Long-term Debt and Capitalized Lease Obligations

9 Months Ended

Dec. 01, 2018

Long-term Debt and Capitalized Lease Obligations

LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS

The Company’s long-term debt as of December 1, 2018 and February 24, 2018, net of unamortized debt discounts of $215.7 million and $249.6 million, respectively, and deferred financing costs of $58.9 million and $79.7 million, respectively, consisted of the following (in millions):



	December 1, 2018			February 24, 2018
Albertsons Term Loans due 2022 to 2025, interest rate range of 4.32% to 5.69%	$	4,614.6		$	5,610.7
Senior Unsecured Notes due 2024 and 2025, interest rate of 6.625% and 5.750%, respectively	2,478.8			2,476.1
New Albertson's, L.P. Notes due 2027 to 2031, interest rate range of 6.52% to 8.70%	1,402.8			1,393.9
Safeway Inc. Notes due 2019 to 2031, interest rate range of 3.95% to 7.45%	944.4			1,266.9
ABL Facility, average interest rate of 3.60%	610.0			—
Other Notes Payable, unsecured	124.0			242.7
Mortgage Notes Payable, secured	18.9			20.9
Total debt	10,193.5			11,011.2
Less current maturities	(315.1		)	(66.1		)
Long-term portion	$	9,878.4		$	10,945.1

The Company's term loans (the "Albertsons Term Loans"), asset-based loan ("ABL") facility (the "ABL Facility") and certain of the outstanding notes and debentures have restrictive covenants, subject to the right to cure in certain circumstances, calling for the acceleration of payments due in the event of a breach of a covenant or a default in the payment of a specified amount of indebtedness due under certain debt arrangements. There are no restrictions on the Company's ability to receive distributions from its subsidiaries to fund interest and principal payments due under the

ABL Facility, the Albertsons Term Loans and the Company's senior unsecured notes (the "Senior Unsecured Notes"). Each of the ABL Facility, Albertsons Term Loans and the Senior Unsecured Notes restrict the ability of the Company to pay dividends and distribute property to the Company's stockholders. As a result, all of the Company's consolidated net assets are effectively restricted with respect to their ability to be transferred to the Company's stockholders. Notwithstanding the foregoing, the ABL Facility, Albertsons Term Loans and the Senior Unsecured Notes each contain customary exceptions for certain dividends and distributions, including the ability to make cumulative distributions under the Albertsons Term Loans and Senior Unsecured Notes of up to the greater of $1.0 billion or 4% of the Company's total assets (which is measured at the time of such distribution) and the ability to make distributions if certain payment conditions are satisfied under the ABL Facility. The Company was in compliance with all such covenants and provisions as of and for the 40 weeks ended December 1, 2018.

Term Loan Refinancing

On November 16, 2018, the Company repaid approximately $976 million in aggregate principal amount of the $2,976 million term loan tranche B-4 (the "2017 Term Loan B-4") along with accrued interest and unpaid interest on such amount and fees and expenses related to the Term Loan Repayment and the 2018 Term Loan B-7 (each as defined below), for which the Company used approximately $610 million of cash on hand and approximately $410 million of borrowings under the ABL Facility (such repayment, the "Term Loan Repayment"). Substantially concurrently with the Term Loan Repayment, the Company amended the Company's Second Amended and Restated Term Loan Agreement, dated as of August 25, 2014 and effective as of January 30, 2015 (as amended, the "Term Loan Agreement"), to establish a new term loan tranche and amend certain provisions of the Term Loan Agreement. The new tranche consists of $2,000 million of new term B-7 loans (the "2018 Term Loan B-7"). The 2018 Term Loan B-7, together with cash on hand, was used to repay in full the remaining principal amount outstanding under the 2017 Term Loan B-4 (the "2018 Term Loan Refinancing"). The 2018 Term Loan Refinancing was accounted for as a debt modification or extinguishment on a lender by lender basis. In connection with the 2018 Term Loan Refinancing and Term Loan Repayment, the Company expensed $4.1 million of financing costs and capitalized $3.6 million of financing costs and $15.0 million of original issue discount. The Company also wrote off $12.9 million of deferred financing costs and $8.6 million of original issue discount associated with the 2017-1 Term B-4 Loan. The 2018 Term Loan B-7 has a maturity date of November 17, 2025. The 2018 Term Loan B-7 amortizes, on a quarterly basis, at a rate of 1% per annum of the original principal amount of the 2018 Term Loan B-7 (which payments will be reduced as a result of the application of prepayments in accordance with the terms therewith). The 2018 Term Loan B-7 bears interest, at the borrower's option, at a rate per annum equal to either (a) the base rate plus 2.00% or (b) LIBOR (subject to a 0.75% floor) plus 3.00%.

Safeway Notes

During the third quarter of fiscal 2018, Safeway Inc., a wholly-owned subsidiary of the Company, repurchased certain amounts of Safeway Inc.'s 7.450% Senior Debentures due 2027 and 7.250% Debentures due 2031 with a par value of $333.7 million and a book value of $322.4 million for $333.7 million plus accrued interest of $7.7 million ("Safeway Notes Repurchase"). In connection with the Safeway Notes Repurchase, the Company recorded a loss on debt extinguishment of $11.3 million.

NALP Notes

During the third quarter of fiscal 2018, the Company repurchased NALP Notes with a par value of $10.4 million and a book value of $10.4 million for $8.6 million plus accrued interest of $0.2 million ("NALP Notes Repurchase"). In connection with the NALP Notes Repurchase, the Company recorded a gain on debt extinguishment of $1.8 million.

Asset-Based Loan Facility

On November16, 2018, the existing ABL Facility was amended and restated in connection with the 2018 Term Loan Refinancing to extend the maturity date of the facility to November 16, 2023. All other terms of the agreement remain unchanged. In connection with the ABL Facility amendment the Company capitalized $13.5 million of financing costs.

As of December 1, 2018, there were $610.0 million of loans outstanding under the Company's ABL Facility, and letters of credit ("LOC") issued under the LOC sub-facility were $561.2 million. There were no loans outstanding under the Company's ABL Facility as of February 24, 2018, and letters of credit ("LOC") issued under the LOC sub-facility were $576.8 million.

Capitalized Lease Obligations

The Company's capitalized lease obligations were $784.4 million and $864.6 million as of December 1, 2018 and February 24, 2018, respectively. Current maturities of capitalized lease obligations were $97.5 million and $102.1 million and long-term maturities were $686.9 million and $762.5 million as of December 1, 2018 and February 24, 2018, respectively.

Merger Related Financing

On June 25, 2018 the Company issued $750.0 million in aggregate principal amount of floating rate senior secured notes (the "Floating Rate Notes") at an issue price of 99.5%. As a result of the Termination Agreement with Rite Aid on August 8, 2018, the Company redeemed all of the Floating Rate Notes at a redemption price equal to 99.5% of the aggregate principal amount of the notes, plus accrued and unpaid interest.