Quarterly report pursuant to Section 13 or 15(d)

Long-Term Debt and Borrowing Arrangements

v3.22.2.2
Long-Term Debt and Borrowing Arrangements
 9 Months Ended
Sep. 30, 2022
Debt Disclosure [Abstract]  
Long-Term Debt and Borrowing Arrangements
11. LONG-TERM DEBT AND BORROWING ARRANGEMENTS
The Company’s indebtedness consisted of:
September 30, 2022 December 31, 2021
Long-term debt: (a)
Amount
Weighted Average Rate (b)
Amount
Weighted Average Rate (b)
$750 million revolving credit facility (due April 2027) $ —  $ — 
Term loan A (due April 2027) 399  3.38% — 
Term loan B (due May 2025) 1,139  3.61% 1,541  3.07%
4.375% senior unsecured notes (due August 2028) 494  4.38% 493  4.38%
Finance leases 46  4.50% 50  4.50%
Total long-term debt 2,078  2,084 
Less: Current portion of long-term debt 15  21 
Long-term debt $ 2,063  $ 2,063 
______________________
(a)    The carrying amount of the term loans and senior unsecured notes are net of deferred debt issuance costs of $12 million and $15 million as of September 30, 2022 and December 31, 2021, respectively.
(b)    Weighted average interest rates are based on period-end balances, including the effects from hedging.

Maturities and Capacity
The Company’s outstanding debt as of September 30, 2022 matures as follows:
Long-Term Debt
Within 1 year $ 15 
Between 1 and 2 years 26 
Between 2 and 3 years 1,170 
Between 3 and 4 years 37 
Between 4 and 5 years 321 
Thereafter 509 
Total $ 2,078 

As of September 30, 2022, the available capacity under the Company’s revolving credit facility was as follows:
Revolving Credit Facility
Total capacity $ 750 
Less: Letters of credit 9 
Available capacity $ 741 
Third Amendment to the Credit Agreement
On April 8, 2022, the Company entered into the Third Amendment to the Credit Agreement dated May 30, 2018 which amended its original five-year $750 million revolver to extend the term to April 2027. The benchmark rate applicable to the revolver has changed from LIBOR to Secured Overnight Funding Rate (“SOFR”). The amendment also provides for a new senior secured term loan A facility in an aggregate principal amount of $400 million maturing in April 2027, the proceeds of which were used to repay a portion of the existing term loan B facility. The revolver and term loan A are subject to an interest rate equal to, at the Company's option, either (i) a base rate plus a margin ranging from 0.50% to 1.00% or (ii) SOFR, plus a margin ranging from 1.50% to 2.00% and an additional 0.10% SOFR adjustment, in either case based upon the total leverage ratio of the Company and its restricted subsidiaries. The revolver and term loan A are subject to the same prepayment provisions and covenants applicable to the existing revolver and term loan B. The term loan A is subject to quarterly principal payments as follows: (i) 0.0% per year of the initial principal amount during the first year, (ii) 5.0% per year of the initial
principal amount payable in equal quarterly installments during the second and third years and (iii) 7.5% per year of the initial principal amount payable in equal quarterly installments during the fourth and fifth years, with final payments of all amounts outstanding, plus accrued interest, being due on the maturity date in April 2027. The interest rate applicable to the term loan B remains unchanged and is equal to, at the Company's option, either a base rate plus a margin of 0.75% or LIBOR plus a margin of 1.75%. As a result of the $400 million term loan B prepayment, the Company is no longer subject to quarterly principal payments on such term loan B.
Deferred Debt Issuance Costs
The Company classifies deferred debt issuance costs related to its revolving credit facility within other non-current assets on the Condensed Consolidated Balance Sheets. Such deferred debt issuance costs were $4 million and $2 million as of September 30, 2022 and December 31, 2021, respectively.
Cash Flow Hedge
In 2018, the Company hedged a portion of its $1.6 billion term loan B. The pay-fixed/receive-variable interest rate swaps hedge $1.1 billion of the Company’s term loan interest rate exposure, of which $600 million expires in the second quarter of 2024 and has a weighted average fixed rate of 2.48% and $500 million expires in the fourth quarter of 2024 and has a weighted average fixed rate of 0.99%. The variable rates of the swap agreements are based on one-month LIBOR. The aggregate fair value of these interest rate swaps was an asset of $54 million and a liability of $23 million as of September 30, 2022 and December 31, 2021, respectively, which was included within other non-current assets and non-current liabilities on the Condensed Consolidated Balance Sheets, respectively. The effect of interest rate swaps on interest expense, net on the Condensed Consolidated Statements of Income was $1 million of income and $7 million of expense for the three months ended September 30, 2022 and 2021, respectively, and $7 million and $19 million of expense for the nine months ended September 30, 2022 and 2021, respectively.
There was no hedging ineffectiveness recognized in the nine months ended September 30, 2022 or 2021. The Company expects to reclassify $28 million of gains from accumulated other comprehensive income (“AOCI”) (loss) to interest expense during the next 12 months.
Interest Expense, Net
The Company incurred net interest expense of $21 million and $22 million for the three months ended September 30, 2022 and 2021, respectively, and $60 million and $73 million for the nine months ended September 30, 2022 and 2021, respectively. Cash paid related to such interest was $64 million and $81 million for the nine months ended September 30, 2022 and 2021, respectively.
The Company incurred non-cash early extinguishment of debt costs of $2 million in 2022 relating to the credit agreement amendment and $400 million partial pay down of its term loan B, as discussed above, for the nine months ended September 30, 2022. For the nine months ended September 30, 2021 the Company incurred costs of $18 million relating to the redemption of its $500 million 5.375% senior unsecured notes redeemed in 2021.