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Line of Credit, Long-Term Debt and Finance Lease Obligations

12 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Line of Credit, Long-Term Debt and Capital Lease Obligations

12. Line of Credit, Long-Term Debt and Finance Lease Obligations:

On March 28, 2019, the Company amended and restated its Credit Agreement to reduce the size of the revolving credit facility, extend the maturity and make other technical and conforming changes. As amended and restated, the Credit Agreement provides for a $1.2 billion unsecured revolving credit facility and includes a $37.5 million sub-facility for the issuance of letters of credit. The Credit Agreement matures on March 28, 2024 and is guaranteed by substantially all of the Company’s subsidiaries and affiliated professional associations and corporations. At the Company’s option, borrowings under the Credit Agreement will bear interest at (i) the alternate base rate (defined as the higher of (a) the prime rate, (b) the Federal Funds Rate plus 1/2 of 1.00% and (c) LIBOR for an interest period of one month plus 1.00%) plus an applicable margin rate ranging from 0.125% to 0.750% based on the Company’s consolidated leverage ratio or (ii) the LIBOR rate plus an applicable margin rate ranging from 1.125% to 1.750% based on the Company’s consolidated leverage ratio. The Credit Agreement also calls for other customary fees and charges, including an unused commitment fee ranging from 0.150% to 0.200% of the unused lending commitments, based on the Company’s consolidated leverage ratio.

The Credit Agreement contains customary covenants and restrictions, including covenants that require the Company to maintain a minimum interest charge ratio, not to exceed a specified consolidated leverage ratio and to comply with laws, and restrictions on the ability of the Company to pay dividends and make certain other distributions, as specified therein. Failure to comply with these covenants would constitute an event of default under the Credit Agreement, notwithstanding the ability of the Company to meet its debt service obligations. The Credit Agreement also includes various customary remedies for the lenders following an event of default, including the acceleration of repayment of outstanding amounts under the Credit Agreement.

In December 2015, the Company completed a private offering of $750.0 million aggregate principal amount of 2023 Notes. In November 2018, the Company completed a private offering of $500.0 million aggregate principal amount of 2027 Notes and in February 2019, the Company completed a private offering of $500.00 million aggregate principal amount of Additional 2027 Notes. At December 31, 2019, the outstanding balance on the 2027 Notes was $1.0 billion. The Company’s obligations under the 2023 Notes and the 2027 Notes are guaranteed on an unsecured senior basis by the same subsidiaries and affiliated professional contractors that guarantee the Credit Agreement. Interest on the 2023 Notes accrues at the rate of 5.25% per annum, or $39.4 million, and is payable semi-annually in arrears on June 1 and December 1. Interest on the 2027 Notes accrues at the rate of 6.25% per annum, or $62.5 million, and is payable semi-annually in arrears on January 15 and July 15.

As of December 31, 2019, the Company may redeem all or a portion of the 2023 Notes, at the redemption prices of 101.313% in 2020 and 100% in 2021 and thereafter, plus accrued and unpaid interest to the redemption date.

At any time prior to January 15, 2022, the Company may redeem all or a portion of the 2027 Notes at a redemption price equal to 100% of the principal amount of the notes being redeemed plus an applicable redemption premium and accrued and unpaid interest to the redemption date. In addition, at any time prior to January 15, 2022, the Company may redeem up to 35% of the aggregate principal amount of the 2027 Notes at a redemption price of 106.250% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, using proceeds from one or more equity offerings. On or after January 15, 2022, the Company may redeem all or a portion of the 2027 Notes, at the redemption prices of 104.688% in 2022, 103.125% in 2023, 101.563% in 2024 and 100% in 2025 and thereafter, plus accrued and unpaid interest to the redemption date.

The indenture under which the 2023 Notes and the 2027 Notes are issued, among other things, limits our ability to (1) incur liens and (2) enter into sale and lease-back transactions, and also limits our ability to merge or dispose of all or substantially all of our assets, in all cases, subject to a number of customary exceptions. Although we are not required to make mandatory redemption or sinking fund payments with respect to the 2023 Notes and the 2027 Notes, upon the occurrence of a change in control of MEDNAX, we may be required to repurchase the 2023 Notes or the 2027 Notes at a purchase price equal to 101% of the aggregate principal amount of the 2023 Notes and the 2027 Notes repurchased plus accrued and unpaid interest.

The carrying value of the Company’s long-term debt was $1.7 billion and $2.0 billion at December 31, 2019 and 2018, respectively, and consisted of the following (in thousands):

		December 31, 2019
		Principal				Unamortized Debt Issuance Costs				Total
Senior notes		$	1,750,000			$	(19,762	)		$	1,730,238
Revolving line of credit			—				(2,664	)			(2,664	)
Total		$	1,750,000			$	(22,426	)		$	1,727,574

		December 31, 2018
		Principal				Unamortized Debt Issuance Costs				Total
Senior notes		$	1,250,000			$	(15,408	)		$	1,234,592
Revolving line of credit			739,500				(4,274	)			735,226
Total		$	1,989,500			$	(19,682	)		$	1,969,818

The Company presents issuance costs related to long-term debt liabilities, other than revolving credit arrangements, as a direct deduction from the carrying value of that long-term debt. The Company has outstanding letters of credit which reduced the amount available under the Credit Agreement by $0.2 million at December 31, 2019. At December 31, 2019, the Company had an available balance on its Credit Agreement of $1.2 billion.

The carrying values of the Company’s variable rate revolving line of credit approximates fair value due to the short-term nature of the interest rates. The estimated fair value of the Company’s 2023 Notes and 2027 Notes were estimated using trading prices as of December 31, 2019 and 2018, respectively, as Level 2 inputs to estimate fair value and are summarized as follows (in thousands):

		December 31,
		2019				2018
2023 Notes		$	766,875			$	736,725
2027 Notes			1,025,600				482,500

The Company’s finance lease obligations consist of the following (in thousands):

		December 31,
		2019				2018
Finance lease obligations		$	188			$	441
Less: Current portion			(130	)			(253	)
Long-term portion		$	58			$	188

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- Definition

The entire disclosure for debt and capital lease obligations can be reported. Information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. Also includes descriptions and amounts of capital leasing arrangements that consist of direct financing, sales type and leveraged leases. Disclosure may include the effect on the balance sheet and the income statement resulting from a change in lease classification for leases that at inception would have been classified differently had guidance been in effect at the inception of the original lease.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 840
-URI http://asc.fasb.org/topic&trid=2208923

Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-URI http://asc.fasb.org/topic&trid=2208564

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- References

No definition available.

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