Long-term debt and interest expense, net

6 Months Ended

Jun. 30, 2022

Long-term debt and interest expense, net

Long-term debt and interest expense, net

7. LONG-TERM DEBT AND INTEREST EXPENSE, NET

	June 30, 2022		December 31, 2021
Syndicated Credit Facility:
Revolving Credit Facility	$	145	$	—
Term Loan B		1,500		1,444
9.75% 2023 Notes		—		500
7.75% 2027 Notes		500		—
7.54% 2027 Notes		150		150
Deferred financing		23		26
Obligations under finance leases and other		6		5
Debt discount and issuance costs		(106)		(39)
Total long-term debt		2,218		2,086
Current portion of long-term debt		(24)		(24)
Non-current portion of long-term debt	$	2,194	$	2,062

Syndicated Credit Facility

As of June 30, 2022, the Company’s senior secured syndicated credit facility (“Syndicated Credit Facility”) is composed of: (i) a senior secured first lien revolving credit facility in an aggregate capacity of up to $500 million maturing in June 2027 (“Revolving Credit Facility”) and (ii) a senior secured first lien term B facility in an aggregate principal amount of $1.5 billion maturing in June 2029, which was issued with an original issue discount of 4.50% (“Term Loan B”).

On June 14, 2022, the Company amended the terms of the Syndicated Credit Facility pursuant to an amended and restated credit agreement (“Amended and Restated Credit Agreement”). The Amended and Restated Credit Agreement (i) replaced the Consolidated Leverage Ratio financial maintenance covenant with the Consolidated Net Debt Leverage Ratio (as defined in the Amended and Restated Credit Agreement) financial maintenance covenant not to exceed to (1) 5.50:1.00 for each fiscal quarter ending on or prior to December 31, 2022, (2) 5.00:1.00 for each fiscal quarter ending on and after March 31, 2023 through and including December 31, 2023 and (3) 4.50:1.00 for each fiscal quarter ending on or after March 31, 2024, (ii) changed the required level of the Interest Coverage Ratio maintenance covenant to 2.50:1.00 as of the last day of each fiscal quarter, (iii) increased the total amount of Term Loan B outstanding to $1.5 billion and (iv) permitted the issuance of the 7.75% Senior Secured Notes due 2027 (“7.75% 2027 Notes”) and the redemption of the 9.75% Senior Secured 2023 Notes (“9.75% 2023 Notes”).

Borrowings under Term Loan B will bear interest at a rate equal to, at the Company’s option, either Adjusted Term SOFR plus an applicable margin ranging from 4.00% to 4.25% or adjusted base rate (“ABR”) plus an applicable margin ranging from 3.00% to 3.25%, in each case depending on the total Consolidated Net Debt Leverage Ratio. Starting September 30, 2022, the Company must make equal quarterly installment payments in aggregate annual amounts equal to 1% of the original principal amount of Term Loan B, with the final balance payable at maturity on June 14, 2029; provided that if the 7.75% 2027 Notes are not repaid in full by the date that is 91 days prior to the maturity date of the 7.75% 2027 Notes (“Springing Maturity Date”), the maturity date for the Term Loan B will be the maturity date of the 7.75% 2027 Notes. Borrowings under Term Loan B may be repaid by the Company, in whole or in part, together with accrued interest, without premium or penalty.

Borrowings under the Revolving Credit Facility will bear interest at a rate equal to, at the Company’s option, if such borrowings are in U.S. dollars, either Adjusted Term SOFR plus an applicable margin ranging from 2.75% to 3.50% or ABR plus an applicable margin ranging from 1.75% to 2.50%, in each case depending on the total Consolidated Net Debt Leverage Ratio. The Company may also, at its option, borrow in Canadian dollars, Euros or British Pounds Sterling using the same applicable margins as noted for U.S. dollars. The Revolving Credit Facility is payable at maturity on June 14, 2027; provided that if the 7.75% 2027 Notes are not repaid in full by the Springing Maturity Date, the maturity date for the Revolving Credit Facility will be the Springing Maturity Date. The Revolving Credit Facility may be repaid by the Company, in whole or in part, together with accrued interest, without premium or penalty.

The Company evaluated the amendment of Term Loan B on a lender-by-lender basis and accounted for $1.3 billion as a debt extinguishment and $103 million as a debt modification. The portion accounted for as a debt modification is excluded from the presentation of cash flows from financing activities in the Consolidated Statement of Cash Flows as it represents a non-cash transaction. The Company recognized a loss on debt extinguishment of $10 million equal to the write-off of unamortized deferred financing costs. The modification of the Revolving Credit Facility resulted in the recognition of a loss on debt extinguishment of $1 million equal to the write-off of unamortized deferred financing costs. The Company recognized the losses on debt extinguishment in Interest expense, net in the Unaudited Condensed Consolidated Statements of Operations.

The Revolving Credit Facility includes an aggregate $200 million sub limit under which letters of credit can be issued. The Company had $29 million and $28 million of issued and undrawn letters of credit outstanding under the Revolving Credit Facility as of June 30, 2022 and December 31, 2021, respectively. As of June 30, 2022 and December 31, 2021, the Company was in compliance with its debt covenants.

9.75% Notes due 2023

On June 14, 2022, the Company used the proceeds from the issuance of the 7.75% 2027 Notes, along with cash on hand, to redeem the remaining $500 million aggregate principal amount of its 9.75% 2023 Notes. The 9.75% 2023 Notes were redeemed at a price of 107.313% of the principal amount thereof, plus accrued but unpaid interest.

The Company accounted for the issuance of the 7.75% 2027 Notes and the redemption of the 9.75% 2023 Notes as a debt extinguishment. As a result, the 7.313% premium paid on the redemption of the 9.75% 2023 Notes is accounted for as a loss on debt extinguishment. Additionally, at the time of the extinguishment there were $1 million of unamortized deferred financing costs and an unamortized debt discount of $5 million associated with the 9.75% 2023 Notes, which were written off as a loss on debt extinguishment. The Company recognized a total loss on extinguishment of the 9.75% 2023 Notes of $42 million, which is included in Interest expense, net in the Unaudited Condensed Consolidated Statement of Operations.

7.75% Notes due 2027 

On June 14, 2022, the Company issued $500 million in aggregate principal amount of 7.75% 2027 Notes in a private placement to qualified institutional buyers in the U.S. pursuant to Rule 144A under the Securities Act of 1933, as amended (“Securities Act”) and outside the U.S. pursuant to Regulation S under the Securities Act. The 7.75% 2027 Notes were issued at a price equal to 100% of their face value and are recorded as long-term debt in the consolidated financial statements. The 7.75% 2027 Notes bear interest at the rate of 7.75% per year, payable semi-annually in cash in arrears on June 15 and December 15 of each year, beginning on December 15, 2022. The 7.75% 2027 Notes will mature on June 15, 2027, unless earlier redeemed or repurchased. The 7.75% 2027 Notes are secured on a first-priority basis by liens on the Company’s and the guarantors’ assets that also secure, equally and ratably, the Company’s indebtedness under the Syndicated Credit Facility and the 7.54% 2027 Notes (as defined below) pursuant to the terms of a first lien intercreditor agreement. The 7.75% 2027 Notes are also guaranteed on a senior secured basis by each of the Company’s subsidiaries that are guarantors under the Syndicated Credit Facility and its 7.54% 2027 Notes (as defined below).

7.54% Notes due 2027

On June 25, 2020, the Company issued $150 million in aggregate principal amount of 7.54% Senior Secured Notes due 2027 (“7.54% 2027 Notes”). The 7.54% 2027 Notes were offered and sold to qualified institutional buyers in the U.S. pursuant to Rule 144A and outside the U.S. pursuant to Regulation S under the Securities Act. The 7.54% 2027 Notes were issued at a price of 98.25% and are recorded as long-term debt in the consolidated financial statements. The 7.54% 2027 Notes bear interest at the rate of 7.54% per year, payable semi-annually in cash in arrears, for which interest payments commenced December 2020. The 7.54% 2027 Notes will mature on December 31, 2027, unless earlier redeemed or repurchased. The 7.54% 2027 Notes are guaranteed on a senior secured basis by each of the Company’s existing and future subsidiaries that guarantee the Syndicated Credit Facility.

Interest expense, net on long-term debt and other obligations is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Interest on long-term debt	$	34	$	33	$	67	$	77
Loss on debt extinguishment		53		—		53		41
Interest on orbital securitization liability		1		1		2		2
Imputed interest and other		—		—		—		1
Capitalized interest		(12)		(10)		(23)		(19)
Interest expense, net	$	76	$	24	$	99	$	102