Debt

9 Months Ended

May 02, 2020


Debt consists of the following:	May 2, 2020		August 3, 2019
	(millions)
Revolving credit facility	$	230.0	$	—
Less: unamortized debt issuance costs ^(a)	(2.4)		(3.2)
	227.6		(3.2)

Term loan	1,292.0		1,371.5
Less: unamortized original issue discount ^(b)	(9.9)		(13.8)
unamortized debt issuance costs ^(b)	(11.4)		(15.9)
	1,270.7		1,341.8
Total debt	1,498.3		1,338.6
Less: current portion	(1,498.3)		—
Total long-term debt	$	—	$	1,338.6

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^(a) The unamortized debt issuance costs are amortized on a straight-line basis over the life of the Amended Revolving Credit Agreement.

^(b) The original issue discount and debt issuance costs for the Term Loan are amortized over the life of the Term Loan using the interest method based on an imputed interest rate of approximately 6.3%.

Amended Revolving Credit Agreement

On February 27, 2018, the Company and certain of its domestic subsidiaries entered into an amendment and restatement agreement of its revolving credit agreement dated August 21, 2015, as amended on October 31, 2016, among the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (the “Amended Revolving Credit Agreement”). The Amended Revolving Credit Agreement provides aggregate revolving commitments up to $500 million, with an optional increase of up to $200 million.

The revolving credit facility may be used for the issuance of letters of credit, to fund working capital requirements and capital expenditures, and for general corporate purposes. The revolving credit facility also includes a $200 million letter of credit sublimit, all of which can be used for standby letters of credit pursuant to an amendment to the revolving credit facility dated September 20, 2019, and a $30 million swingline loan sublimit. The interest rates, pricing and fees under the agreement fluctuate based on the average daily availability, as defined therein. The Amended Revolving Credit Agreement has a maturity date of the earlier of (i) five years from the closing date (or February 2023) or (ii) 91 days prior to the maturity date of the Term Loan (unless (a) the outstanding principal amount of the Term Loan is $150 million or less and (b) the Company maintains liquidity (which can include (1) availability under the revolving credit facility in excess of the greater of $100 million and 20% of the credit limit and (2) cash held in a controlled account of the administrative agent of the revolving credit facility), in an amount equal to the outstanding principal amount of the remaining Term Loan. There are no mandatory reductions in aggregate revolving commitments throughout the term of the Amended Revolving Credit Agreement. However, availability under the revolving credit facility is limited to a percentage of the amount of eligible cash, eligible inventory, and eligible credit card accounts receivable as defined in the Amended Revolving Credit Agreement.

On March 16, 2020, the Company borrowed approximately $230 million under the Amended Revolving Credit Agreement, which represents the total amount currently outstanding. The blended interest rate for the borrowings under the Amended Revolving Credit Agreement is approximately 2.78%, which factors a base rate range of 40 basis points to 150 basis points plus a spread of 150 basis points. The Company took this action as a precautionary measure in order to increase its cash position and preserve financial flexibility in light of the current uncertainty in the global financial markets from COVID-19. As of May 2, 2020, the Company had $167.7 million of availability under the Amended Revolving Credit Agreement.

Under the Amended Revolving Credit Agreement, the Company is required to maintain a fixed charge coverage ratio, as defined in the Amended Revolving Credit Agreement, of at least 1.00 any time in which the Company is in a covenant period, as defined in the Amended Revolving Credit Agreement (the “Covenant Period”). Such Covenant Period is in effect if Availability is less than the greater of (a) 10% of the Credit Limit (the lesser of total Revolving Commitments and the Borrowing Base) and (b) $37.5 million for three consecutive business days and ends when Availability is greater than these thresholds for thirty consecutive days. The Covenant Period was not in effect as of May 2, 2020.

For a more detailed description of the Company’s Amended Revolving Credit Agreement and restrictions thereunder, refer to Note 10 to the audited consolidated financial statements included in the Fiscal 2019 10-K.

Term Loan

In connection with the August 2015 acquisition of ANN INC., the Company entered into a $1.8 billion variable-rate term loan (the “Term Loan”), which was issued at a 2% discount and provides for an additional term facility of $200 million. The Term Loan matures on August 21, 2022 and requires quarterly repayments of $22.5 million with a remaining balloon payment of approximately $1.1 billion required at maturity. During Fiscal 2018, the Company made repayments of $225.0 million of which $180.0 million was applied to future quarterly scheduled payments such that the Company is not required to make its next quarterly payment of $22.5 million until November of calendar 2020. The Company is also required to make mandatory prepayments in connection with certain prepayment events. As of May 2, 2020, borrowings under the Term Loan consisted entirely of Eurodollar Borrowings at a rate of approximately 6.4%. The Company entered into an interest rate swap agreement in March 2019 to mitigate some of the risk associated with the variable rate. Refer to Note 12 for additional information.

During the second quarter of Fiscal 2020, the Company repurchased $79.5 million aggregate principal amount of its Term Loan debt in open market transactions for a total purchase price of $49.4 million. The repurchase was settled in the second quarter of Fiscal 2020 and the Company recorded a gain on extinguishment of debt of $28.5 million, net of transaction costs and a write-off of a portion of deferred financing fees. In the third quarter of Fiscal 2020, the Company performed an additional repurchase of $42.0 million of principal amount of debt for a total purchase price of approximately $28.6 million. However, in order to maintain maximum financial flexibility as a result of COVID-19, this additional repurchase has not yet been settled and the underlying debt remains outstanding.

For a more detailed description of the Company’s Term Loan and restrictions thereunder, refer to Note 10 to the audited consolidated financial statements included in the Fiscal 2019 10-K.

Maturities of Debt

The Company’s outstanding debt as of May 2, 2020 matures as follows:


Fiscal Year	Amount
	(millions)
2020	$	1,522.0

Chapter 11 Cases

Subsequent to the end of the third quarter, the Company filed the Chapter 11 Cases, as discussed in Notes 1 and 21. The Chapter 11 Cases impact both the Company’s obligations under the Amended Revolving Credit Agreement and Term Loan, and following the commencement of the Chapter 11 Cases, the Company may not make borrowings under the Amended Revolving Credit Agreement. Refer to Note 21 for more information.