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DEBT | 6 Months Ended
--- | ---
Jun. 30, 2024
Debt Disclosure [Abstract] |
DEBT | DEBT Debt consisted of the following (in thousands):
| June 30, 2024 |  | December 31, 2023
2023 Term Loan | $ | 290,625 |  |  | $ | 294,375 |
2023 Revolver Facility | 17,000 |  |  | 15,000 |
Unamortized discount and debt issuance costs | (2,571) |  |  | (2,952) |
Total debt, net | 305,054 |  |  | 306,423 |
Less: Short-term debt | (17,000) |  |  | (15,000) |
Less: Current portion of long-term debt | (9,375) |  |  | (7,500) |
Long-term debt, net | $ | 278,679 |  |  | $ | 283,923 |
2023 Credit Agreement On February 2, 2023 (the "Closing Date"), PHD Intermediate LLC (“Holdings”), Portillo’s Holdings LLC (the “Borrower”), the other Guarantors party thereto from time to time, each lender party thereto from time to time and Fifth Third Bank, National Association, as Administrative Agent, L/C Issuer and Swing Line Lender entered into a credit agreement (“2023 Credit Agreement”) which provides for a term A loan (the "2023 Term Loan") in an initial aggregate principal amount of $300.0 million and revolving credit commitments in an initial aggregate principal amount of $100.0 million (the “2023 Revolver Facility”). The 2023 Term Loan and 2023 Revolver Facility are scheduled to mature on February 2, 2028. The 2023 Term Loan and the 2023 Revolver Facility will accrue interest at the forward-looking secured overnight financing rate (“SOFR”) plus an applicable rate determined upon the consolidated total net rent adjusted leverage ratio, subject to a floor of 0.00% (plus a credit spread adjustment of 0.10% per annum for 1-month interest periods and 0.15% for 3-month interest periods). As of June 30, 2024, the interest rates on the 2023 Term Loan and 2023 Revolver Facility were 7.98% and 7.94%, respectively. Pursuant to the 2023 Credit Agreement, as of June 30, 2024, the commitment fees to maintain the 2023 Revolver Facility were 0.20% and letter of credit fees were 2.50%. Commitment fees and letter of credit fees are recorded as interest expense in the condensed consolidated statements of operations. As of June 30, 2024, the effective interest rate was 8.31%. As of June 25, 2023, the interest rate on both the 2023 Term Loan and 2023 Revolver Facility was 8.00%. Pursuant to the 2023 Credit Agreement, as of June 25, 2023, the commitment fees to maintain the 2023 Revolver Facility were 0.25%, letter of credit fees were 2.75%, and letter of credit fronting fees were 0.125%. As of June 25, 2023, the effective interest rate was 8.16%. The 2023 Term Loan will amortize in quarterly installments equaling an aggregate annual amount of $7.5 million for the first two (2) years following the Closing Date, (b) $15.0 million for the third (3rd) and fourth (4th) years following the Closing Date, and (c) $30.0 million for the fifth (5th) year following the Closing Date, commencing on the last day of the first full fiscal quarter ended after the Closing Date, with the balance payable on the final maturity date. As of June 30, 2024, outstanding borrowings under the 2023 Credit Agreement totaled $307.6 million, comprised of $290.6 million under the 2023 Term Loan, and $17.0 million under the 2023 Revolver Facility. Letters of credit issued under the 2023 Revolver Facility totaled $4.2 million. As a result, as of June 30, 2024, the Company had $78.8 million available under the 2023 Revolver Facility. As of December 31, 2023, outstanding borrowings under the 2023 Credit Agreement totaled $309.4 million, comprised of $294.4 million under the 2023 Term Loan, and $15.0 million under the 2023 Revolver Facility. Letters of credit issued under the 2023 Revolver Facility totaled $4.3 million. As a result, as of December 31, 2023, the Company had $80.7 million available under the 2023 Revolver Facility. 2014 Credit Agreement Holdings, the Borrower and certain of its subsidiaries entered into a credit agreement ("2014 Credit Agreement"), dated as of August 1, 2014 and as amended October 25, 2016, May 18, 2018 and December 6, 2019, with UBS AG, Stamford Branch, as the administrative agent and collateral agent, and other lenders from time to time party thereto (the “2014 Lenders”). The 2014 Lenders extended credit in the form of (i) first lien initial term loans in an initial aggregate principal amount of $335.0 million and (ii) a revolving credit facility in an original principal amount equal to $30.0 million, including a letter of credit sub-facility with a $7.5 million sublimit (the “2014 Revolving Facility” and the loans thereunder, the “2014 Revolving Loans”). On December 6, 2019, the Borrower entered into a third amendment to the 2014 Credit Agreement (the “Third Amendment to 2014 Credit Agreement”) whereby the aggregate principal amount of the term loans as of the effective date of the Third Amendment to 2014 Credit Agreement was $332.4 million (the “2014 Term B-3 Loans”), and the 2014 Revolving Facility was increased to $50.0 million. The maturity date with respect to the 2014 Term B-3 Loans was extended to September 6, 2024, and the maturity date with respect to the 2014 Revolving Loans was extended to June 6, 2024. On February 2, 2023, the Company used proceeds from the 2023 Term Loan and 2023 Revolver Facility, along with cash on hand, to pay off the 2014 Credit Agreement in full in the amount of $321.8 million. The 2023 Revolver Facility under the 2023 Credit Agreement replaces the $50.0 million 2014 Revolving Facility under the 2014 Credit Agreement. Discount, Debt Issuance Costs and Interest Expense Pursuant to the 2023 Credit Agreement, the Company capitalized deferred financing costs and issuance discounts of $3.6 million which will be amortized over the term of the 2023 Credit Agreement. The Company amortized an immaterial amount and $0.1 million of deferred financing costs during the quarter and two quarters ended June 30, 2024, respectively, and an immaterial amount and $0.3 million for the quarter and two quarters ended June 25, 2023, respectively, which is included in interest expense in the condensed consolidated statements of operations. In addition, the Company amortized $0.2 million and $0.3 million in original issue discount related to the long-term debt during the quarter and two quarters ended June 30, 2024, respectively, and $0.2 million and $0.3 million in the quarter and two quarters ended June 25, 2023, respectively, which is included in interest expense in the condensed consolidated statements of operations. Total interest expense was $6.6 million and $13.1 million for the quarter and two quarters ended June 30, 2024, respectively, and $6.5 million and $14.0 million for the quarter and two quarters ended June 25, 2023, respectively. Fair Value of Debt As of June 30, 2024 and December 31, 2023, the fair value of long-term debt approximates the carrying value as it is variable rate debt. The fair value measurement of this debt is considered Level 2 of the fair value hierarchy as inputs to interest are observable, unadjusted quoted prices in active markets for similar assets or liabilities. Guarantees and Covenants The 2023 Credit Agreement is guaranteed by all domestic subsidiaries of the Borrower (subject to customary exceptions) and secured by liens on substantially all of the assets of Holdings, the Borrower and the subsidiary guarantors (subject to customary exceptions). The 2023 Credit Agreement also includes certain financial covenants with respect to cash interest coverage and total net rent adjusted leverage. As of June 30, 2024, the Company was in compliance with financial covenants in the 2023 Credit Agreement.

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- Definition The entire disclosure for 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147481544/470-10-50-6 Reference 2: 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