6. Long-Term Indebtedness
New Credit Facility
On December 20, 2011, we entered into a new $1,135.0 million credit agreement (the “New Credit Facility”), which replaced the Exit First Lien Facility, with several lenders including Wells Fargo Bank National Association, as administrative agent, and related loan and security documentation agents. The New Credit Facility is comprised of a 5-year $200.0 million revolving credit loan facility (the “Revolving Loan”), a 5-year $75.0 million Tranche A Term Loan facility (the “Term Loan A”) and a 7-year $860.0 million Tranche B Term Loan facility (the “Term Loan B” and together with the Term Loan A, the “Term Loans”). In certain circumstances, the Term Loan B can be increased by $300.0 million. The proceeds from the $935.0 million Term Loans were used, along with $15.0 million of existing cash, to retire the $950.0 million senior term loan from the prior facility. Interest on the New Credit Facility accrues based on pricing rates corresponding with SFTP’s senior secured leverage ratios as set forth in the credit agreement.
At March 31, 2012 and December 31, 2011, no advances under the Revolving Loan were outstanding (excluding letters of credit in the amount of $18.2 million and $31.2 million, respectively). Interest on the Revolving Loan accrues at an annual rate of LIBOR + an applicable margin with an unused commitment fee based on our senior secure leverage ratio. At March 31, 2012, the Revolving Loan unused commitment fee was 0.50%. The principal amount of the Revolving Loan is due and payable on December 20, 2016.
At March 31, 2012 and December 31, 2011, $74.1 million and $75.0 million of the Term Loan A was outstanding, respectively. Interest on the Term Loan A accrues at an annual rate of LIBOR + an applicable margin based on our senior secure leverage ratio. At March 31, 2012 and December 31, 2011, the Term Loan A interest rate was 2.63% and 2.55%, respectively. Beginning on March 31, 2012, the Term Loan A amortizes in quarterly installments as follows: (i) $937,500 per quarter in year 1, (ii) $1,875,000 per quarter in years 2 and 3, (iii) $2,812,500 per quarter in year 4 and (iv) $3,750,000 per quarter in year 5 with all remaining outstanding principal due and payable on December 20, 2016.
At March 31, 2012 and December 31, 2011, the full amount of the $860.0 million Term Loan B was outstanding. Interest on the Term Loan B accrues at an annual rate of LIBOR + an applicable margin, with a 1.0% LIBOR floor, based on our senior secure leverage ratio. In March 2012, we entered into a floating-to-fixed interest rate agreement in order to limit exposure to an increase in the LIBOR interest rate on $470.0 million of the Term Loan B. The interest rate agreement capped the LIBOR component of the interest rate at 1.00% (see Note 4). At March 31, 2012 and December 31, 2011, the Term Loan B interest rate was 4.25%. Beginning on March 31, 2013, the Term Loan B will amortize in quarterly installments of $2.2 million with all remaining outstanding principal due and payable on December 20, 2018.
Pursuant to the New Credit Facility agreement, amounts outstanding under the New Credit Facility are guaranteed by Holdings, SFO and certain of the domestic subsidiaries of SFTP are guarantors thereunder (collectively, the “Loan Parties”). The New Credit Facility is secured by first priority liens upon substantially all existing and after-acquired assets of the Loan Parties. The New Credit Facility agreement contains certain representations, warranties and affirmative covenants, including minimum interest coverage and a maximum senior leverage maintenance covenant. In addition, the New Credit Facility agreement contains restrictive covenants that, subject to certain exceptions, limit or restrict, among other things, the ability of the Loan Parties to incur indebtedness, create liens, engage in mergers, consolidations and other fundamental changes, make investments or loans, engage in transactions with affiliates, pay dividends, make capital expenditures and repurchase capital stock. The New Credit Facility agreement contains certain events of default, including payment, breaches of covenants and representations, cross defaults to other material indebtedness, judgment, and changes of control and bankruptcy events of default.
Exit First Lien Facility and Exit Second Lien Facility
On the Effective Date, Holdings, SFO and SFTP entered into the Exit First Lien Facility with several lenders. The Exit First Lien Facility consisted of an $890.0 million senior secured credit facility comprised of the $120.0 million revolving loan facility, which could be increased to up to $150.0 million in certain circumstances, and a $770.0 million term loan facility. On August 5, 2010, we made a discretionary $25.0 million prepayment on the term loan facility and recorded a $1.0 million net loss on the debt extinguishment.
On December 3, 2010, the Exit First Lien Facility was amended (the “First Lien Amendment”) to increase the Exit First Lien Facility to $1.070 billion comprised of $120.0 million revolving loan facility, which could be increased up to $200.0 million in certain circumstances, and a $950.0 million term loan facility. Interest on the Exit First Lien Facility accrued at an annual rate equal to LIBOR + 4.25% in the case of the revolving loan, with a 1.50% LIBOR floor and LIBOR + 3.75% in the case of the term loan facility, with a 1.50% LIBOR floor. Interest on the term loan facility was subject to a 0.25% reduction based on the Company achieving certain rating agency levels or senior secured leverage ratio amounts. In March 2011, we received this 0.25% reduction when our corporate rating was improved to BB- by Standard & Poor’s. On December 20, 2011, in connection with the New Credit Facility, we repaid in full the $950.0 million term loan facility, terminated the Exit First Lien Facility, and recorded a $42.2 million loss on debt extinguishment for the year ended December 31, 2011.
Also, on the Effective Date, Holdings, SFO and SFTP entered into Exit Second Lien Facility with several lenders. The Exit Second Lien Facility consisted of a $250.0 million senior secured term loan facility. On December 3, 2010, in connection with the First Lien Amendment, the Company repaid in full the $250.0 million second lien term loan and recorded a $17.5 million loss on debt extinguishment for the year ended December 31, 2010.
TW Loan
On the Effective Date, the TW Borrowers entered into the TW Loan with TW-SF, LLC. The TW Loan provided the TW Borrowers with a $150.0 million multi-draw term loan facility. The TW Loan was unconditionally guaranteed on a joint and several and senior unsecured basis by Holdings, SFO, SFTP and each of the direct and indirect domestic subsidiaries of Holdings who were guarantors under the Senior Credit Facility (collectively, the “TW Guarantors”) pursuant to the terms of a Guarantee Agreement (the “TW Guarantee Agreement”). On December 3, 2010, the TW Loan agreement and TW Guarantee Agreement were amended to primarily conform to the new terms under the First Lien Amendment. Under the TW Loan amendment, the TW Borrowers agreed to pay an unused commitment fee of 0.50% per year. No borrowings occurred during 2011 under the TW Loan. On December 20, 2011, in connection with the New Credit Facility, the TW Loan and the related TW Guarantee Agreement were terminated and we recorded a $4.3 million loss on debt extinguishment for the year ended December 31, 2011.
HWP Refinance Loan
On November 5, 2007, HWP entered into a $33.0 million term loan (the “Refinance Loan”) retiring (i) the $31.0 million construction-term loan with Marshall Investments Corporation incurred December 17, 2004 and (ii) the term loan and revolving line of credit with BankFirst incurred April 20, 2006. Borrowings under the Refinance Loan bear interest at 6.72%. Monthly payments of principal and interest of $0.2 million are payable through November 1, 2017. On December 1, 2017, all unpaid principal and interest is due and payable. HWP is subject to various covenants under the Refinance Loan that place certain restrictions limiting or prohibiting engaging in certain types of transactions. Pursuant to the Refinance Loan, HWP deposited into escrow $0.4 million and $0.5 million at March 31, 2012 and December 31, 2011, respectively, and will make additional monthly deposits to cover annual amounts owed for insurance, taxes and furniture, fixture and equipment purchases.
In connection with the issuance of the Refinance Loan, Holdings and the other joint venture partners provided a limited guarantee of the Refinance Loan, which becomes operative under certain limited circumstances, including the voluntary bankruptcy of HWP or its managing member and other specified events of default. The limited guarantee will be released five years following full payment and discharge of the loan. As additional security for the Refinance Loan, we also provided a $1.0 million letter of credit to secure the Refinance Loan.
Long-Term Indebtedness Summary
At March 31, 2012 and December 31, 2011, long-term debt consisted of the following (in thousands):
|
|
March 31, 2012 |
|
December 31, 2011 |
|
|
|
|
|
|
|
Term Loan A |
|
$ |
74,063 |
|
$ |
75,000 |
|
Term Loan B |
|
860,000 |
|
860,000 |
|
HWP Refinance Loan |
|
31,441 |
|
31,546 |
|
Net discount |
|
(9,016 |
) |
(9,310 |
) |
|
|
|
|
|
|
Long-term debt |
|
956,488 |
|
957,236 |
|
Less current portion |
|
(38,279 |
) |
(35,296 |
) |
Total long-term debt |
|
$ |
918,209 |
|
$ |
921,940 |
|
|