Quarterly report pursuant to Section 13 or 15(d)

Debt

v3.23.3
Debt
 9 Months Ended
Sep. 28, 2023
Debt Disclosure [Abstract]  
Debt Debt
The following table summarizes the Company’s long-term debt as of September 28, 2023 and December 29, 2022:
in thousands Maturity Date
Interest Rate Per Annum at September 28, 2023 (1)
 September 28, 2023 December 29, 2022
Credit Facilities:
Term Loan Facility February 14, 2027 7.33% Variable $ 202,922  $ 204,499 
Asset-based Loan Facility (“ABL Facility”) August 4, 2027 6.57% Variable —  210,200 
Total secured debt at par value 202,922  414,699 
Less: current maturities 2,103  2,103 
Long-term debt maturities 200,819  412,596 
Less: unamortized discount and debt issuance costs 5,777  7,045 
Total long-term debt $ 195,042  $ 405,551 
(1) The applicable interest rate for the Term Loan Facility as presented herein does not include the effect of interest rate cap agreements.
Market risk associated with the Company’s long-term debt relates to the potential change in fair value and negative impact to future earnings, respectively, from a change in interest rates. The aggregate fair value of debt is based primarily on the Company’s estimates of interest rates, maturities, credit risk, and underlying collateral.
The following table summarizes scheduled maturities of the Company’s debt as of September 28, 2023:
in thousands Amount
Thirteen weeks ending December 28, 2023 $ 526 
2024 2,103 
2025 2,103 
2026 2,629 
2027 195,561 
Total minimum debt payments $ 202,922 
Components of interest expense are as follows for the periods presented:
Thirteen Weeks Ended Thirty-nine Weeks Ended
in thousands September 28, 2023 September 29, 2022 September 28, 2023 September 29, 2022
Total interest costs, net of interest income $ 3,255  $ 4,092  $ 14,022  $ 8,617 
Less: interest capitalized 2,009  1,060  5,016  2,751 
Interest expense, net $ 1,246  $ 3,032  $ 9,006  $ 5,866 
Term Loan Facility
The Term Loan Facility bears interest at a rate equal to either (a) a base rate determined by reference to the highest of (1) the “Prime Rate,” (2) the U.S. federal funds rate plus 0.5% and (3) the one-month Term Secured Overnight Financing Rate (“SOFR”) plus 1.0%, or (b) Adjusted Term SOFR, plus, in each case, the Applicable Margin (each term as defined in the Term Loan Facility credit agreement). The Applicable Margin for base rate loans will be between 1.00% and 1.25%, and the Applicable Margin for SOFR loans will be between 2.00% and 2.25% (subject to a floor of 0.00%), in each case, if the Company exceeds certain leverage ratio tests.
All obligations under the Term Loan Facility are secured by (1) a first-priority security interest in substantially all of the property and assets of Outlets and the other guarantors under the Term Loan Facility, with certain exceptions, and (2) a second-priority security interest in the collateral securing the ABL Facility.
ABL Facility
As of September 28, 2023, the Company’s ABL Facility had a maximum availability of $800.0 million with actual available borrowings limited to the sum, at the time of calculation, of (a) eligible credit card receivables multiplied by the credit card advance rate, plus (b) the cost of eligible inventory, net of inventory reserves, multiplied by the applicable appraisal percentage, plus (c) 85% of eligible net trade receivables, plus (d) all eligible cash on hand, plus (e) 100% of the amount for which the eligible letter of credit must be honored after giving effect to any draws, minus certain Availability Reserves (each component as defined in the ABL Facility). The ABL Facility is available for issuance of letters of credit and contains a sublimit of $50.0 million for standby letters of credit and commercial letters of credit combined. Available borrowings under the facility are reduced by the face amount of outstanding letters of credit. The Company’s ABL Facility allows for the Company, under certain circumstances, to increase the size of the facility by an additional amount up to $200.0 million.
All obligations under the ABL Facility are secured by (1) a first-priority security interest in the cash and cash equivalents, accounts receivable, inventory, and related assets of Outlets and the other guarantors under the ABL Facility, with certain exceptions, and (2) a second-priority security interest in substantially all of the other property and assets of Outlets and the other guarantors under the Term Loan Facility.
Based on financial data as of September 28, 2023, net availability under the ABL Facility was $697.3 million as reduced by letters of credit of $32.6 million.
Covenants
The credit agreements governing the Term Loan Facility and ABL Facility contain customary restrictive covenants, which, among other things and with certain exceptions, limit the Company’s ability to (i) incur additional indebtedness and liens in connection with such indebtedness, (ii) pay dividends and make certain other restricted payments, (iii) effect mergers or consolidations, (iv) enter into transactions with affiliates, (v) sell or dispose of property or assets, and (vi) engage in unrelated lines of business. In addition, these credit agreements subject the Company to certain reporting obligations and require that the Company satisfy certain financial covenants, including, among other things, a requirement that if borrowings under the ABL Facility exceed 90% of availability, the Company will maintain a certain fixed charge coverage ratio (defined as Consolidated EBITDA less non-financed capital expenditures and income taxes paid to consolidated fixed charges, in each case as more fully defined in the ABL Facility).
The Term Loan Facility has no financial maintenance covenants. The Company is currently in compliance with all covenants under the credit agreements.
Fair Value of Debt
The estimated fair values and classifications within the fair value hierarchy of the Term Loan Facility and the ABL Facility were as follows as of September 28, 2023 and December 29, 2022:
in thousands Fair Value Hierarchy Classification September 28, 2023 December 29, 2022
Term Loan Facility Level 3 $ 201,524  $ 196,575 
ABL Facility Level 2 —  210,200 
Total $ 201,524  $ 406,775 
The Term Loan Facility fair value is classified as Level 3 within the fair value hierarchy due to the use of unobservable inputs significant to the valuation, including indicative pricing from counterparties and discounted cash flow methods. The carrying amount of borrowings under the ABL Facility approximates fair value as the ABL Facility variable interest rates are based on prevailing market rates, which are a Level 2 input.