Quarterly report pursuant to Section 13 or 15(d)

Long-Term Debt and Borrowing Arrangements

v3.20.2
Long-Term Debt and Borrowing Arrangements
 6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Long-Term Debt and Borrowing Arrangements
9. LONG-TERM DEBT AND BORROWING ARRANGEMENTS

The Company’s indebtedness consisted of:
 
June 30, 2020
 
December 31, 2019
Long-term debt: (a)
Amount
 
Weighted Average Rate (b)
 
Amount
 
Weighted Average Rate (b)
$750 million revolving credit facility (due May 2023)
$
734

 
2.44
%
 
$
—

 
 
Term loan (due May 2025)
1,561

 
3.23
%
 
1,568

 
4.00
%
5.375% senior unsecured notes (due April 2026)
495

 
5.38
%
 
494

 
5.38
%
Finance leases
57

 
4.50
%
 
60

 
4.50
%
Total long-term debt
2,847

 
 
 
2,122

 
 
Less: Current portion of long-term debt
21

 
 
 
21

 
 
Long-term debt
$
2,826

 
 
 
$
2,101

 
 
______________________
(a)
The carrying amount of the term loan and senior unsecured notes are net of deferred debt issuance costs of $16 million and $18 million as of June 30, 2020 and December 31, 2019, 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 June 30, 2020 matures as follows:
 
Long-Term Debt
Within 1 year
$
21

Between 1 and 2 years
21

Between 2 and 3 years
755

Between 3 and 4 years
22

Between 4 and 5 years
1,503

Thereafter
525

Total
$
2,847



As of June 30, 2020, the available capacity under the Company’s revolving credit facility was as follows:
 
Revolving Credit Facility
Total capacity
$
750

Less: Borrowings
734

Less: Letters of credit
15

Available capacity
$
1


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 $5 million and $4 million as of June 30, 2020 and December 31, 2019, respectively.
Cash flow hedge
In 2018, the Company hedged a portion of its $1.6 billion term loan. As of June 30, 2020, 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 2.54% and $500 million expires in the fourth quarter of 2024
and has a weighted average fixed rate of 1.45%. The variable rates of the swap agreements are based on one-month LIBOR. The aggregate fair value of these interest rate swaps was a liability of $85 million and $34 million as of June 30, 2020 and December 31, 2019, respectively, which was included within other non-current liabilities on the Condensed Consolidated Balance Sheets. The effect of interest rate swaps on interest expense, net on the Condensed Consolidated Statements of Income was $6 million and $8 million of expense for the three and six months ended June 30, 2020, respectively, and not material for the three and six months ended June 30, 2019. There was no hedging ineffectiveness recognized in the six months ended June 30, 2020 and 2019. The Company expects to reclassify approximately $26 million of losses from accumulated other comprehensive income ("AOCI") (loss) to interest expense during the next 12 months.
Revolving credit facility
In April 2020, the Company completed an amendment to its revolving credit facility agreement to waive the quarterly-tested leverage covenant until the second quarter of 2021. The covenant was also modified for the second, third and potentially fourth quarters of 2021 to use a form of annualized EBITDA, as defined in the credit agreement, rather than the last twelve months EBITDA, as previously required. In return for this modification, the Company agreed to maintain minimum liquidity of $200 million, which is defined in the credit agreement as the total of unrestricted cash on hand and available capacity under the Company's revolving credit facility, pay 25 basis points of higher interest on outstanding borrowings, restrict share repurchases and reduce payment of dividends, or restrict dividends to $0.01 per share in the event the Company's liquidity is below $300 million.
Interest expense, net
Wyndham Hotels incurred net interest expense of $28 million and $26 million for the three months ended June 30, 2020 and 2019, respectively, and $54 million and $50 million for the six months ended June 30, 2020 and 2019, respectively. Cash paid related to such interest was $52 million and $50 million for the six months ended June 30, 2020 and 2019, respectively.