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LONG-TERM DEBT (Note)
12 Months Ended
Dec. 27, 2020
Debt Disclosure [Abstract]  
LONG-TERM DEBT LONG-TERM DEBTOn March 16, 2020, we entered into a first amendment to our credit agreement with Bank of America, N.A., Wells Fargo Bank, N.A., PNC Bank, N.A., KeyBank, N.A. and HSBC Bank USA, N.A. dated as of July 13, 2018, which extended the maturity of the revolving credit facility established thereunder (the “Revolving Credit Facility”) to March 16, 2025 and modified certain other terms. On June 24, 2020, we entered into a second amendment to our credit agreement (the “Second Amendment”), which modified terms of our financial covenants as well as certain other provisions of the Revolving Credit Facility. On January 28, 2021, we entered into a third amendment to our credit agreement (the “Third Amendment”), which clarified the definition of the Asset Coverage Ratio financial covenant of the Revolving Credit Facility. The Third Amendment was effective as of December 27, 2020 (refer to Note 16: Subsequent Event for details of the Third Amendment).
The amended credit agreement provides for a revolving line of credit of up to $300.0 million with an option, subject to lender approval, to increase the amount to $450.0 million. Included in the Revolving Credit Facility is a $30.0 million sub-limit for “Swingline” loans and a $125.0 million sub-limit for letters of credit. At December 27, 2020, $6.1 million was utilized by outstanding standby letters of credit, leaving $293.9 million unused under the Revolving Credit Facility, which is constrained by our most restrictive covenant making $160.9 million available for additional borrowings. At December 29, 2019, $37.1 million was drawn on the Revolving Credit Facility, which included a $17.1 million Swingline loan.
Under the terms of the Revolving Credit Facility, we pay a variable rate of interest on funds borrowed under the revolving line of credit in excess of the Swingline loans, based on the U.S. Dollar London Interbank Offered Rate (“LIBOR”) plus an applicable spread between 1.25% and 3.50%. Alternatively, at our option, we may pay interest based on a base rate plus an applicable spread between 0.25% and 1.50%. The base rate is the greater of the prime rate (as announced by Bank of America), or the federal funds rate plus 0.50%. The applicable spread on LIBOR was 3.50% through the end of fiscal 2020, and will be determined by the consolidated leverage ratio thereafter, as defined in the amended credit agreement.
Under the terms of the Revolving Credit Facility, we are required to pay a variable rate of interest on funds borrowed under the Swingline loan based on the base rate plus applicable spread between 0.25% and 1.50%, as described above.
A commitment fee between 0.25% and 0.50% is applied against the Revolving Credit Facility’s unused borrowing capacity, with the specific rate determined by the consolidated leverage ratio, as defined in the amended credit agreement. Letters of credit are priced at a margin between 1.00% and 3.25%, plus a fronting fee of 0.50%.
Obligations under the Revolving Credit Facility are guaranteed by TrueBlue and material U.S. domestic subsidiaries, and are secured by substantially all of the assets of TrueBlue and material U.S. domestic subsidiaries. The amended credit agreement contains customary representations and warranties, events of default, and affirmative and negative covenants, including, among others, financial covenants. The Second Amendment suspended testing of certain covenant through June 27, 2021 (second quarter of 2021).
The following financial covenants, as defined in the Second and Third Amendments, are currently in effect through the second quarter of 2021:
Asset Coverage Ratio of greater than 1.00, defined as the ratio of 60% of accounts receivable to the difference of total debt outstanding and unrestricted cash in excess of $50.0 million, subject to certain minimums. As of December 27, 2020, our asset coverage ratio was 27.4.
Liquidity greater than $150.0 million, defined as the sum of unrestricted cash and availability under the aggregate revolving commitments. As of December 27, 2020, our liquidity was greater than $150.0 million at $356.4 million.
The following financial covenant, as defined in the Second Amendment, will be in effect for the first and second quarter of 2021:
EBITDA, as defined in the amended credit agreement, greater than $12.0 million for the trailing three quarters ending Q1 2021 and greater than $15.0 million for the trailing four quarters ending Q2 2021. As of December 27, 2020, EBITDA for the trailing three and four quarters was $35.6 million and $47.0 million, respectively.
The following financial covenants, as defined in the Second Amendment, will be in effect starting the third quarter of 2021 and thereafter:
Consolidated leverage ratio greater than 4.00 for the third and fourth quarters of 2021 and greater than 3.00 thereafter, defined as our funded indebtedness divided by trailing twelve months consolidated EBITDA, as defined in the amended credit agreement.
Consolidated fixed charge coverage ratio greater than 1.25, defined as the trailing twelve months bank-adjusted cash flow divided by cash interest expense.
As of December 27, 2020, we were in compliance with all effective covenants related to the Revolving Credit Facility.