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Debt
 6 Months Ended
Jul. 02, 2022
Debt Disclosure [Abstract]  
Debt Disclosure DEBT
Long-term debt as of July 2, 2022 and December 31, 2021 consists of the following:
(In thousands)July 2, 2022December 31, 2021
Senior unsecured notes due 2030$895,000 $— 
Senior secured notes due 20291,600,000 — 
Senior unsecured notes due 2029400,000 400,000 
Senior unsecured notes due 2028400,000 400,000 
Senior secured term loan facility due 20251
145,000 145,000 
Revolving facility due 20268,000 — 
3,448,000 945,000 
Unamortized discount and debt issuance costs39,199 7,973 
Total long-term debt$3,408,801 $937,027 
Annual maturities of long-term debt, excluding unamortized discount and issuance costs, due as of July 2, 2022 are as follows:
(In thousands)202220232024
20251
2026ThereafterTotal
Contractual debt obligation maturities*$— — — 145,000 8,000 3,295,000 $3,448,000 
*Subject to Excess Cash Flow payments to the lenders.
1The senior secured term loan facility due 2025 was repaid in full with the completion of the CMC Materials. acquisition on the Closing Date.
CMC Materials Acquisition Financing
Subsequent to the closing of the quarter, on the Closing Date, the Company completed the acquisition CMC Materials pursuant to the terms of the previously announced Agreement and Plan of Merger, dated as of December 14, 2021 (the “Merger Agreement”), by and among the Company, CMC Materials and Yosemite Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company (“Merger Sub”). Pursuant to the Merger Agreement, Merger Sub merged with and into CMC (the “Merger”), with CMC Materials surviving the Merger and becoming a wholly-owned subsidiary of the Company.
On the Closing Date, the Company and certain of its subsidiaries entered into an Amendment and Restatement Agreement (the “Amendment”), which amended and restated the Credit and Guaranty Agreement, dated as of November 6, 2018 (as previously amended, restated, amended and restated, supplemented, modified and otherwise in effect prior to the effectiveness of the Amendment, the “Existing Credit Agreement” and, the Existing Credit Agreement as amended by the Amendment, the “Amended Credit Agreement”), by and among the Company, as borrower, certain subsidiaries of the Company party thereto, as guarantors, the lenders party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent.
The Amended Credit Agreement provides for senior secured credit facilities in an aggregate principal amount equal to $3.1 billion, consisting of (a) a senior secured term loan credit facility in an aggregate principal amount equal to $2.495 billion (the “Initial Term Loan Facility”) and (b) a senior secured revolving credit facility in an aggregate amount equal to $575.0 million (the “Revolving Facility” and, together with the Initial Term Loan Facility, the “Credit Facilities”). The Revolving Facility contains sublimits for swingline loans and the issuances of letters of credit.
The commitments under the Revolving Facility expire on July 6, 2027, and any loans then outstanding will be payable in full at that time. All outstanding loans under Initial Term Loan Facility are due and payable on July 6, 2029.
The obligations under the Credit Facilities are guaranteed by certain of the Company’s wholly-owned domestic restricted subsidiaries (collectively, the “Subsidiary Guarantors”), subject to customary exceptions and limitations. The obligations under the Credit Facility are secured by a first-priority lien on substantially all of the assets of the Company and the Subsidiary Guarantors, subject to customary exceptions and limitations, on a pari passu basis with the obligations under the Secured Notes, pursuant to customary intercreditor arrangements.
Borrowings under the Initial Term Loan Facility bear interest at a rate per annum equal to, at the Company’s option, either (i) Term Secured Overnight Financing Rate (“SOFR”) plus an applicable margin of 3.00% or (ii) a base rate plus an applicable margin of 2.00%. Borrowings under the Revolving Facility bear interest at a rate per annum equal to, at the Company’s option, either (i) Term SOFR, in the case of US dollar denominated borrowings, or the applicable benchmark rate as further described in the Amended Credit Agreement, in the case of any other currency, in each case, plus an applicable margin of 1.75% or (ii) a base rate, plus an applicable margin of 0.75%. The applicable margin set forth in the Amended Credit Agreement steps-down
depending on the First Lien Net Leverage Ratio. The Amended Credit Agreement also contains customary unused commitment fees, letter of credit fees and agency fees.
The Amended Credit Agreement contains customary representations, warranties and affirmative covenants. The Amended Credit Agreement also includes negative covenants that limit, among other things, incurring additional indebtedness, transactions with affiliates, additional liens, sales of assets, dividends, investments and advances, prepayments of debt and mergers and acquisitions, in each case, subject to certain exceptions, qualifications and baskets. The Amended Credit Agreement also includes a “springing” financial covenant that would require the Company to maintain a First Lien Net Leverage Ratio of 5.20:1.00 or less as of the end of any period of four fiscal quarters ending after December 31, 2022 if at any time the Company has revolving borrowings, unreimbursed letter of credit drawings and undrawn letters of credit (subject to certain exceptions) outstanding in an amount in excess of 35.0% of the aggregate commitments in respect of the Revolving Facility.
The Amended Credit Agreement contains customary events of default for facilities of this type. If an event of default occurs and is continuing, the Company may be required immediately to repay all amounts outstanding under the Amended Credit Agreement.
On the Closing Date, the Company and the Subsidiary Guarantors entered into a 364-Day Bridge Credit and Guaranty Agreement (the “Bridge Credit Agreement”), among the Company, as borrower, certain subsidiaries of the Company party thereto, as guarantors, the lenders party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent. The Bridge Credit Agreement provides for a senior unsecured term loan facility in an aggregate principal amount equal to $275.0 million (the “Bridge Credit Facility”). All outstanding loans under the Bridge Credit Facility are due and payable on the date that is 364 days after the Closing Date.
Borrowings under the Bridge Credit Facility bear interest at a rate per annum equal to, at the Company’s option, either (i) Term SOFR plus an applicable margin of 4.55% or (ii) a base rate plus an applicable margin of 3.55%. In addition to paying interest on the outstanding principal under the Bridge Credit Facility, the Company will pay to each lender under the Bridge Credit Agreement duration fees equal to 0.25% of the aggregate outstanding principal amount of such lender’s loans under the Bridge Credit Facility at 90, 180 and 270 days after the Closing Date.
The Company’s obligations under the Bridge Credit Facility are guaranteed, on an unsecured basis, by the Subsidiary Guarantors, subject to customary exceptions and limitations. The Bridge Credit Agreement contains customary representations, warranties and affirmative covenants. The Bridge Credit Agreement also includes negative covenants that limit, among other things, additional subsidiary indebtedness, additional liens, sales of assets and mergers and acquisitions, in each case, subject to certain exceptions, qualifications and baskets.
The Bridge Credit Agreement contains customary events of default, including, but not limited to, payment defaults, breaches of representations and warranties, covenant defaults, events of bankruptcy and insolvency, and a change of control. If an event of default occurs and is continuing, the Company may be required immediately to repay all amounts outstanding under the Bridge Credit Agreement.
The Company began incurring ticking fees associated with the Initial Term Loan Facility on March 2, 2022 through the Closing Date. The ticking fees were paid in cash to the term loan lenders on the Closing Date. For the three and six months ended July 2, 2022, the Company incurred $6.9 million and $11.6 million in ticking fees, respectively, which were recorded to interest expense in the condensed consolidated statement of operations.
Senior Secured Notes Due 2029 and Senior Unsecured Notes Due 2030
On April 14, 2022, the Company, via a wholly-owned escrow subsidiary (the “Escrow Issuer”), issued $1.6 billion aggregate principal amount of 4.750% senior secured notes due April 15, 2029 (the “2029 Notes”) pursuant to an indenture dated as of April 14, 2022 (the “2029 Notes Indenture”), by and between the Escrow Issuer and Truist Bank (“Truist”), as trustee and as notes collateral agent. Interest on the 2029 Notes is payable semi-annually in arrears on April 15 and October 15 of each year, commencing on October 15, 2022. The Company incurred debt issuance costs of $6.3 million in connection with the 2029 Notes. These costs are reported in the Company’s condensed consolidated balance sheet as a direct deduction from the face amount of the 2029 Notes, along with $7.6 million of original issue discount costs.
On June 30, 2022, the Company, via the Escrow Issuer, issued $895 million aggregate principal amount of 5.950% senior unsecured notes due June 15, 2030 (the “2030 Notes” and together with the 2029 Notes, the “New Notes”) pursuant to an indenture, dated as of June 30, 2022 (the “2030 Notes Indenture” and together with the 2029 Notes Indenture, the “New Notes Indentures”), by and between the Escrow Issuer and Truist. Interest on the 2030 Notes is payable semi-annually in arrears on June 15 and December 15 of each year, commencing on June 15, 2022. The Company incurred debt issuance costs of $1.7 million in connection with the 2030 Notes. These costs are reported in the Company’s condensed consolidated balance sheet as a direct deduction from the face amount of the 2030 Notes along with $16.7 million of net original issue discount costs.
On the Closing Date, the Escrow Issuer merged with and into the Company and, in connection therewith, the Company executed a supplemental indenture to each New Notes Indenture and such Company subsidiaries agreed to guarantee the Company’s obligations under the New Notes.
Accordingly, each series of New Notes is guaranteed, jointly and severally, fully and unconditionally, on a senior basis, by the Company’s existing and future domestic subsidiaries, other than certain excluded subsidiaries, to the extent that such subsidiaries guarantee indebtedness under the Amended Credit Agreement or existing senior notes. In addition, the 2029 Notes and related guarantees are secured, subject to permitted liens and certain other exceptions, by first priority liens on substantially the same collateral that secures the obligations under the Amended Credit Agreement.
The Company may, at its option, redeem, at any time and from time to time prior to June 15, 2025, some or all of the 2029 Notes at 100% of the principal amount thereof plus the applicable “make-whole” premium as set forth in the 2029 Notes Indenture plus accrued and unpaid interest, if any, to, but excluding, the redemption date. On or after June 15, 2025, the Company may redeem some or all of the 2029 Notes at the applicable prices set forth in the 2029 Notes Indenture plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, the Company may redeem up to 40% of the principal amount of the 2029 Notes before June 15, 2025 with the net proceeds from one or more equity offerings at the applicable price set forth in the 2029 Notes Indenture, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
The Company may, at its option, redeem, at any time and from time to time prior to January 15, 2029 (the “Par Call Date”), some or all of the 2029 Notes at 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the redemption date plus the applicable “make-whole premium” described in the 2029 Notes Indenture. On or after the Par Call Date, the 2029 Notes will be redeemable, at the Company’s option, in whole or in part, at a redemption price equal to 100% of the principal amount of the 2029 Notes to be redeemed plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
Upon the occurrence of certain change of control events accompanied by certain ratings events, the Company will be required to offer to repurchase all of the outstanding principal amount of each series of New Notes at a purchase price of 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of repurchase.
Each New Notes Indenture contains covenants that, among other things, limit the Company’s ability and/or the ability of the Company’s subsidiaries to: incur liens; engage in sales-and-leaseback transactions; and consolidate, merge with or convey, transfer or lease all or substantially all of the Company’s and its subsidiaries’ assets to another person and limits the ability of any non-guarantor subsidiary of the Company to incur indebtedness. These covenants are subject to a number of other limitations and exceptions as set forth in the New Notes Indentures. The Company was in compliance with these covenants at July 2, 2022.
Each New Notes Indenture provides for customary events of default (subject in certain cases to customary grace and cure periods) which, if certain of them occur, would permit the trustee or the holders of at least 25% in aggregate principal amount of the then-outstanding applicable series of New Notes to declare the principal of, and interest or premium, if any, and any other monetary obligations on, all the then-outstanding series of New Notes to be due and payable immediately.