Quarterly report pursuant to Section 13 or 15(d)

DEBT

v3.20.1
DEBT
3 Months Ended
May 02, 2020
DEBT  
DEBT

5. DEBT

Long-term debt consists of the following (in thousands):

May 2,

February 1,

May 4,

Interest Rate

2020

2020

2019

Term loan credit facility

Variable

$

2,176,325

$

2,182,550

$

2,201,225

Asset-based revolving credit facility

Variable

 

600,000

 

 

Senior notes

8.00

%

 

500,000

 

500,000

 

Senior subordinated notes

5.875

%

 

 

 

510,000

Total debt

 

3,276,325

 

2,682,550

 

2,711,225

Less unamortized discount/premium and debt costs

(12,374)

(13,190)

(10,723)

Total debt, net

3,263,951

2,669,360

2,700,502

Less current portion

 

(624,900)

 

(24,900)

 

(24,900)

Long-term debt

$

2,639,051

$

2,644,460

$

2,675,602

Revolving Credit Facility

As of May 2, 2020 and May 4, 2019, the borrowing base under our Amended Revolving Credit Facility was $826.9 million and $784.3 million, respectively, of which Michaels Stores, Inc. (“MSI”) had unused borrowing capacity of $137.7 million and $677.1 million, respectively. As of May 2, 2020 and May 4, 2019, outstanding standby letters of credit, which reduce our borrowing base, totaled $89.2 million and $107.2 million, respectively. As a result of the COVID-19 pandemic, we borrowed $600.0 million under our Amended Revolving Credit Facility to improve our cash position and preserve financial flexibility. In May 2020, we repaid $300.0 million of the outstanding borrowings using cash on hand.

Interest Rate Swaps

In April 2018, we executed two interest rate swaps with an aggregate notional value of $1 billion associated with our outstanding Amended and Restated Term Loan Credit Facility. The interest rate swaps have a maturity date of April 30, 2021 and were executed for risk management and are not held for trading purposes. The objective of the interest rate swaps is to hedge the variability of cash flows resulting from fluctuations in the one-month LIBOR. The swaps replaced the one-month LIBOR with a fixed interest rate of 2.7765% and payments are settled monthly. The swaps qualify as cash flow hedges and changes in the fair values are recorded in accumulated other comprehensive income in the consolidated balance sheet. The changes in fair value are reclassified from accumulated other comprehensive income to interest expense in the same period that the hedged items affect earnings. Amounts reclassified from accumulated other comprehensive income to interest expense during the first quarters of fiscal 2020 and fiscal 2019 were $3.5 million and $0.7 million, respectively.

Interest Rate Caps

In April 2020, we executed two interest rate cap agreements with an aggregate notional value of $2 billion associated with our outstanding Amended and Restated Term Loan Credit Facility. The interest rate caps have an effective date of September 30, 2020 and April 30, 2021, respectively. The interest rate caps have a maturity date of April 30, 2025 and were executed for risk management and are not held for trading purposes. The interest rate caps will effectively cap our LIBOR exposure on a portion of our Amended and Restated Term Loan Credit Facility at 1%. The interest rate caps qualify as cash flow hedges and changes in the fair values are recorded in accumulated other comprehensive income in the consolidated balance sheet. The changes in fair value are reclassified from accumulated other comprehensive income to interest expense in the same period that the hedged items affect earnings. There were no amounts reclassified from accumulated other comprehensive income to interest expense during the three months ended May 2, 2020.