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Long-Term Debt | 6 Months Ended
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Mar. 31, 2022
Debt Disclosure [Abstract] |
Long-Term Debt | Long-Term Debt Senior Secured Notes On February 10, 2022, and in connection with the spin off, embecta issued $500.0 million aggregate principal amount of 5.00% senior secured notes due February 15, 2030 (the “Notes”). Interest payments on the Notes are due semi-annually in February and August until maturity, with the first interest payment due in August 2022. Credit Agreement On March 31, 2022, embecta entered into a credit agreement (the “Credit Agreement”), providing for: •a Term Loan B Facility (the "Term Loan") in the amount of $950.0 million, with a seven-year term that matures in March 2029. The interest rate is 300 basis points over the secured overnight financing rate (“SOFR”), with a 0.50% SOFR floor. The Term Loan was issued at a discount of 0.50%. As of March 31, 2022, the initial draw of the Term Loan was for a 3-month period at an interest rate of 3.65%. Principal and interest payments on the Term Loan will begin on June 30, 2022. Such quarterly principal payments are calculated as 0.25% of the initial principal amount, with the remaining balance payable upon maturity; and •a Revolving Credit Facility (the "Revolving Credit Facility") in an aggregate principal amount of up to $500.0 million, with a five-year term that matures in 2027. Borrowings under the Revolving Credit Facility bear interest, at embecta’s option, at an annual rate equal to (a) in the case of loans denominated in U.S. dollars (i) the SOFR or (ii) the alternate base rate or (b) in the case of loans denominated in Euros, the EURIBOR rate, in each case plus an applicable margin specified in the credit agreement. A commitment fee applies to the unused portion of the Revolving Credit Facility, equal to 0.25% per annum. As of March 31, 2022, no amount has been drawn on the Revolving Credit Facility. The Credit Agreement and the indenture for the Notes contain customary financial covenants, including a total net leverage ratio covenant, which measures the ratio of (i) consolidated total net debt to (ii) consolidated earnings before interest, taxes, depreciation and amortization, and subject to other adjustments, must meet certain defined limits which are tested on a quarterly basis in accordance with the terms of the Credit Agreement and Notes. In addition, the Credit Agreement contains covenants that will limit, among other things, embecta’s ability to prepay, redeem or repurchase its subordinated and junior lien debt, incur additional debt, make acquisitions, merge with other entities, pay dividends or distributions, redeem or repurchase equity interests, and create or become subject to liens. The following is a summary of embecta's total debt outstanding as of March 31, 2022:
Term Loan due 2029 | $ | 950.0
5.00% senior secured notes due 2030 | 500.0
Total principal debt issued | $ | 1,450.0
Less: current debt obligations | (9.5)
Less: debt issuance costs and discounts | (36.8)
Long-term debt(1) | $ | 1,403.7
(1) Excludes Related Party Notes (See Note 3). Long-term debt is recorded at amortized cost. During the three months ended March 31, 2022, embecta incurred approximately $36.7 million of debt issuance costs associated with the Credit Agreement and Note issuances. The Term Loan was issued at a discount of $5.8 million. The debt issuance costs on the Term Loan and the Notes and the discount on the Term Loan are reported in the condensed combined balance sheet as a reduction of debt that are amortized as a component of interest expense over the term of the related debt using the effective interest method. The unamortized debt issuance costs related to the Term Loan and the Notes and the discount on the Term Loan approximate $36.8 million as of March 31, 2022. The debt issuance costs on the Revolving Credit Facility are reported in the condensed combined balance sheet as a component of Other assets and are amortized over the term of the Revolving Credit Facility as a component of interest expense using the effective interest method. The unamortized debt issuance costs related to Revolving Credit Facility approximate $5.6 million as of March 31, 2022. During the three and six months ended March 31, 2022, embecta incurred approximately $3.4 million of interest expense related to the $500.0 million of senior secured 5.00% notes and approximately $1.0 million of interest expense related to the Term Loan. These amounts are included within Interest expense in the condensed combined statements of income. embecta utilized the aggregate proceeds received from the issuance of the Notes and the Term Loan to make a distribution payment of approximately $1,466.0 million to BD in connection with the spin off. The $1,466.0 million payment to BD for the consideration for assets transferred consisted of $1,266.0 million of cash and $200.0 million of Related Party Notes (see Note 3). The schedule of principal payments required on long-term debt for the next five fiscal years and thereafter is as follows:
2022 | $ | 4.8 |
2023 | $ | 9.5 |
2024 | $ | 9.5 |
2025 | $ | 9.5 |
2026 | $ | 9.5 |
Thereafter | $ | 1,407.3 |
The estimated fair value of long-term debt (including current portion) at March 31, 2022 was $1,409.5 million compared with a carrying value (which includes a reduction for amortized debt issuance costs and discounts) of $1,413.2 million. Fair value was estimated using inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability and would be considered Level 2 in the fair value hierarchy.

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- Definition The entire disclosure for long-term debt. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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