Quarterly report pursuant to Section 13 or 15(d)

DEBT

v3.10.0.1
DEBT
9 Months Ended
Nov. 03, 2018
DEBT  
DEBT

4. DEBT

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

November 3,

 

February 3,

 

October 28,

 

Interest Rate

 

2018

 

2018

 

2017

Term loan credit facility

Variable

 

$

2,214,994

 

$

2,232,350

 

$

2,244,800

Asset-based revolving credit facility

Variable

 

 

218,000

 

 

 —

 

 

109,000

Senior subordinated notes

5.875

%

 

510,000

 

 

510,000

 

 

510,000

Total debt

 

 

 

2,942,994

 

 

2,742,350

 

 

2,863,800

Less unamortized discount/premium and debt costs

 

 

 

(12,431)

 

 

(15,686)

 

 

(16,555)

Total debt, net

 

 

 

2,930,563

 

 

2,726,664

 

 

2,847,245

Less current portion

 

 

 

(240,261)

 

 

(24,900)

 

 

(140,125)

Long-term debt

 

 

$

2,690,302

 

$

2,701,764

 

$

2,707,120

 

Revolving Credit Facility

 

As of November 3, 2018 and October 28, 2017, the borrowing base under our senior secured asset-based revolving credit facility was $850.0 million, of which Michaels Stores, Inc. (“MSI”) had unused borrowing capacity of $567.0 million and $675.7 million, respectively. As of November 3, 2018 and October 28, 2017, outstanding standby letters of credit, which reduce our borrowing base, totaled $65.0 million and $65.3 million, respectively.

 

Term Loan Credit Facility

 

On May 23, 2018, MSI entered into an amendment with JPMorgan and other lenders to amend and restate our term loan credit facility. The amended and restated credit agreement, together with the related security, guarantee and other agreements, is referred to as the “Amended and Restated Term Loan Credit Facility”. Borrowings under the Amended and Restated Term Loan Credit Facility bear interest at a rate per annum, at MSI’s option, of either (a) a margin of 1.50% plus a base rate defined as the highest of (1) the prime rate of JPMorgan, (2) the federal funds effective rate plus 0.5%, and (3) the one-month London Interbank Offered Rate (“LIBOR”) plus 1% or (b) a margin of 2.50% plus the applicable LIBOR. MSI is required to make scheduled quarterly payments equal to 0.25% of the original principal amount of the term loans (subject to adjustments relating to the incurrence of additional term loans) for the first four years and two quarters of the Amended and Restated Term Loan Credit Facility, with the balance to be paid on January 28, 2023. All other terms under the Amended Term Loan Credit Facility have remained unchanged. As a result of this refinancing, we recorded a loss on the early extinguishment of debt of $1.8 million during the second quarter of fiscal 2018.

 

Interest Rate Swaps

 

In April 2018, we executed two interest rate swaps with an aggregate notional value of $1.0 billion associated with our outstanding Amended 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. We reclassified $1.6 million and $3.7 million from accumulated other comprehensive income to interest expense during the three and nine months ended November 3, 2018, respectively.  As of November 3, 2018, the fair value of the interest rate swaps was a net asset of $4.5 million, consisting of $5.0 million recorded in other assets and $0.6 million recorded in accrued liabilities in our consolidated balance sheets.