totaled $66 million and related to the call premium and write-off of unamortized deferred financing costs in connection with the $1.2 billion redemption of the Prime Notes in February 2020.

During the six months ended June 30, 2019, loss on extinguishment of debt totaled $88 million and included (i) $22 million associated with the call premium and the partial write-off of unamortized deferred financing costs in connection with the $300 million partial redemption of the Prime Notes in February 2019, (ii) $61 million associated with the call premium and partial write-off of unamortized deferred financing costs in connection with the $1 billion partial redemption of the Prime Notes in April 2019, and (iii) $6 million associated with the partial write-off of unamortized deferred financing costs and discount in connection with the $500 million repayment of the First Lien Term B-1 Loan in April 2019.