Quarterly report pursuant to Section 13 or 15(d)

Long-Term Debt and Borrowing Arrangements

v3.23.3
Long-Term Debt and Borrowing Arrangements
 9 Months Ended
Sep. 30, 2023
Debt Disclosure [Abstract]  
Long-Term Debt and Borrowing Arrangements
10. LONG-TERM DEBT AND BORROWING ARRANGEMENTS
The Company’s indebtedness consisted of:
September 30, 2023 December 31, 2022
Long-term debt: (a)
Amount
Weighted Average Rate (b)
Amount
Weighted Average Rate (b)
$750 million revolving credit facility (due April 2027)
 $ 110  7.42% $ — 
$400 million term loan A (due April 2027)
 389  6.70% 399  5.92%
$1.6 billion term loan B (due May 2025)
—  1,139  3.70%
$1.1 billion term loan B (due May 2030)
1,125  4.11% — 
4.375% senior unsecured notes (due August 2028)
 495  4.38% 494  4.38%
Finance leases 41  4.50% 45  4.50%
Total long-term debt 2,160  4.59% 2,077  3.79%
Less: Current portion of long-term debt 37  20 
Long-term debt $ 2,123  $ 2,057 
______________________
(a)    The carrying amount of the term loans and senior unsecured notes are net of deferred debt issuance costs of $17 million and $11 million as of September 30, 2023 and December 31, 2022, respectively. The carrying amount of the term loan B is net of unamortized discounts of $5 million as of September 30, 2023.
(b)    Weighted average interest rates are based on the stated interest rate for the year to date periods and include the effects from hedging.

Maturities and Capacity
The Company’s outstanding debt as of September 30, 2023 matures as follows:
Long-Term Debt
Within 1 year $ 37 
Between 1 and 2 years 43 
Between 2 and 3 years 48 
Between 3 and 4 years 442 
Between 4 and 5 years 514 
Thereafter 1,076 
Total $ 2,160 

As of September 30, 2023, the available capacity under the Company’s revolving credit facility was as follows:
Revolving Credit Facility
Total capacity $ 750 
Less: Borrowings 110 
Less: Letters of credit 9 
Available capacity $ 631 
Revolving Credit Facility
During the third quarter of 2023, the Company borrowed $110 million on its revolving credit facility. Such borrowings are included within long-term debt on the Condensed Consolidated Balance Sheet.
Fourth Amendment to the Credit Agreement
On May 25, 2023, the Company entered into a Fourth Amendment to the Credit Agreement dated May 30, 2018 (the “Amendment”), which, prior to giving effect to the Amendment, provided for senior secured credit facilities in an aggregate principal amount of $2.35 billion, consisting of (i) a term loan B facility in an aggregate principal amount of $1.6 billion maturing in May 2025 and (ii) a revolving credit facility in an aggregate principal amount of $750 million maturing in April 2027. The Amendment provides for a new senior secured term loan B facility in an aggregate principal amount of $1.14 billion maturing in May 2030, the proceeds of which were used to repay the existing term loan B facility. The interest rate per annum applicable to the new term loan B facility is equal to, at our option (a) Base Rate (as defined in the Credit Agreement), plus an applicable rate of 1.25% or (b) term SOFR, inclusive of the Secured Overnight Financing Rate (“SOFR”) Adjustment (defined as 0.10% per annum in the Credit Agreement), plus an applicable rate of 2.25%. The term SOFR with respect to the new term loan B is subject to a “floor” of 0.00%. The new term loan B is subject to the same prepayment provisions and covenants applicable to the prior term loan B facility, subject to customary exceptions and limitations, and is subject to equal quarterly amortization of principal of 0.25% of the initial principal amount, starting in the third quarter of 2023, the first full fiscal quarter after the closing date.
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 $3 million and $4 million as of September 30, 2023 and December 31, 2022, respectively.
Cash Flow Hedge
The Company has pay-fixed/receive-variable interest rate swaps which hedges the interest rate exposure on $1.1 billion, or more than 96% of the outstanding amount of its term loan B as of September 30, 2023. The interest rate swaps consist of a $600 million swap that expires in the second quarter of 2024 and has a weighted average fixed rate of 2.33% (plus applicable spreads) and a $500 million swap that expires in the fourth quarter of 2024 and has a weighted average fixed rate of 0.91% (plus applicable spreads). As a result of the Amendment, as well as the discontinuance of LIBOR as a benchmark interest rate, during the second quarter of 2023 the Company amended its interest rate swaps to align with the change in the benchmark interest rate of the underlying debt. As such, the variable rates of such swap agreements are based on one-month SOFR. Additionally, during the third quarter of 2023, the Company entered into new pay-fixed/receive-variable interest rate swaps that hedges the interest rate exposure on $600 million of its term loan B with an effective date in the second quarter of 2024 and an expiration date in the second quarter of 2028. The fixed rate associated with the new swaps is 3.84% (plus applicable spreads). The aggregate fair value of these interest rate swaps was an asset of $45 million and $53 million as of September 30, 2023 and December 31, 2022, respectively, which was included within other non-current assets on the Condensed Consolidated Balance Sheets. The effect of interest rate swaps on interest expense, net on the Condensed Consolidated Statements of Income was $10 million and $1 million of income for the three months ended September 30, 2023 and 2022, respectively, and $26 million of income and $7 million of expense for the nine months ended September 30, 2023 and 2022, respectively.
There was no hedging ineffectiveness recognized in the nine months ended September 30, 2023 or 2022. The Company expects to reclassify $38 million of gains from accumulated other comprehensive income (“AOCI”) to interest expense during the next 12 months.
Interest Expense, Net
The Company incurred net interest expense of $27 million and $21 million for the three months ended September 30, 2023 and 2022, respectively, and $73 million and $60 million for the nine months ended September 30, 2023 and 2022, respectively. Cash paid related to such interest was $80 million and $64 million for the nine months ended September 30, 2023 and 2022, respectively.
Early Extinguishment of Debt
The Company incurred non-cash early extinguishment of debt costs of $3 million and $2 million during the nine months ended September 30, 2023 and 2022, respectively. The 2023 amount relates to the refinancing of the Company's term loan B during the second quarter of 2023. The 2022 amount related to the credit agreement amendment and $400 million partial pay down of its term loan B.